My last post have received many comments and about half of them still trying to blame others for  buying any stocks. The purpose i start writing articles is to help the public to understand the stock market and at the same time to learn from fellow SIFUs in this forum. As I previously mentioned, one of my uncle knew nothing about stock market and decided to buy HIBISCUS( an oil and gas company) that rumoured to have found OILS here and there. Further researching, I found this company made no profits for the past few years! And he bought in around RM200k. Until now, he doesn't admit that he made mistake!

       Above is a typical story of investors in Malaysia, at least 50% of them (conservatively). They believe on NEWS from taxi driver, neighbours and colleague. They buy in chicken that didn't lay egg for the past few years! and worst of all, the chicken is shrinking in size and i not sure whether it can survive the next few years.            

       As you know, Mr. K told everybody that his golden rule is to see previous quaterly results on EPS and decide to buy any stocks.This means that Mr. K is buying a chicken that is growing bigger in size so that it can lay more eggs and sell for more money. However, there're many companies that is growing. Particularly some Golden chicken such as Top Glove and Scientex! Both companies have been growing fast and why he didn't pick those according to his golden rule? Continue to read on.

      The reason is the potential and the chicken is selling at the right price! If you buy a chicken that worth RM 1 for RM 0.50, when the number of eggs it produces drop ( profit drop ), you don't lose much money. The perfect example is FAVCO, the recent quaterly report showed that the profits dropped by half! and the stock price didn't collapse but just dropped from 2.7 to 2.58 currently. Imagine a golden chicken like Top Glove and Scientex both have very high earnings, perform so well over the past few years, suffered a 50 percent drop in profits in recent quaterly result? For potential, for a 500 gram chicken to grow into 1 kg, easy. But for a 500 kg to grow into one ton?

      There are many professionals from all over the world eyeing to buy the largest glovemaker in the world, the largest stretch film maker in the world, so tell me what is the likelyhood of these stocks not being priced rightly? However, this doesn't mean that this chicken doesn't grow eggs and grow bigger. As long as the golden chicken keep growing, it will just worth more and more. Check out Public bank! If you don't know what stocks to buy, why not buy these golden chicken instead of gambling here and there? Just split your money and buy these golden chicken and you will be so comfortable when you retired! Why split? Because golden chicken also can get sick you know!

      Many misunderstood that buy low sell high as relative to its past stock price and they care so much about VOLUME. Of course we need volume to increase the stock price. Imagine you selling chicken at Mid valley as compared with Parkson. But it doesn't necessary means that you are buying a good and cheap chicken! Instead of doing that, you just have to find that golden chicken at some unpopular mall (aiya, since you guys like stock tip so much, i secretly tell you one lah.... HEVEA (oi, don't blame me ah. Although i want to be rich like Uncle K, but i don't want to get blame), and wait
lic to rush in and when it's overcrowded, some people offered high price for your chicken, sell it to them. You don't have to worry that nobody buy the golden chicken....

      In this way, even the company didn't grow in size or reduced earnings, the downside is very limited. Many gamblers used PE as a method to identify undervalued stocks which i strongly disagree! I'm not saying PE is completely useless, but big companies normally have very high PE  and smaller companies have low PE. I suggest you to look at EV/EBIT as this method includes the invested capital into account or other similar method.

      As many famous investors said, investing is an art. If it's all about numbers or technical analysis. All finance graduates or accountants would make it to the Richest list. I strongly encourage the serious investor to blame only yourself on your 'investments'. Buy chicken that Lay Eggs, that is growing in size to lay more eggs, and to buy them cheap! If you do not believe, you can try and find a list of chickens that have the above characteristic and you will find that Uncle K has all his stocks in this list.

    Buy according to your own research, there's no need to copy others' stock pick and blame so hard. Just find your own golden chicken, there're many in Bursa and give it TIME to grow into a BIG HUGE GOLDEN CHICKEN!

Note: I welcome anyone to comment so that I can learn and become a better investor.