WHILE ‘to err is human’ is an undisputable wisdom, is takes magnanimous courage – and nobility – to admit one’s erroneous act while openly sharing it with the world.
This is perhaps the most profound characteristic yours truly find in investor extraordinaire-cum-philanthropist Koon Yew Yin a.k.a Uncle Koon.
The bubbly 88 year-old can be equated to American inventor Thomas Edison who is said to have tested more than 3,000 designs of the light bulb and 6,000 different materials for the filaments before finally inventing a functional and affordable light bulb.
Like Edison, Uncle Koon is never ashamed to admit that he has erred (many times) along the way – after all, which investor in this wide world can claim to only be making money without succumbing to occasional losses which at times may overwhelm their gains thus making them an instant pauper or bankrupt.
In his latest blog posting aptly entitled “A Safe Strategy during Pandemic”, Uncle Koon shared how his ‘newfound’ love with steel stocks – and Leon Fuat Bhd in particular – has not been bearing the desired fruits.
The Malaysian version of Warren Buffet recalled that his temptation with steel stocks has its origin in listed steel counters reporting increased profit in their latest quarter ending March or April due to a rise in steel price.
Leon Fuat’s last traded price was 99.5 sen and its latest quarter earnings per share (EPS) was 11.65 sen. Assuming EPS for the next three quarters remain unchanged, its annual EPS will be 46.6 sen (4 x 11.65 sen) while Leon Fuat is selling at price-to-earnings ratio (PE) of two times.
“That was why I have been buying so much of Leon Fuat and I have also posted a few buy recommendations,” revealed Uncle Koon.
“Now I realise I was wrong in buying so much of Leon Faut even though it is selling at PE of two times because due to the COVID-19 lockdown, Leon Fuat’s workers cannot go to work to produce steel products.
Uncle Koon’s admission of being overly bullish on Leon Fuat runs parallel with FocusM’s recent exposé entitled “Uncle Koon’s Leon Fuat Push Not as Fruitful as Dayang, Supermax” in which yours truly argued that the timing factor – domestically at least – is not in favour of the rolled long and flat products specialist.
While last year’s glove stock rally at this time of the year had very much fuelled Bursa Malaysia into a regional star performer, the same cannot be said of this year with the FBM KLCI having contracted 5.75% year-to-date retail.
Coming to his senses, Uncle Koon now sees the harsh reality of how the full movement control order (FMCO) which prevented construction workers from going to work spills over onto construction industry contractors who refrain (temporarily) to buy steel from Leon Fuat or from any other steel company.
“Based on the same logic, Leon Fuat and all steel companies will also not be able to report increased profit in the next quarter,” projected Uncle Koon. “In fact, COVID-19 is also affecting all listed companies and all of them will not be able to report increased profit in the next quarter.”
So what should the ultimate remedy be?
“A safe strategy during the pandemic is for all investors is to cash out because all listed companies will not be able to report increased profit in the next quarter. I will start to buy back Leon Fuat when it reports increased profit,” reckoned Uncle Koon. – July 10, 2021
