Friday, 29 August 2014

Tales of two salemen

Salesman A : I am going this rural town to explore new business opportunity.

 

Salesman B : I will be going there to assess the market too.

 

After their trip to the rural town, both salesmen reported back to their respective company on the viability of setting up the shoe business over there.

 

Salesman A : Boss, cannot do ! I spent the entire day and noticed that almost all the people do not wear shoe ! If we set up our shoe business there, surely there will be no business. We should only go to places where people wears shoe.

 

Salesman B : Boss, wonderful ! I spent the whole day and noticed that nobody wears shoe and thus it is a huge market opportunity. Give them the awareness to wear shoe to protect their feet. If we set up our shoe business there, it will surely flourish. It is a new business frontier.



This is a story I think many might have heard before. It is about 2 salesmen have different opinion on how they view business opportunity on a particular same situation.



*****

 

I see the above story is quite relevant to our stock investment. Essentially, stock investment is like putting our money into a business which we think it will flourish over time. The business model must not only sustainable but must have plenty of opportunities to expand. It is not good enough just maintaining the current rate of doing business. Revenue must increase over time. Profit will catch up as the company will improvise to reduce cost as the company understands more deeper and have more knowledge about the business over time. With revenue increasing and cost reducing over time, the only thing that sure will go up is profit.

 

Back to the relevancy of the above story. A good businessman or salesperson will see great opportunity ahead in an uncharted territory while other will take the easy path of following the established market. Of course it will be safer to join the established market but competition is higher as you will be the newcomer up against the big guys. Investing in stock market is the same. A good investor or value investor will see great opportunity ahead at time when the company is moving into uncharted business territory. Average investor will normally shun this type of company until they show good results. Granted. But by the time the company shows good results, the average investor like you and me will not be fast enough to see it. By the time we see it, the big guys are already in it and the average investor will have to fight it out with them or with everyone i.e. chasing after stock and end up buying at higher price which by then there is lesser room to go up further. Sadly, this is what most average investors do, that is, only take investment action when price started to move up, but not based on company's business fundamental. Company's business fundamental has been relegated to second priority. Even though it is nothing wrong with this, but it is not wise strategy. You will end up just another story of Johnny comes late. Surprisingly, many an average investor is contented with such situation.



Currently, stock market is full of pessimistic sentiment. Have you heard of this quote - "Maximum pessimistic is the best time to buy and maximum optimistic is the best time to sell". The problem is when maximum pessimistic has set in, we already short of money to buy because we already fully invested at the time of maximum optimistic. Whilst I don't fully subscribe to this quote but certainly there is one or two things to learn from this quote. I would advise investor to set out their investment goal first. Once you have set your investment goal, any situation of the stock market is time to buy or sell. I have set my investment goal for OCK since June last year. Here. You see, there were so many strong ups as well as many terrible downs since then until now but I have been patiently stood my ground because I have set my investment goal for this company right from the start. If I have sell or sell-then-buy-back which is the most favourite strategy among retail players, I think I would not have make that kind of profits as it is now. From what I gathered, the next four months will be interesting months for OCK. Yes. I can't wait for the New Year to come. The company has announced their quarterly results. Good or bad, you judge yourself or wait for analyst's report (this will be another Johnny-comes-late case again). But I am certain this will set a new tone for a better results for the coming quarters.



As for Hovid, the company has announced their full year results. Revenue improved and profit dropped slightly. I am satisfied with the results. As expected, not much of excitement. The company announces a dividend of 0.5 cents and this is good for any long term investment.

 

Its price (Hovid) closed at RM0.41 on 28.08.2014.

Its price (OCK) closed at RM1.40 on 28.08.2014.

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