Sunday, 22nd
July 2012 @ IEM Miri office.
Investing
in the stock market must be clearly differentiated from speculating in the same
according to seasoned stock market investor, Ir Richard Teo, a past chairman of
IEM Miri. This means it is important to
do your own research about the economy, the industry and more importantly the
companies that you might be considering to invest in.
To start with he recommended a couple of classic books by investment gurus as background reading. The two books are: “Intelligent Investor,” by Benjamin Graham (1949) and “Common Stocks Uncommon Profits,” by Philip A. Fisher (1958).
So unless
you know the business and the industry of the business it is unwise to dabble
in stocks. And then only if you have
enough savings to use as investment.
Because the next thing you need is patient (& a strong stomach) as
volatility of market sentiment is a given even if there is nothing
fundamentally changed in the prospects of your companies. He illustrated this based on his own
investment in a banking stock which first went “under water” before it turned a
good profit. However, there were also others
where he was badly burnt. Re-affirming
the saying that in life, there are only two certainties: death and taxes;
Everything else is a case of calculated risks.
In
assessing a company, among a company’s strengths that you might need to take
into account is its “goodwill” or intangible assets. This is because companies
with a lot of “goodwill” (more commonly known as reputation or brand power) are
generally more profitable and may need less capital for growth. Another thing that you might want to consider
is the timing of your investment and usually you might wish to take advantage
of market or industry down cycle i.e. when market (or industry) prices are generally
depressed due to some form of crisis (or excess capacity etc).
According to his observation, there had been a major market down cycle
every past ten years or so.
Once you are
ready to take the dive, the procedure involving a stock broking firm or bank is
fairly simple. And with facility such as CDS (Central Depository of Shares) you
won’t have to worry about dishonest stock brokers playing tricks using your
shares. Then having invested in the companies it is also necessary for you to
continue monitoring not just their performance but also the industry at large
since past performance is never a guarantee of the future and new industry
players have been known to cause famous upsets to the status quo and this may include
the local banking industry.
In all about
eleven people
attended the very informative talk.
Reported by
Ir Paul Chiew
