Last year August, I wrote about MFCB as a long term value stock due to the strong fundamental nature of the company which meets all my metrics as a long term investment. As of close of Friday, MFCB closed above RM 8 and hit a new all time high. For those who missed my earlier write up for MFCB, feel free to revisit here :
With the permission of a fellow reader, who asked for my view in the course of the week, I will be sharing my views for the benefit for all.
Q: She said, "I held on MFCB for a long time, added when it dropped below RM 7. Yesterday I sold half at RM 7.45, today I sold the balance at RM 7.70. I am very heartache now as MFCB is RM 7.89. I feel painful because every time I take profit, it seems to go higher. When I hold it doesn’t move. How can I prevent this in future?"
A: In essence, this is about long term investing vs short term trading. For short term traders, they enjoy the thrill, excitement of fast money, quick income, small wins. For long term investors, they are not interested in small returns, they are fishing for larger windfall. Some people like to feel like a winner and winning means making money in the stock market. So they enjoy the feeling of being a winner as often as possible. They cannot stand seeing a red portfolio or at a loss. So whenever their losses start piling up, they sell. Whenever their profit comes, whether big or small, they take. At the end of the day, the real winner is the brokerage who basically makes commission from the frequent trades with none or minimal risk involved.
However, a long term investor looks at the company like buying a property or land. They understand it may not make money in the short term, so long there is capital appreciation in future, in the mean time, as long as there are some form of income yield (dividend yield is just like rental yield), which may not be large but can cover some cost, they are happy. Often, it is this group of people who makes the most money. Not immediate, but in the long haul.
Coming back to MFCB, it is a good company and have huge potential. The management is strong and they have a recurring cash flow from their cash cow Don Sahong dam. Their expansion plans are paying off after 10 years of hard work and till today, they have yet to realise their full potential yet. Their results would be out this month. When I call it my Long Term Value Stock, it is because its a long term investment. Sure, if it the share price moves faster towards the goal, I am happy too. However, I would not rush to take profits because of the potential. As an investor, we must look at the potential, not immediate short term gains. Having said that, if you are happy with the profits, don’t want to risk further and can accept missing out on future upside, then by all means take profit. Don't feel heartache thereafter, as you still landed yourself a good profit.
So to overcome this issue, you have to ask yourself, what is your intent of investing in the first place? Is it to seek immediate gains, or to build wealth?