Thoughts about share investments

Objective:
As everyone is different, the aim of investors to invest in shares listed on the stock exchange is to seek a good return on their investments.


The intention is to buy low and sell high. It is easier said than done.
The question often asked is what is 'low' and what is 'high' for a stock price? I have often observed investors who bought shares of a certain counter at a certain price, which appeared to be high, but which went up very much higher. At the same time, I also observed some investors who bought shares of another counter which had dropped substantially from its recent high, lost money when the price of this counter plummeted to unbelievably low levels.
Human weakness:
I have also observed investors who purchased shares of a certain counter at a certain price, neither too high nor too low (based on their price-earnings ratio), held on to the shares even though the price had gone up 5 times the original price, only to see it plummet to a very low level, thus causing them to suffer huge losses. Many counters listed on Bursa Malaysia (formerly KLSE) suffer the same fate. Some notable ones are:
1. Promet
2.API - changed later to Uniphoenix, and now Apex securities
3.MUI - currently traded around RM0.20. It was as high as RM20+ in its hay days.
4.MBF Holdings
5.Duta - now Olympia
6.Nam Fatt - delisted
7.Magnum - taken private by parent MPHB
8.Repco - went as high as RM60+
9.MAA
10.Renong - now UEM Land
11.Pengkalen Holdings - now PM Holdings
12.Sin Heng Chan
13.Supreme
14.Union Paper
15.Antah Holdings
16.Khong Guan Holdings
and many others. Some of these have since changed their names after restructuring/taking over, or delisted from Bursa Malaysia.

Another human weakness is to follow blindly whatever tips one hears and buy the shares based on rumors. Many investors lost heavily when buying shares in Repco; a friend of mine bought them at RM69. Worse, he bought them on margins. When the bubble burst, he went into heavy debt. He managed to pay off the debt only after many years of hard work.
A lot of pains are caused by human greed. A case in point was the stock market euphoria in 1993, when even a loan stock with a face value of RM1.00 was chased up to RM4.00. 2 years later, you could not find a share listed on the second board (now merged with the main board), which was of a much lower status to the main board, selling for less than RM5.00. If you bought a hot stock in the morning, you could make a 50% profit in the afternoon. At this point, taxi drivers would stop by at their remisier's trading room, where housewives also crowded around,  and office workers were busy executing their buy and sell orders. People everywhere talked of nothing but the stock market. Tips were freely given. As a result, productivity suffered. The situation was so bad that the prime minister had to plead with the working mass to stop this madness. Then came the infamous Asian Financial crisis in 1997. Many people lost their fortunes overnight. This financial crisis only ended after a few years.

Market weaknesses:
The stock market is never perfect. It is subject to manipulations. This includes insider trading. How else can one explain the phenomenal rise of some shares and subsequent announcement of a takeover? This also applies to companies to being taken private. Companies in the Ananda Krishnan counters, like Tanjung, Maxis and Astro, were taken private at very high prices. Unless someone has insider information, they would not dare to buy Maxis at RM15 prior to the privatisation exercise.
Fraud is another common practice among listed companies. This can come in many forms. The most common being the company buying an asset from a director at inflated prices, which has to be written off some years down the road, causing a terrible loss to the company. A classic example being Multipurpose Holdings, which bought some land in Kelantan at much inflated prices from its director. The director was later jailed for fraud when his camp fell out of favor with those in the corridors of power.
The most blatant fraud was committed on Pahang Consolidated, when false share certificates were printed and put in circulation. At that time, late 1970s, before the introduction of CDS system, share certificates had to be delivered physically after the shares were sold. Many investors lost heavily when the company applied to delist and dissolve itself. Until today the perpetrators are never caught, intentionally or otherwise.
The most recent case of unjust deal was done when San Miguel of Philippines took over Esso Malaysia in April 2012. On the announcement date of the deal, Esso Malaysia was trading around RM5.00. The deal involved the taking over of Esso Malaysia, a listed company on Bursa Malaysia, together with the major sharesholder's, (in this case Exxon Mobil), other unlisted assets in Malaysia, and the price offered to Esso Malaysia's shareholders was RM3.59, when the share was trading around RM5.00. Are the acquirers not obliged to buy the target company at the price not less the the market value at the particular time? Also, is it fair to lump the major shareholder's other unlisted assets with listed Esso Malaysia, which means that if the value of the unlisted assets is less than RM3.59 and the value of Esso Malaysia is more than RM3.59, it has to be brought down to make an average price of RM3.59. In spite of numerous protests and appeals, the Government deemed it fit to approve the deal. However, the acquirer did not manage to buy 90% of shares in the company to delist it. Trading resumed and the share price plunged to around RM2. But over time, it recovered to trade to a high of RM7. But due to political factors, it had since turned downward again, and today, 29/6/2016, it is traded at RM3.72. The company is now known as Petron Malaysia.
Back in 1970's, a second board counter by name of Union Paper had its share price manipulated from around RM2.00 to RM12.00, in spite of numerous warnings and letters to the company to explain its rise. It was subsequently suspended. Those who sold the shares short were forced to buy-in at very high prices, RM14-RM15, when the contracts were due. Subsequently investigations were carried out by KLSE (Bursa Malaysia) and a Tan Sri  of Promet fame was prosecuted and fined RM1 million.
Over and above these cases, directors may mismanage/cheat the company and when the company is suspended from trading or wound up, minority shareholders lose everything. The directors may have siphoned off the money and stashed it in secret accounts overseas.
A case in point is the Kenmark Holdings ( a company controlled by a Taiwan director ) saga. This was a reasonably profitable company, until the CEO disappeared without trace. All efforts to locate him failed, until he finally phoned in to say he was sick and seeking treatment overseas. Whether this is true or not, no one knows. The company was subsequently put under receivership, and finally delisted from Bursa Malaysia, causing its shareholders heavy losses. Again, this shows that whenever the directors of a company misbehave, the shareholders. especially the minority shareholders, suffer, while the directors go scotch free. A side story of this saga involved the purchase of the shares by an investor/speculator. He bought a big stake, though not enough to trigger a mandatory general offer which stands at 32%, when the price plunged to around RM0.05, making it appear that he was taking over control of the company, but he subsequently sold the stake at around RM0.12, making more than RM16 million in profits.
Some people say that the stock Exchange is a crocodile pond, swarming with hungry crocodiles. If you are unlucky to fall into it, you make good lunch for them.
This person was charged in court for insider trading on Kenmark Holdings, as reported by The New Straits Times on 14 June 2016.

Investment stradegy:
Different investors use different investment strategies for their investments. It cannot be said which strategy is best. Some use charts of stock movements, some base their investment on stock fundamentals, while others base their choice on volume of trade and price movements. Still there are others which buy stocks based on rumors.
All have the target to sell high and buy low. But it is acknowledged that this is an impossible task, not only that we cannot tell when a price is high or when it is low. It is interesting to learn that a few investors that I know held on tightly to their shares even when they had moved up more than 100% of their purchase price, only to see them crashing to a loss a few months later. In some extreme cases, the loss was total, when the counter of that particular company was suspended from trading and eventually delisted.
Human greed is partly to blame for this unfortunate episode and luck also plays a part. Some people just refuse to sell their shares when they move down a few bids from their highs, even if they still sit on a very good profit. They believe the price will recover, (which sometimes do), and only then they will sell them. But I believe a profit is never a mistake, even if the price starts to move up after selling. It also happened that a person I know invested in more than 20,000 shares of Hong Leong Industries loan stock, which he purchased for around  RM2.80 per share. It was played up to more than RM10, but he totally forgot about it, until it came down below his purchase price. But he eventually sold them at around RM 3.00 when the price recovered a bit.
I have known investors who trade regularly, basing their purchase on rumors and heavy trading volumes, lose money over the long term. But those who bought shares based on rate of return and company performance more often than not make good profits. They studied the company performance over a number of years to decide on the company's price to earnings ratio, dividend yield, and net tangible assets and the current share price compared to its historical average to make a decision to buy. This method is seldom wrong.