Implementation of Lo Kheng Hong Investment Strategy to Build Optimal Stock Portfolio

Abstract

The favorite investment choice of the Indonesian people, gold is in first place with a survey of 60.2%, and stock investment is ranked sixth with a value of 22.5%. Compared to Indonesia’s total population, the number of individual investors has a relatively small percentage of 1.48% but continues to show significant growth yearly. Before entering the Indonesia Stock Exchange, every stock investor must have good knowledge and strategies to get optimal returns and risks. Lo Kheng Hong is an individual investor who has proven successful in the Indonesian stock exchange. The purpose of this research is to get an overview of the results of stock investment using the Lo Kheng Hong investment strategy on the Indonesian stock exchange. The method used to select stocks IDX is to use the PBV <0.5, PER <10, and Market Cap > 500 billion; after that, the top 4 stocks with the largest Total Annual Income were selected in 2012. The author uses the RTI Analysis Method (Read Think Analysis), which Lo Kheng Hong uses to verify that the stocks being screened are truly undervalued stocks with good fundamentals. Optimize portfolio and investment risk using the Excel Solver tool to obtain the composition of the stock weight with the best Sharpe Ratio. The author simulated purchasing shares within ten years using the buy hold, rebalancing method of buying shares every 1, 3, 6, and 12 months. Then, compare the Portfolio performance with the Composite Stock Price Index (IHSG). The results obtained from this study are the composition of the PTRO stock portfolio = 15.01%, INKP = 44.19%, SMDR = 35.90%, and TKIM = 5% by maximizing the Sharpe ratio of 0.2134. For the method of buying shares using the rebalancing method every year, it gets the best performance compared to the buy and holds or rebalancing plans for other periods, with a yield of 3400.61% and a Sharpe ratio of 0.1807. Portfolio performance using the Lo Kheng Hong investment strategy can exceed the Jakarta Composite Index (IHSG) performance within a 10-year investment period.