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BenGan
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I am a Malaysian Chinese. I have been investing in the Malaysian stock market for a long time. I was working in bank before I retired and became a full-time investor. I believe that fundamental analysis and technical analysis are equally important when investing or trading in the stock markets.... More
My blog:
  • Quality Of Earnings Matters

    Earnings are important, but it's the quality of the earnings that counts

    When it comes to fundamental analysis, the most important item is earnings. Indeed earnings are the lifeblood of a company. Without earnings, a company cannot survive. When a company reports earnings that are above expectation, the price of the stock rises. And when it reports earnings that are below expectation, the stock price drops.

    When we look at earnings, we should look at earnings per share (NYSEARCA:EPS) and not only at the amount. A company earning RM10 million with an issued capital of RM10 million comprising of 10 million shares issued at RM1 each is better than a company earning RM100 million but with a capital of RM500 million comprising 500 million shares of RM1 each. While the former's EPS is RM1, the latter's EPS is only 20 sen. Many people look only at the amount earned when they should be looking at the EPS.

    Another feature often overlooked is the quality of the earnings. Earnings from sales and received in cash is the highest quality of earnings. Earnings placed under Accounts Receivable may not be fully realized, and therefore has a lower quality. Earnings from sale of assets, not repeatable, are the lowest form of earnings. So when you look at earnings, you must take into consideration the quality of the earnings.

    Ideally, earnings should go up in tandem with sales of the company's products or services, year after year. Sometimes earnings improvement is the result of cost cutting. If the cost cutting comes from decreasing the labor force thus demanding more work from each worker, this is not so good even though competency is enhanced.

    The best scenario is that the quality of its products is upgraded resulting in more sales and better margins.

    Next time you look at EPS, don't forget to look at the quality of the earnings.

    Please click f if you find this article useful. Thanks.

    Apr 13 8:50 PM | Link | Comment!
  • The Sure Way To Stock Market Success

    Knowledge, wisdom, discipline and patience are what you must have to succeed in the stock market. Without knowledge, you can't compete. Without wisdom, you can't strategize. Without discipline, you can't implement, and without patience, you can't control your emotion. Never allow greed, hope and fear to control you. To have a good knowledge means knowing what is happening around you locally and internationally. What is happening in some countries, especially the big ones, like America, China, India, Brazil and the European countries can have a profound effect on small countries like Malaysia, Singapore, Indonesia, HongKong, Japan, and Taiwan, to name a few. Of utmost importance is that you must know how to analyze an annual report of a company. Once you know this, you will be able to distinguish a good stock and that of a rotten one. A rotten stock is like a bad egg which will not hatch no matter how long you sit on it. Wisdom is the excellent use of knowledge. Without wisdom, knowledge cannot be put to good use. For example, if you know that smoking, gambling and alcoholism are bad for you, but you continue to smoke, gamble and drink. This means you are not putting your knowledge to good use, and thus your knowledge is useless to you. Having knowledge and knowing what to do are not good enough. You must have discipline to implement those actions needed to bring about success. If you know that buying in a downtrend is stupid, but continue to catch the falling dagger, you have no discipline. Impatience is the cause of many a loss. The market is designed to transfer money from the impatient to the patient. So you have to be patient. If you overpay, even for a great stock, it will be a long time before you see a good profit. When it's not the time to buy, don't buy, otherwise you will soon say to your money, "bye, bye." Investing in the stock market is a serious affair. Don't take it lightly. Success is sure to be yours if you have knowledge, wisdom, discipline and patience. Unless you are well prepared and well planned, success may just remain a dream. Good luck and may God bless your every trade.

    Mar 22 10:41 PM | Link | Comment!
  • Control Your Emotion Or Other People Will Control You

    Many people are controlled by fear. Fear of losing an opportunity causes you to act in haste. Fear of losing your paper profit causes you to sell out too early. And fear of losing everything causes you to sell right at the bottom. Although selling right at the bottom is caused more by frustration than anything else, fear also plays a part. How do we overcome these kind of fears? Knowledge is the best weapon. When you know, people cannot scare, frighten or intimidate you. They can't con you in anyway.

    Hope causes you to hold on to a falling stock. Sometimes your hope is rewarded; your stock turns around and you make a profit. Unfortunately, hopes often become hopeless. Experience tells me that it is much better to keep an uptrend stock and let go a falling one. This strategy is vital, simply because a trend in motion is likely to continue. Hope also causes people to buy into excessively high PE stocks. I prefer what is good today and better tomorrow.

    You often hear people say: "Don't be greedy." Actually greed is necessary if you want to make big money. How else can you get a ten-bagger if you are not greedy.

    But unsatisfied greed is bad. Bulls make money, bears make money but never a pig. (A pig is someone who will not sell, not matter how high the price goes up.)

    Everything has a fair price. When a stock is overpriced, your concern is to sell it. The best way I know is to use a trailing stop-loss which is a valuable device to prevent you from selling out too early.

    Mar 21 10:59 PM | Link | Comment!
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