I am always fixated with swing trading because I do not have patience with most things in life. Whenever there is a 15% unrealised gain in a position, I will be very tempted to monetise the gain. I believe that I am in the category of “sell winners too fast, hold on to the losers”. To some extent, I truly believe that we live in a world that is filled with ‘black swans’. Hence, the bird in the hand theory matters. Swing trading provides wealth creation opportunities in the shortest possible time frame. On a serious note, one should seriously consider long term investing in order to balance out a portfolio that is filled by a combination of short-medium and long term trading / investment positions. It is usually the case that multi-baggers come from long term investing. To qualify for long term investing, one should truly look beyond an investment horizon of more than 2-3 years.
Long term investing requires careful analysis of the fundamentals. There will be less focus on technical analysis. My screening criteria will be anchored towards the fundamentals of a security:
The results are shown as follows (as of 26 July 2017):
Poh Huat (a furniture maker) was covered in an earlier posting. The recent gain in its share price is very much in tandem with the growth / recovery in Malaysian exports.
Based on a simple desktop valuation analysis and using earnings capitalisation, we derive an indicative equity value of RM1.96 which is quite close to the actual share price of RM1.90. The analysis has considered an assumed 25% discount as margin of safety.
As we are emphasizing on long term investing, we should not be discussing the technical aspects. Nevertheless, for a complete picture, as shown below, the current trend appears to be on an upward trajectory, with a possible current pull-back trading opportunity.
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