Friday, 6 May 2016

Who Make Money, Who Lose Money From My Stock Calls ?

Publish date: Sun, 17 Jan 2016, 09:46 AM 

1. Introduction

I missed those days when I can blog about anything without attracting too much attention. Recently, my blog articles are quite popular. Not only that, sometime they will have impact on share price. 

Of course, this wide acceptance by readers delighted me. However, the enthusiastic response also make me feel uneasy. Who actually make money from my stock calls ? If they make money, where does the money come from ? Who lose money ?         

The ojective of this article is to explore those issues.

2. Who Wins, Who Loses

When I publish an article, some readers will read it first, some will read later. The early birds will be able to buy cheaper. The latecomer more expensive.

However, that is not meant to be the final outcome.

As most of my readers would have noticed, same like Uncle Koon, I like stocks that have earnings growth potential (the faster the better). Some might have bought the stocks cheaper, some more expensive, but everyody is supposed to win over the long run when the company's earnings indeed grow as predicted.

Rising water lifts all boats. 

For example : I first wrote about Poh Huat at the end of 2014 when it was trading around RM1.40. Some of my readers bought at let's say, RM1.45, some bought at let's say, RM1.56.

However, fast forward twelve months, Poh Huat is now trading at almost RM4.30, a gain of 187% (RM1.90 x 2 + RM1.00 x 0.5). When we look back, it doesn't really matter whether your entry point is RM1.45 or RM1.56. All who bought at that level will have made a lot of money.

But in finance, there is no free lunch. If somebody in i3 wrote about a stock and ALL his readers make money, who lose out ? Where does the money come from ?

The answer for the above question can be very long winded and complicated. To make it easy to understand, I would say that non i3 members lose out to i3 members (on Poh Huat, for discussion sake).

i3 members gain because they are early birds.

THAT, is the whole idea of us sharing information in i3. By congregating in this forum, we try to pool our wisdom to gain an edge over everybody else in the market.

Forum members gain from my articles, but I also gain from their inputs, leads and expert opinions. Everybody in i3 wins (unless you play T+3, ha ha).    

(Actually, the non i3 members also do not lose out. Stock market is not a zero sum game. As Poh Huat grows, they make tonnes of money as well. Where does the money come from ? They probabaly come from funds outflow from out of favor stocks such as those in oil and gas and property industry. Most of the time, it is just money sloshing around, folks...)

3. Tickets To Holland

Before I finish off this article, I would like to take the opportunity to caution my readers that they should not blindly take position based on what I wrote.

My articles should be treated as a rich source of information, not a definitive guide to Buy or Sell.

To be fair, I would say that my rate of success for stock picking in i3 is reasonable. But sometime I also got burnt. This is not surprising at all. All my analysis is based on public sources and I don't have any information advantage against other market players. There is limitation on how accurate my view can be.

Buy at own risk.

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