Sunday, February 09, 2014

Trait #1 : Be a contrarian


By : Koon Yew Yin

Trait 1. 

The ability to buy stocks while others are panicking and sell stocks while others are euphoric.

KYY : In 1983 when China wanted to take back Hong Kong, the stock market crashed. Did you dare to buy Hong Kong shares knowing the risk when the communists took over the control Hong Kong? Everyone thinks they can do this, but then when the market crashed on October 19, 1987, almost no one had the stomach to buy. When the year 1999 came around and the market was going up almost every day, you could not bring yourself to sell because if you did, you might fall behind your peers.


Take the latest bad-news related to HSBC. Google it and search if u r un-aware of the bad news. Couple with sharp correction in HSI, HSBC broken HKD80, dropped from HKD86 to HKD79 in two weeks time. Will we dare to BUY such a strong good bank when it was oversold recently?

This is a trait of CONTRARIAN.

It is easier said than done as most of us like to chase over-valued companies or over-bought stocks. Majority retailers will buy when hot-stocks moving higher, and higher. They will use any speculative news to buy into such counters, or even trying to justify why it will or should move higher.

So, to profit well ... we do need to WAIT for market to crash ... wait for good companies to relate to some BAD news(temporary setback) ... and dare to BUY when all panic-selling.

Anyone remember BP oil-spill bad news? Do a search on that piece of bad news, check the price when it dived so so low due to fear .... and silly me, I bought into it.

Again, it is easier said than done.


90% of people want to be in their own 'comfort zone'. In investment world, I have learnt that it is being contrarian that we could do well. We should be doing the opposite of what others doing.

What is Fear-Greed?

Be greedy when others in fear?! 

How many of us REALLY understand such simple quote? It is too simplified, so we tend not to believe it. We prefer to see all those technical-analysis indicators shown in the charts, making it so complicated ... we prefer large financial jargons, in order to believe that could be good.

It is all WIRED wrongly, as KYY said.

That explained the first TRAIT. WHY majority in the forums(i3, investlah, FB,  chat-pages etc etc) will NOT do well in their trading or investments. They are looking for a quick KILL. They are looking for some thrill in tradings. They could be intelligent in the fields or expertise ... but being in market require that LOGICAL brain to analyse, to think ... and learn from those done it well.

I do have high respect for most successful biz-people ... and my high respect to Mr KYY, for being so humble and kind to share with 'public'. It was an honour to meet him in person.

What KYY trying to explain in trait #1 is that we should do our own homework and dare to BUY into a good under-valued counters during market crashing rather than to chase or jump into hot-stocks such as IRIS now ... or many more.

While there is no such thing as right or wrong ... the statistic shown clearly that 80% of retailers LOST or LOSING money, while 10% of them manage to breakeven. Only a small 10% retailers profiting consistently from markets.

Will we follow the top 10% in markets or will we just adding to the numbers of those losing in markets?

Be a contrarian ... as they are the minority. The chances are HIGH that doing what others NOT doing will bring us good profits ... and it we are to be in stock-market for long.

Choice is ours ... are we choosing to be the minority, with good investor's traits?

I have chosen my clearly. I will learn from those winners. I appreciate those sharing with me, enrich me with knowledge ... and placing importance of moving into the top 10% winners. I have intention to maintain my good records, may it be bull or bear market.

Lets take an example .. the current situation : Ecoworld vs SPSetia



Ecoworld now trading around RM4.40 ... came up from 60cents, then everyone in the KLSE talking about 'Focal' ... Liew-n-gang moving into her, changed the name into Ecoworld ... and yes, it gets the publicity needed. So, it has been moving higher and higher. It is a known fact that Liew is leaving SPSetia(by end of April?)


On the other hand, funds selling SPSetia ... many abandoning SPSetia as the 'whole' management jumped ship ... so, SPSetia is only having PNB to handle ... and knowing these GLCs could not find high quality persons to manage well, many are expecting SPSetia to slide ... in their profits and such.

So, now ... should we jump wagon into Ecoworld to, anticipating Ecoworld to be the next SPSetia and over-taking SPSetia as best developer? Perhaps not in the near future, but the prospect is good.

If we are a contrarian, we should be thinking of SPSetia, right? 

But ... is buying SPSetia wise, knowing that such good management by Liew-n-gang leaving? What will happen to SPSetia now and in future?

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Time to re-think on why we do what we did?

contact me at : cpteh@yahoo.com to join my trading group. 


TEH

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