Yap has been writting constantly on investing. coincidentally, his latest post on investing (PE ratio - sell, hold, or buy more) comes in the same tone with my recent investing story with QL Resources Bhd.

Stock trading (or investing) is an unknown world to me in the past… nonetheless, i’ve picked up on the learning curve on that after i resigned from my day job… read forums, investing blogs, and quite a few good investing books and had a few trades for the past 6 months.

My bible in stock trading

The first stock i ever bought in my life is QL Resources Bhd, a main board stock trading on KLSE, symbol (QL:7084). as it was my first time, i’ve done quite some homework (based on rule#1 concepts - or the so-call value investing) on the stock before i really got in.

What’s so special about QL Resources?

QL is a diversified agricultural-based group of companies. The Group is principally involved in marine-based manufacturing, integrated livestock, oil palm related and other distribution activities. in details, QL supplies eggs, fishmeals, fish, palm oild (via crude palm oil milling). as i ran thru their numbers, i was amazed to read about their past financial standings.

• EPS 5-Y/10-Y grwoth rate yield an amazing 21.5/21.7%.
• ROE was sitting on an astonishing plus-minus 20% for the past few years.
• Debt-to-equity ratio is on healthy level.

Based on Rule#1 calculation, i determined that QL sticker price (intrinsic value) is at RM4.40. take out 50% for margin-of-safety (as we always want to buy a dollar of stock on a price of 50 cents)… the MOS’s at RM2.20/ share. at the time of the study, the stock price was floating around RM2.70 - RM2.80 range.

Considering on several ‘feel-good’ factors: the company is running on a stable business (eggs, fish, fishmeal - you take them day and night no matter KLSE’s sitting on 900 points or 1300 points), impressive growth rate for the past 10 years, sustain its profitability during bird flu and SARS time, and more importantly, the company is audited by a well-known auditor KPMG (malaysia’s stocks, you know…); i decided to buy in QL with a lower MOS (about 70%) on RM2.75, and setting my target selling price at RM4.00.

The wrong turn

Not too long after it, the stock price rised and it’s soon sitting on a constant RM3.2 - 3.4 price tag. you can tell i am happy with my first attempt. it was a good buy, but as KLSE index shot up 40%++ for the past 12 months, my remiser’s (a successful hardcore short term trader) picks was gaining so much faster than QL.

Eventually my patients ran off, i sold QL at RM3.2 (on no basis) and jumped on some other penny stocks for short term gain. overall result on the trade - 16.4% return before fees in 6 months time.

Not bad huh?

Now one month later, at current time of writing, guess how much QL is sitting? RM3.84/share! RM3.84 - that’s RM684 per 1000 shares compare to RM3.20. RM3.84, if i’d do nothing and waited for a month (just roughly 20 trading days!), i would have yield a sweet 40% return on this!

Now how BAD was that?

I’d done my study, i’d set my target, i’d already seeing positive results - yet, the sense of greed ate my confidence and patients - a trade that suppose to be a beautiful win turned out to be a screwed up (yes, even if it earns money)!

Guess this’s a good decipline lesson.