Posted by Frank Soweto > 2014-01-14 09:43 | Report Abuse

A wise investor once gave me this advice from the The tribal wisdom of the Dakota Indians, passed on from generation to generation, says that, "When you discover that you are riding a dead horse, the best strategy is to dismount." :)

Posted by KC Loh > 2014-01-14 10:50 | Report Abuse

can always try the slower bullock! speed is questionable in distance covered and cerebral aspects! LOL

Posted by kcchongnz > 2014-01-14 11:06 | Report Abuse

"When you discover that you are riding a dead horse, the best strategy is to dismount."

Welcome Frank, long time no hear.

Let us discuss what are the few things which we should check if you should sell this particular loser (company name withheld) in your portfolio.

1. Have we made some significant mistakes in the analysis of the stock?
a. For this stock I doubt many people made any analysis at all. If ever there is any analysis, it would have been based on the reports of the company and analysts who have projected ultra rosy prospect for the company years ago in its acquisition trail.
b. Has the prospect projected been realized? Obviously not as its share price has dropped from an adjusted price of more than ten Ringgit per share in 2007 to less than half a Ringgit now.
2. Have the fundamentals changed drastically?
a. Well I haven’t done any fundamental analysis in 2007 and do not know its fundamentals then. However looking at its fundamental now I can say it is horrible.
i. It has persistently making losses for years. Even if there is any profit declared, I have doubt it is real. The cash flow is horrible.
ii. It has high net asset backing (not tangible though as it has very high intangible assets) per share but the quality of the assets is so poor that I doubt there is anything left for common shareholders if liquidated. The only value it has is just a pure option value in its listing status.
iii. There is no visibility in future earnings with my eyes.
iv. I don’t see the management is doing anything to improve the business.
3. Were we wrong about the management or the deterioration of management decisions?
a. This will make a great story about the management, refer to the link below:
http://whereiszemoola.blogspot.co.nz/search?q=knm
b. There is absolutely no credibility on the part of the management.
c. Management is still making “wonderful” decision recently to buy back its own shares with its backside.
4. “If we didn’t own it, would we be buying it today?”
Need I say further?

So the long term investors of this company, are you suffering from this cognitive bias of endowment effect due to your loss aversion and hence causing you this disposition effect?

Posted by houseofordos > 2014-01-14 11:54 | Report Abuse

I have had the unpleasant experience of seeing the share price of my losers soar immediately after I ve given hope and sold them.... This is also one of the reason its hard for me to cut my losses for fear of missong out on the recovery...

Posted by bsngpg > 2014-01-14 12:48 | Report Abuse

Houseofordos : Ha ! Ha ! I have had many same experiences as yours. That’s why my wife gave me a nickname: “black star of the share market”股市衰星. After I sold, the price will go up. After I bought, the price will go down. The shares I hold will not move up. So if you need KFima to up, just ask me to sell lah. It is easy. This is “ming shui”命水。I cannot do anything about it.

Posted by ganasai > 2014-01-14 12:51 | Report Abuse

ya, this is the people always make mistake, buy high, sell low. Cut loss point really got its useful. But a lot people not follow until loss 90% then only want to sell. Unfortunately, the downside for the stock is no more, after the heavy selling. So, this is why the stock can jump up big, and you regret to sell with big loss.

Posted by andychucky28 > 2014-01-14 13:42 | Report Abuse

Do you know why .... After you sold, the price will go up. After you bought, the price will go down. The shares you hold will not move up? It is explainable.

Posted by kcchongnz > 2014-01-14 13:57 | Report Abuse

The sunk cost trap or the Concord fallacy

An investor have spent say RM100,000 buying 10,000 shares of a certain stock at RM10 a piece 7 years ago. Now the stock is trading at say 48 sen and the 10,000 shares is worth only RM4800. So since the share price has dropped by 95%, there won’t be any more downside to this stock, and there is only one direction to go, up. Is that so?

Welcome to the fallacy of sunk cost in investing, “holding on a loser until it breaks even”. I am sure just four and a half years ago when the adjusted price of this stock was at RM4.00, the same person would have said the same thing that there wasn’t any more downside as that stock has dropped by 60% at that time.

Worse yet, some investors try to turn a losing investment around by “throwing good money after bad,” which can have devastating consequences when they increase their position in a poorly performing stock that continues to fall. This is sometimes referred to as trying to “catch a falling knife.” Admitting failure isn’t easy, but sometimes it’s the least costly way out of a poor investment.

How would one decide if this is a sunk cost case? Go learn about the company’s business now and its future; study its financials thoroughly; watch the actions of the management; and finally determine if the value of the company worth its present price, and forget about the sunk cost.

Not more room for downside? Let me ask you if the stock dropped another 30 sen and becomes 18 sen, what is the percentage of loss? It is 63% drop. To go back to the 48 sen level, the stock needs to go up by 167%.

Posted by houseofordos > 2014-01-14 14:06 | Report Abuse

successful investing must require some sort timing and luck besides just FA... businesses are cyclical and using ratios alone without forward thinking on the business prospects can result in buying at the peak of the cycle.... My loser stock today I m holding with more than 30 pc paper loss is Evergreen. I bought this stock in 2011 using rear view investment method...blooking at its past history showed very good numbers and The biggest mistake I made was to extrapolate past results into the future.... ended up, the company over expanded during good times, suffered from poor efficiencies due to overcapcity and made big losses this year... i m still holding this stock with the hope that a recovery in the wood business will enable it to turn around. Furthermore the EBITDA has turned positive in previous quarter... lets see if I ll be proven right this time

Posted by ganasai > 2014-01-14 14:33 | Report Abuse

still need to depend on company fundamental. As my case: sunway. when its combine and listed, the price drop from 2.8 to 1.7x. I loss almost 50% But I decide not sell, and collect some more. 2 years later price jump to more than 4. So sell or not, very depend on you know that company or not.

Posted by bsngpg > 2014-01-14 14:45 | Report Abuse

I have Evergreen too. Bought on 17 Aug 2010 at 1.57 and cut loss on 25 Feb 2011 at 1.37. Ha! Ha! I knew to cut loss too,

In fact, I am selective in holding losers; I am not really hopeless lah.(last night, in other thread I described myself stupid).

My losers are JTiasa, Notion. Nevertheless, my opportunity cost is significant as the few counters I bought in the last 12 months increased significantly such as GTronic and MKH.

Posted by bsngpg > 2014-01-14 14:48 | Report Abuse

Checklist #4: “If I didn’t own it, would I be buying it today?”
The answer is definitely: NO!

Posted by ganasai > 2014-01-14 15:00 | Report Abuse

some stock got cycle. just the "up" cycle may need some time to happen. So if you are investor, just collect it at low low price and wait for "up" cycle to happen. I like the "market filter" and monitor those good fundamental stock but with low price. when the rsi stable means stock start stable. Then your collect action can start.

Posted by bsngpg > 2014-01-14 15:26 | Report Abuse

Tan KW : Why my both losers cannot pass chklist #4: not buying today.

Notion : when I bought it, the biz of HDD was good. The contribution from camera segment was higher and higher each qtr. Thus I bought Notion. I am OK with the one off incidents such as flood, fire and currency lose. But I will definitely not buying Notion today due to the unattractive, if I do not describe it as dying, HDD.

JTiasa : I bought it during the high of CPO cycle. Today it is still very great if I follow the view of the highly respected Mr Koon YY. But, there are few doubts (uncertainties) surrounding the company, such as debt, CF and the PE. I am neither an expert nor rich man, so why should I buying a company which is relatively less certain. If I like CPO, I can choose KFima and MKH. Yes, both are not stocks with pure CPO but both will benefit from the up cycle of CPO too as JTiasa, while demonstrating a much clearer profit visibility and higher dividend yield than JT.

Every time I talk to you, I want to express my highest respect to your great contribution on great articles in I3. Thanks again.

Posted by regnig > 2014-01-14 16:38 | Report Abuse

Tan KW, can i know if the major steel companies like Annjoo is worth to collect now since steel industry is in "low" cycle?

Posted by Ayoyo > 2014-01-14 16:50 | Report Abuse

From a trader's perspective, being shaken out of a trade and then seeing the stock rise almost immediately remains one of the most frustrating experience. However, just as the investor, if the trader can still justify that the 'fundamentals' of the price and volume action remain intact, he can continue to stay in the trade.

Understand that the business of speculation is human induced. Therefore, just as any humans, the syndicates must time their play so as to reap maximum profit . That means, if they have an opportunity to ride your emotions of fear (to collect at a cheaper price) or greed (change of play to drive higher due to better participation).

Therefore, if one were to follow a mechanically created system, eg MACD, Stoch or RSI which are price-centric, they can be easily shaken out when the market turns a little worse but it's not an inherent weakness of the stock itself.

Technicians make the mistake of following the indicator rules without understanding the PSYCHOLOGY behind the move. You hear of people mentioned 3 black crows, marubusu, etc etc and that it's immediately means bullish or bearish. So, the hapless guy will say bcos its 3 black crows, its bearish. Try to decipher the psychology behind that formation. Match it to volume to better your reading.

Therefore,my contribution to this article from a traders perspective is that if one were to buy a long consolidating (say 4-6 months min) stock on a start of a breakout momentum, if the stock were to retrace that move and go lower, is it going lower because of its inherent weakness or is it moving lower in sympathy with general market conditions?

If it's the former, run like hell. If it's the latter, hold it because your analysis is still valid. Bcos this stock will bounce back very strongly and exceed their initial price.

What's the psychology there? The syndicate was preparing for a play but for some reasons, a bad news QE tapering for an example, comes out. The whole market is taken down. What do you think the syndicate will do? Absorb your stock at high price or maximize my profit by buying lower, quietly.

Use volume as your guidance. (Save for giving you a fish, This is the best tip I can give you)

PS: and I absolutely abhor technical indicators. One of the stupidest guidance is that a stock in overbought can continue to be in overbought territory for some time. Ok, then what's the meaning of overbought. Let me tell you a secret. You can see this on the chart itself - because the price continues to rise.

Posted by Frank Soweto > 2014-01-15 07:01 | Report Abuse

@KC Loh the one with 11K posting - got to be careful as too many KC lohs around lately LOL - hopefully you're not referring to Sapi or fish cause I rather jump to a donkey LOL

Posted by Frank Soweto > 2014-01-15 07:04 | Report Abuse

hi KCchongnz A very happy and belated new year to you and hope all is well.
let me try to discuss with you and see if my answers will help your questions
1. Have we made some significant mistakes in the analysis of the stock?
I dunno about the 'we' there but I sure know that I definitely made a huge mistake reading all the analysis reports about this fabulous so called company that I lost my pants off listening to their buy call :)

b. Has the prospect projected been realized? Obviously not as its share price has dropped from an adjusted price of more than ten Ringgit per share in 2007 to less than half a Ringgit now.
'We' have a duty to continuously enhance the shareholders* values from time to time to announce projects whether it is viable or not in order to 'goreng' the share prices. To do multiple 'gorengs' we also have in the past 'trying' to privatize our 'undervalued' company to create excitement for our minority shareholders. When the ikan bilis got overly excited like in mid 2009 I the General happily sold almost 64 millions shares at ave of 1 buck a piece netting me a cool 64 millions :)
shareholders*= majority :( not ikan bilis solly

2. Have the fundamentals changed drastically?
Fundamentals? oh please! we are out of ideas now to feed the investment public 'news' that would excite them for the next goreng session :( any suggestions will be much appreciated :) juz so you know - we have tried a, the 'earnings' guidance b, our 'new' projects won, c, privatization (can't do that no more cause the last time we pulled that stunt bursa fined us directors 25k each :( d, the continuous delay listing of our German torpedo in SGX - u think the Singaporean authorities suspecting something amiss?

Even if there is any profit declared, I have doubt it is real. The cash flow is horrible.
Profits? haha if they're real we would have given dividends as promised since 2010. if you'll may recalled after the disastrous qtr results in 2010 I as the general on behalf of my great empire promised u all that all future profits will be given 50% of the dividends. please be patience

The only value it has is just a pure option value in its listing status
ah we got to be better than that - we still have peter pan in UK which we're trying to find financing since we first announced the projects in 2010 - only been 3 years plus mah - do you know any suckers err bankers ar? also dun forget ha we still have our 'hope' to list our torpedo in SGX which we paid a lot you know - again only 1 year plus delay mah - why you people so impatient one and once it get done it's gonna BOOM - u all juz wait hor - can or not? mean while I'll keep it interesting for you fellas with my up 3 cents and down 2 cents and up 2 cents and down 4 cents weekly adventures :)

iii. There is no visibility in future earnings with my eyes
haiya beauty is in the eyes of the beholder mah err in this case my loyalist lovers mah - I can give my shareholders 'good' news and they can take it from there. we worry about the future when the future comes :)

iv. I don’t see the management is doing anything to improve the business
aiyoyo where got time? CNY coming liao I better think of a reason to goreng first for my big fat angpow

Posted by Frank Soweto > 2014-01-15 07:06 | Report Abuse

3. Were we wrong about the management or the deterioration of management decisions?
hey nobody get's it right all the time. I give you all the punting excitement, the news,the hope and I can promise you this like how I promised to give you all 50% dividends on future profits that once I get my house in order and if we can big IF ya we will scale to the top of himaya mountains.

a. This will make a great story about the management, refer to the link below:
http://whereiszemoola. blogspot.co.nz/search?q=knm
we took care of that fella already juz like how I took care of my 'traitor' uncle - that is why he has been missing - check his last post :)

b. There is absolutely no credibility on the part of the management
of course we are credible - like I said earlier we continue to enhance the shareholders* value from time to time and we are now accepting any suggestions to goreng up our share prices. my company motto has been goreng comes first and as long I I'm the top 40 richest in bolihland that's all it matters to my supporters. - again here shareholders* means majority hor not the kecik mai :)


Management is still making “wonderful” decision recently to buy back its own shares with its backside.
No that is NOT true at all. I have instructed my boys to keep the price from sliding downwards and in order to do that we have to goreng from time to time and rest assured that we do not use our own funds to do the buyback - where we got the funds but we sure had FUN gorenging it from .40 to .50 to keep all my loyal followers especially my ex commander excited :) hell with those TA buggers I'm the supreme commander and I call the shots when to goreing and not according to any dumb charts :)

4. “If we didn’t own it, would we be buying it today?”
If I have that many suckers you think the price still hovers at all time low? look I played out lot of those ikan bilis from 10 bucks to now heck I even played those foreign funds and our local big boys too so if you want Fun and excitement feel free to buy some I sure can promise you one of these days I will take u up to himaya mountain but once there watch out for the slippery steps :)

sarcasm aside KC the beauty of the market in bolihland for the listed company owners is that no matter how bad or poorly run they still have plenty of loyal followers/bravehearts :) of course it is very commendable for you to keep highlighting these way below par managements specifically to newbies and some long term holders but likely will fall on deaf ears especially when there is another run err goreng session.

cheers and hopefully you have been scoring well on the course :)

Posted by bsngpg > 2014-01-15 07:26 | Report Abuse

Checklist #3. Were we wrong about the management or the deterioration of management decisions?

In my opinion, checklist #3 is the most critical one. If I have admitted this mistake or discovered the deteriorated management, the first and only thing is RUN. Else it will be like the example quoted by kcchongnz in post about “Sunk Cost/Concord Fallacy”( http://klse.i3investor.com/blogs/kianweiaritcles/44855.jsp), from RM4 to RM0.48 and then RM0.18. I can contribute 2 data points to KCChong’s Concord Fallacy which are AKN and Transmile. I lost till pant down.

The keys are : Can you admit this mistake ? Can you discover the deterioration of the management?

Posted by kk123 > 2014-01-15 07:59 | Report Abuse

U shld strictly cutloss if say the share drop a lot

Posted by kcchongnz > 2014-01-15 12:09 | Report Abuse

Frank is getting heated up again on his once wonderful investment. But he is smart fella. He knows about psychology and cognitive bias behaviour and hence understood sunk cost means well, sunk, and got back what was remainder (and knew what was lost was lost and forgot about it) and moved on. He made great profit then in MyEg, Pantech etc.

If any newbie hopes to learn any thing about investment, Frank is one of the most qualified to talk about it with his experience.

bsngpg is another one experienced guy whom many newbies can benefit from his experience. We all have gone through various boom and bust, been there, done that. Well I know I know, not many people would hear and agree with us. That is ok. We just talk cock and have some fun here.

Posted by KC Loh > 2014-01-15 12:23 | Report Abuse

Aik, frank came back with a vengeance I see! Hehehe

Happy new year belated to you franksoweto! All quiet so far in the zoo front! LoL

Posted by Frank Soweto > 2014-01-16 02:19 | Report Abuse

@Kcchongnz - thanks for the kind words and you're being far too kind LOL yes they can learn from my BAD experience to avoid these speculative counters and hopefully they will since another great INSIDER experience coming from HorseField above :) I did very well last year especially with my limited FA and even more limited TA - not to boast here - but I believe and learnt the hard way the 'secret' to success in the market at least 50% of it already is that you DON"T invest in speculative counters and especially the flavor of the day.

I only stumbled on i3 thru CPteh BlogSpot and here I met KC Loh ( the original one )when I was real LOST thru my big bet on General's stock - need to do some soul searching as to how can 9/10 research reports all with high BUY recommendations can get it SO wrong. Kc Loh has helped me a lot though sapi fish might disagree LOL and then you came along wow like this 2 KC's combine together is like they say in Cantonese 'tin har mou tik' LOL.

yes it was very painful to cut loss on General's and to move on and am really glad I did as I've recovered all my losses thru Myeg ( I still have a little - every time I sell it keeps moving UP LOL),pantech,fibon,Scomies,willow etc. Of course the bullish market helps a lot too but then again if you're holding lousy stocks it will not help much. The market is at all time high and this stock is still hovering at close to all time low. if I continue holding Not only I will NOT recover but drop another 30% and sure it 'MIGHT' one day be goreng again - let's hope so for our frend YS sake :)

I really admire you spent so much of precious time here doing all these superb time consuming analysis when you can of course spending time on the course and I actually want to kick myself on the head for not buying pres bhd and MFCB - sort of like wasting good analysis like one of my email friend said! That is the other 50% of being successful in the market - buying fundamentally stocks with good safety of margins :)

Posted by Frank Soweto > 2014-01-16 02:22 | Report Abuse

LOL KC Loh I'm very passionate with regards to General hehe and Happy belated new year to you too :)
as for the zoo front hopefully it stays that way as times are still tough - 20 is still a lot of money for frivolous internet spending LOL

Posted by Frank Soweto > 2014-01-16 02:41 | Report Abuse

HorseField Personal experience, I was an proposal engineer working in (withheld name) company since I graduate 4 years ago (2009 yr). The global economy wasn't good but i was very happy as i still can manage to join the so called "OIL & GAS" industry for my first job.

I was doing proposal/quotation/bid for the project from globe market. The quoted gross margin was shocking me which is only 5%. sometime it can be 0% as that time don't have any project. we facing a lot competition from overseas especially Korea & China. The gross margin is still remains low even during good time in 2010 & 2011.

Someday in 2010, GM come to my dept and announce that company awarded a giant UK project. Since then, every1 (of coz including myself) was gone crazy to buy the share and share was shoot up for awhile. However, since then price drop to current 40+ cent.. I still holding the share till now.

There is few things I learn from this stock: 1) never listen to "news" 2) never invest low earning margin stock, business moat is very important 3) cut loss. I will never ever touch similar stock again. I rather miss the earning opportunity than loss all money for those stock.


A very good sharing above from someone who was? with General's organization and hopefully the long term holders take note. may I add that even with huge contracts win but with razor thin margins and any delays or cost over runs will turn into losses but of course the investment public will be only excited with the 'good news' and this is where it is important to take heed Kcchongnz advice to read thoroughly the accounts. of course with the release of 'good news' will also be party time for our General's next goreng session - be sure that there's real food to be goreng and not you that the General is gorenging :) ah like kcchongnz said not many loyalist will agree and we're here juz to talk C*&K especially on a slow day like today :)cheers and may the force be with you :)

Posted by kcchongnz > 2014-01-16 09:17 | Report Abuse

One of the best posts from a new forumer. Right from the horse mouth.

Posted by HorseField > Jan 16, 2014 12:31 AM | Report Abuse
Personal experience, I was an proposal engineer working in (withheld name) company since I graduate 4 years ago (2009 yr). The global economy wasn't good but i was very happy as i still can manage to join the so called "OIL & GAS" industry for my first job.

I was doing proposal/quotation/bid for the project from globe market. The quoted gross margin was shocking me which is only 5%. sometime it can be 0% as that time don't have any project. we facing a lot competition from overseas especially Korea & China. The gross margin is still remains low even during good time in 2010 & 2011.

Someday in 2010, GM come to my dept and announce that company awarded a giant UK project. Since then, every1 (of coz including myself) was gone crazy to buy the share and share was shoot up for awhile. However, since then price drop to current 40+ cent.. I still holding the share till now.

There is few things I learn from this stock: 1) never listen to "news" 2) never invest low earning margin stock, business moat is very important 3) cut loss. I will never ever touch similar stock again. I rather miss the earning opportunity than loss all money for those stock.

Gross margin at 5%! What would be the operating margin after the company allocate the administration and other expenses to that project? Negative? What if there is a mistake in the costing? What about cost overrun due to increase in cost of material and/or labour? What if mistakes made in the contract, rework, unusual wastage, delay, liquidated damages for delay? etc? Won't happen? I can tell you, these cost overruns happen all the time. So don't think that when a company can a big project, the company sure make tons of money. the reverse is also true very often.

There is another thing the public may not know. Why does management takes up this type of low margin and risky jobs. Don't they know? Of course they know. But they don't give a damn if the company lose money or not, as long as they make money. You know what I mean?

In contracting works, it is a dog-eat-dog world out there. You have to have a niche, an advantage over others, and a super good and credible management team. These stuff definitely not within the company Horsefield worked before. But there are some in the market, but very rare. One company is, you sure know which one I refer to. Yes, Pintaras Jaya.