There is no investment thesis that does not in some way share its investing theories on the back of a famous investor like warren buffet and charlie munger. I will not seek to use their name and reputation to further my own, but will instead paraphase their thought process and attempt to put my own spin on it.

Good week everyone, I am a private equity investor with 10 years experience, previously working with SE, now on my own using my own money, my wife and family money as well as a few friends who have decided to join my limited partnership. I have finally crossed the RM500,000 mark of assets under management (after 5 years, and after yearly management fees and profit share ), and am feeling confident enough to share my investment philosophy in this wonderful forum. I hope I don't make any big losses, and I certainly wish to get some knowledge from the great sifu's around here ( mr fong siling, mr koon yew yin, mr ooi teik bee, mr tan teng boo, mr s=qr philip, mr choi yi kit, mr lee shung shen, mr 3iii, mr icon8888, and many many more). I hope to meet all these sifu's one day and learn more things from them.

I realized that there are many many investment strategies and trading methods to beat the market, and it is a wonderful thing. I would want to be like bruce lee in his description: "put water in a cup, it becomes the cup; You put water into a bottle it becomes the bottle; You put it in a teapot it becomes the teapot. Now water can flow or it can crash. Be water, my friend"

This is a very interesting topic on making money in the stock market.

Technical Analysis (momentum based)

Fundamental Analysis (intrinsic value oriented)

Qualitative Analysis ( intangibles oriented)

Similar to Bruce Lee, I hope to learn and absorbed as much as I can from everyone here in I3, discard those strategies which don't work for me, and concentrate on the most efficient way to make money long term.

I invite criticism, as it will definitely improve my investing patterns long term and provide me with much in the way of a quality product for my family, my friends and my close investors.

Anyway, onwards with my 1st blog, the concept of Qualitative Versus Quantitative Stock Analysis

As a millenial, I spend a lot of time reading and listening to annual reports and AGM's, BRK in particular. Here I highlight minute 1:50:00 for more clarity on the discussion here.

From investopedia:

What is Qualitative Analysis?

Understanding People and Qualitative Analysis

Company Culture and Qualitative Analysis

Gathering Data for Qualitative Analysis

Qualitative Analysis in Context

I think this will be the most difficult part to apply, as it is very difficult to quantify into most businesses, but I will attempt to give an explanation based on a real case of my investment.

I have 4 stocks in my tiny tiny portfolio, all chosen based on my combination of quantitative (i.e fundamental analysia), market momentum (i.e technical analysis), and qualitative ( management capability, competitive advantage, long term prospects).

I take for example Hartalega, which I started a position of in 2015. The quantitative aspects aside (50% in earnings delivered to shareholders as dividends, the growth of earnings and revenues consistently for the past 5 years)

In terms of quantitative, it would seem to be very expensive as the price to earnings ratio is on the very high side (pe>50 and currently at 35 in 2019 april), however I try to look more on the qualitative side.

It is a very shareholder centric company, with a big amount of the earnings given back to the shareholders. On top of that in terms of R&D, it is top notched, with a huge market share based on its patent share of the nitrile glove market, which is still the preferred gloves used in medical and high margin industries. Qualitatively, I have attended every AGM since 2016 and at each juncture, the response and the management thought process has always been very clear.

I continue to put a big sum of money into harta until today as I feel it would be a safe investment well into the future.

I also put a big sum of money into JAKS (14% of my portfolio) as ever since the margin call of mr Koon Yew Yin, the stock has dropped from the overly bought level of RM1.8 to the overly sold levels of RM0.45. This is also the same case, in terms of technical analysis and quantitative analaysis, JAKS appears to be a poorly selected stock, however if you look at the quantitative side, the share price does not seem jive with the loss of market value, as the business fundamentals itself has not changed from the time Mr Koon bought it and when he sold it (i.e power plant still ongoing as per schedule, completion and uprunning still expected in 2020). With this qualitative thought process, if the business fundamentals have not changed, then the share price is definitely overblown. I went in at 0.56, with 100K shares done. It has also been very good to me, as the share price has gone up to RM0.86 in the meantime, a 30 cent increase. However after listening to some comments by Mr philip and DK66, I have started a small cashout (5K shares at 0.83) due to the unrealized risk of the project, while at the same time keeping my ears to the ground at the next quarterly earnings report.

My biggest winner so far has been GKENT, as quantitatively looking at the business, not much has changed except for the the delay in the lrt3 project progress (now rectified), its massive drop from RM4.30 to RM0.9 for a profitable business ( with good management, depending on how you look at the golf playing buddy of najib and now I assume LGE) was too much of a business opportunity not too be missed that buying a 100K share position at RM0.85 seemed too low risk to be a no-brainer. It continues to be one today.

In a simple summary, I think qualitative analysis seems to be far more difficult to apply than technical or fundamental analysis because it involves using multiple strands of data and weaving it into a concrete picture of how a stock will perform long term. For Gkent, it involves adding dimensions (on top of technical and fundamental analysis) by looking at geographical factors (china, singapore, the needs and requirements of railway transit), political factors ( government budget, government trade agreements and future relations with china), investment factors (gkent historical capability to hand over complex projects, MRCB financial capability), the possibility of winning future projects (in hospitals, railway transit, water treatment projects) versus their projected profit margin and thus their long term share price.

JAKS also involves the same, understanding how an IPP works, its maintenance and downtime schedule, the fuel prices (and availability of coal), the energy prospects of vietnam and its costs (and subsidy possibility), the capability of both JAKS and its china partner, etc etc etc all in an effort to know whether the price is going to go up or down in the long run.

It's a full time job this thinking, and there are so many things to consider, but it makes it all worthwhile.

May the Force be with you!

J.G.HO

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