kcchongnz blog
Does “value investing” work in Bursa? kcchongnz
My first article on value investing recently, “What is Value Investing” in the link below attempts to dismiss the myth that most people have, the misconception that value investing is about buying stock with low price-to-earnings, or price-to-book value, etc.
https://klse.i3investor.com/blogs/kcchongnz/173926.jsp
Hence a comment as below is just naïve, ignorant and uninformed.
[Posted by qqq3 > Sep 14, 2018 02:15 AM | Report Abuse 
value investor? go and buy up all the dead shares la....a Lot of the dead shares have discounts of up to 70% from the "revaluations"/valuations of assets.]
It also dispelled the notion that value investing is about buying big companies’ stocks, companies listed as the component stocks of KLCI. Value investing is also not about holding it for decades without looking at it after buying.
Following it, I wrote an article to explain some “Key principles of Value Investing”, in the link below,
https://klse.i3investor.com/blogs/kcchongnz/174104.jsp
The key principles describing why value investing works are summarised as below,
1. Price is not value
2. Mr. Market is a crazy guy
3. Every stock has an intrinsic value
4. Only buy with a margin of safety
5. Diversification is the only free lunch
The key principles of value investing are plausible. Value investing follows a process. It works most of the time and over a long period of time. However, it doesn’t mean it works all the time. At least, it works better than all the alternatives I can think of.
It is extremely hard to instil value investing to old dogs and “lazy controllers” like the ones below, and make them understand what value investing is and its simple concepts, despite after doing it repeatedly. If so, pig can fly.
[Posted by qqq3 > Sep 14, 2018 11:01 PM | Report Abuse
kc
allow me to expose your fraud....the margin of safety of a stock lies in its history and the charts....not in your maths formulas, not PE, not NTA.
Posted by qqq3 > Sep 14, 2018 06:00 PM | Report Abuse
kc....margin of safety should refer to what is worse case scenario.....
buy mutual fund la....most mutual funds in Malaysia are well managed and will not suddenly lose 50 sen on the dollar......]
Well, this is a democratic society, of free speech. Everybody is free to expressed himself, including making a fool of himself, repeatedly.
In the most recent article, “Does value investing work and what are the evidences” in the link below,
https://klse.i3investor.com/blogs/kcchongnz/174215.jsp
I have shown the phenomenal track records of each of nine disciples of Benjamin Graham with annual compounded returns of between 18% and 29% lasting between 14 to 30 years, using various and different strategies of value investing.
In the above article, it also shows value investing has been shown to work in almost all established markets in the world, including that in Bursa in the past.
However, we have seen many arguments that, even some believe value investing works in US, they just plainly dispute that it works in Bursa, without any substantiations, and that our market is different.
One persistent argument against value investing in Malaysia is that there is no stock in Bursa worth to hold long-term as no stock in Bursa can continue to go up in prices, not even for a couple of years.
Is that so, or is it just a wild allegation? Let us examine some facts.
The best way to prove or whether value investing works or not is to examine some academic research in Bursa. However, I could not find any credible research for Bursa to rely on, unlike those of the US and other matured overseas market. Here, we just have to rely on some records of some stocks held for 10 years, just for illustration purpose.
Just to reiterate that value investing is not about holding a stock long-term, but basing on price-value relationship to make buy or sell decision. The long holding period of these stocks is used just as an illustration.
Value investing in Bursa
I will provide some evidence that value investing works in Bursa for both the big cap stocks as well as the small and mid-cap stocks here.
Big cap stock
I found a comment in i3investor as below recently, and I will choose this portfolio randomly for illustration. The stocks and their returns after 10 years are shown in Table 1 in the Appendix.
[Posted by stockraider > Aug 21, 2018 10:26 PM | Report Abuse
Raider Having spare with 3iii for 10 yrs ....raider understand 3iii loh....!!
In fact raider can list out 3iii stocks loh;
1. Petdag
2. Nestle
3. Pbb
4. Dutch Lady
5. Heim
6. LPI
7. Aeoncr
8. Carlsberg]
This portfolio above consists of big-caps stocks which are followed closely by fund managers and institutional investors. The first three are component stocks of FBMKLSE. The stocks above meet the requirement of value investing in one form or another such as high dividend yield, stability of earnings and cash flows, high return on capitals, growth etc. It returned an average of 379% over the last 10 years as on 22nd August 2018. In compounded annual return (CAGR), it is a whopping 16.5%, more than 3 times the 5.2% of the broad index during the same period.
In comparison with the performance of the fund managers investing in Bursa for the last 10 years, only 6 funds out of about 100 returned more than a CAGR of 8%, with the maximum of 10.7%.
Small and medium cap stocks
I refer here an article in a Chinese Investing periodical, The Bust Weekly sometime in September 2017.
In the above article, it mentions that for the last 10 years from the year 2007, just before the subprime housing crisis in the US, which also adversely affected the stock markets all over the world, and up till September 2017, 70% of the stocks in Bursa had positive returns.
My estimation shows that the broad KLCI increased by about 52% for the last 10 years from 1414 points to 1784 points as on 18th September 2017. Together with dividends, the compounded annual rate of return (CAGR) was about 5.5%.
The Busy Weekly also compiled a list of 20 “bull” stocks which returned over 1000% over the 10 years. They were mostly small and mid-cap stocks listed in Bursa. The best performer, MYEG, returned 3443%, and the last in the list, Poh Huat, 1147%. Those numbers are equivalent to a CAGR of 43% and 29% respectively, more than 10 times the return of fixed deposit a year, for each of the 10 years.
This shows that if one could identify some good companies with good prospects at that time using the principles of value investing, would be able to obtain fantastic extra-ordinary return leveraging on the power of compounding, and invest in them for long-term, even after the steep corrections during the subprime housing crisis which affected Bursa badly in 2008 and 2009.
This forgotten and least travelled tracks of the small and medium cap stocks is also where I like to dwell in as it is where I could find value in investing.
Conclusions
Value investing has been shown to work in almost all matured as well as emerging markets in the past everywhere in the world. I have also just shown that it works in Bursa.
The principles of value investing are logical and plausible, control your emotion of fear and greed, be contrarian and right about it. It may not work all the time, and sometimes not in the short-term, but it will certainly work for most of the time, and in the long-term.
In the next article, I will show you my own personal experience that value investing works for me very well investing in Bursa.
For those who wish to know more and learn about value investing, or wish to follow some stock picks in Bursa following the principle of value investing may contact me at,
I do this as a great service by educating the “poor investors” on the right path of investing in the stock market so they avoid making heavy losses, which happened to most of them, and have higher chance of earning satisfactory return. I sincerely think so.
KC Chong
Appendix
Table 1: Return of portfolio
|
No |
Company |
Code |
Ref price |
22/8/2018 |
Cum return |
CAGR |
|
1 |
Petdag |
5681 |
8.20 |
26.64 |
225% |
12.5% |
|
2 |
Nestle |
4707 |
27.00 |
146.4 |
442% |
18.4% |
|
3 |
PBBank |
1295 |
9.05 |
24.68 |
173% |
10.6% |
|
4 |
Dutch Lady |
3026 |
11.90 |
66.9 |
462% |
18.8% |
|
5 |
Heim |
3255 |
5.35 |
22.34 |
318% |
15.4% |
|
6 |
LPI |
8621 |
4.62 |
17.04 |
269% |
13.9% |
|
7 |
Aeoncr |
5139 |
1.82 |
15.12 |
731% |
23.6% |
|
8 |
Carlsberg |
2836 |
3.88 |
19.9 |
413% |
17.8% |
|
Average |
379% |
16.4% |
||||
|
FBMKLSE |
1101 |
1823 |
66% |
5.2% |
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Discussions
3 people like this. Showing 50 of 68 comments
I agree that value investing do works in bursa. But i had been consistenly investing in nasdaq and hkex for past few yrs... what i can say is many stocks in bursa cannot earn money consecutively for few yrs unlike in nasdaq and hkex... u can hold a stock in bursa but until certain extent
2018-09-23 20:26
stock_investor << I agree that value investing do works in bursa. But i had been consistenly investing in nasdaq and hkex for past few yrs... what i can say is many stocks in bursa cannot earn money consecutively for few yrs unlike in nasdaq and hkex... u can hold a stock in bursa but until certain extent
>>
True. Perhaps consumer product stock in Bursa has that quality, like Nestle, DL, or beer business as shown above.
2018-09-23 20:44
knowledge is not discipline.
knowledge is not even wisdom.....
no wisdom, Xinuan cash in bank appears great value investor dream stock.
2018-09-24 10:43
Posted by qqq3 > Sep 24, 2018 10:43 AM | Report Abuse
knowledge is not discipline.
knowledge is not even wisdom.....
no wisdom, Xinuan cash in bank appears great value investor dream stock.
Value investors with knowledge, experience and wisdom can see through that the cash in Xingguan was not real. Certainly it is not the "dream stock" of value investors, but that of BS investors, and the followers of BS investor.
Notice that those BS investor continued to buy and called others not following "stupid"?
2018-09-24 11:32
Posted by qqq3 > Sep 23, 2018 02:38 PM | Report Abuse
whether it works in Bursa is not as important as this....
Knowledge can help you to avoid huge mistakes but knowledge alone is not skill. Skill comes from constant practise, comes from choices and habits. Knowledge without practice is like the guy who reads some investment books and offers himself as stock market sifu. Not much use.
"Knowledge can help you to avoid huge mistakes", can't disagree with that. Did you know that those value investors with the knowledge of how to read financial statements avoided losing their pants when an idiot with his hidden agenda kept on telling them to sailang and margin Jaks and Sendai when they were selling at RM1.80+ and RM1.30+ respectively a few months ago?
I also agree knowledge without practice is of not much use, but I don't think anybody will disagree with me that it is at least much better than the one without the knowledge of reading financial statements, to understand the business, but only know how to BS and slogan calling, "sailang", "margin" and all that jest.
2018-09-24 11:42
Posted by qqq3 > Sep 24, 2018 09:25 AM | Report Abuse X
sslee
share market not for you.
AGMs are Games People Play
Forums also another Games People Play
Share market also Games People Play.
U think Warren the Bufalo really do as he says meh?
Warren the Bufalo just play the game better than most.
Posted by qqq3 > Sep 24, 2018 09:44 AM | Report Abuse X
sslee
Warren the Bufalo says don't be a stock picker....go buy Index funds.
Every stock picker in town quotes Wallen the Bufalo....
when u can understand that....u begin to get wisdom....
oh.....and by the way....Knowledge is not wisdom.
2018-09-24 12:12
Posted by qqq3 > Sep 23, 2018 03:21 PM | Report Abuse
https://klse.i3investor.com/servlets/forum/600152736.jsp
great blog
Wow, I can't get any words to describe you!
2018-09-24 12:58
kc
if it is murder case.....u wouldn't say, why prosecutors dig up old cases.....why suicide cases cannot dig up old cases?
2018-09-24 13:03
The same things reproduce and reproduce. Recycle and recycle. Better go to school teach form 5 students. They will be very excited
2018-09-24 14:12
Your surest way to create wealth in the stock market:
Purchase shares of superior businesses at discount to their fair value and allowing those businesses to compound value over long periods of time.
2018-09-24 23:29
for heavens sake, I was an auditor once....I know the strength and weaknesses of historical figures......ex engineers looking for the magic formulas in the figures to become rich.....lol.......
2018-09-25 00:49
heaven sake, must be a mistake to allow you to pass through as an auditor. u sign out the 1 account?
2018-09-25 00:54
cheoky...auditors are also business men....but they know...deep in their hearts they know.......
2018-09-25 01:13
Dear KCChong.
Posted by qqq3 > Sep 23, 2018 03:21 PM | Report Abuse
Wow, I can't get any words to describe you!
24/09/2018 12:58
Please allow me to describe qqq3:
He is the lowest of the low, the worst of the worst, the most heartless, the most disgusting, deceitful, unkind and utterly distasteful person I had come across. He is void of any human decency, humility and humanity.
He is feeling great and proud now that he has outlasted most of his nemesis by his bullet proof thick skin. His shameless self invincibility is second to none and should outgun the shameless MO1 to shame.
He had perfected his choo-choo-buffology, bodek-logy, bootlicking, king of PLP with his simplicity flattering. Everyone can now look forward to be hoodwinked and blown away by his perfect simplicity bullshit-logy.
In short he is “paranoia” and “schizophrenia” mental derangement with delusions of grandeur, disconnection between intellect, emotions, action and etc.
Thank you
2018-09-25 08:52
>>>Posted by qqq3 > Sep 25, 2018 12:38 AM | Report Abuse
kc....
does OTB count as value investor? <<<<
Reviewing his promotion of HY.
Buy at $ 6. TP of $16 or $18.
What do you think of his TP then?
Was the intrinsic value of HY $ 16 then?
What is the market price of HY today?
What is the intrinsic value of HY today?
Just thinking through the above promotions by otb, this is not value investing.
Snake oil salesman does similar promotions regularly.
2018-09-25 08:54
sslee
like I say, u are weird, ....indeed weird. But stock market not for u.....
2018-09-25 08:55
I stopped following when Homeritz, Jaycorp, Luxchem make me loose 22% to 27%. I have yet to recover a singke sen from rm1500 tution fee
2018-09-25 09:11
@sslee, qqq3 talks alot but no substance, he good at condemn and mouth full of shit. Be careful talk to him, you might be infected with the virus.
2018-09-25 09:12
Posted by smalltimer > Sep 25, 2018 09:11 AM | Report Abuse
I stopped following when Homeritz, Jaycorp, Luxchem make me loose 22% to 27%. I have yet to recover a singke sen from rm1500 tution fee
======================
don't take it so hard....It is just a phase everybody goes through.
Free world, remember?
2018-09-25 09:15
qqq3
Your track record proof that your mouth full of shit and cannot be erase.
Double confirm and confirm. The proof is as solid as steel and final conclusion your mouth full of shit. Those mouth full of shit can never be successful whether he is a gambler or an investor. Luck will not be with him.
I better go away, otherwise I will be like shit too
2018-09-25 09:39
3i portfolio is really outstanding during bear market. Investors are being risks adversed in the bad times with the priority of capital protection. This is another proven track record for consumer staple business. It won't last for long. Many companies have been badly hit by surging in commodity prices in past 2 years. We are waiting up cycle bottom line in second liners.
2018-09-25 09:48
naive and arrogant can also make u a lot of money......at times.
I think is a topic by itself, especially in a forum such as this full of retailers, dreamers and people who don't pay attention to management quality and business sense.
2018-09-25 09:52
tough to find a rare gem that fits everything ( ie. level of margin to recovery stock )
2018-09-25 10:17
bang on the money. invest in the big names. 99% of the market is there. the liquidity is there. hence price discovery. i like sime over ppb. f&n over heim. just my 2 cents.
2018-09-25 10:21
bought Grade A eggs at $ 11.40 over the week end.....shit...normally $ 10.00.....so I come back buy Layhong la.
2018-09-25 10:25
Investing in stock market is more like the combination of Arts & Science.
My winning formulas are so far the combination Value investing + Trending.
For example, Lay Hong.
If it is lousy company without solid track records, I won't go in even how low is the price.
After analyzing the annual reports & all news in the past 3 years, it is no brainer buy & soon it would rebound. It proved me right again on that.
We need all kinds of people in bursa, so we can have panic sell. Fear will make price drop very fast.
In my opinion, panic buy won't make price increase.
2018-09-25 10:33
But trending investing is more like opportunism, you right you win, you wrong you die.
If not coupled with value investing, you are just gambling only.
2018-09-25 10:35
one more thing, I will add one more, "Daily life experience" in stock investing. Like what qqq3 done in Lay Hong.
qqq3 bought Grade A eggs at $ 11.40 over the week end.....shit...normally $ 10.00.....so I come back buy Layhong la.
25/09/2018 10:25
2018-09-25 10:37
value investing = 公司体质
trending = 众人反应 （过激和羊群反应）
daily life experience = 个人体验
Combination on the above
2018-09-25 10:39
qqq3, stupid ass worst than a con man, buy egg invest in egg company. Really stupid ass
bought Grade A eggs at $ 11.40 over the week end.....shit...normally $ 10.00.....so I come back buy Layhong la.
25/09/2018 10:25
2018-09-25 13:17
qqq3 May be talked to chicken can understand, stupidity to the highest level. Con man is a con man cannot change. May be lick my ass is better. KC value investing is as good as buy chicken eggs invest in chicken egg company. F***K
buy eggs invest in egg company....makes good sense....
2018-09-25 13:44
To be fair every approach has its weakness. It makes no sense to commit fully on a stock using only its pass track of record. It simply makes no sense
2018-09-25 15:01
Agreed, all got its own weaknesses & strengths, it is up to the users of applying it. Ultimately, making money is the only goal in investing, no matter how you choose on the methods.
godhand To be fair every approach has its weakness. It makes no sense to commit fully on a stock using only its pass track of record. It simply makes no sense
25/09/2018 15:01
2018-09-25 15:06
Posted by qqq3 > Sep 25, 2018 12:38 AM | Report Abuse
kc....
does OTB count as value investor?
ME:WHY ASKING ME? YOU HAVE BEEN CONTINUOUSLY BASHING HIM, AND YOU DON'T KNOW WHAT YOU ARE BASHING FOR?
The guy says he is FA and TA specialist....( maybe u too).....doesn't care about management analysis (MA) or Business sense (BS).....He calls MA and BS bull shits, he says he only interested in facts and figures.....qualitative aspects such as Business sense, quality of management does not interest him..........
ME: YOU HAVE BEEN BASHING ME CONTINUOUSLY TOO. AM A TA SPECIALIST? IS THAT ONE OF THE THINGS YOU CAN'T STAND ABOUT ME?
No wonder he recommendations so many lousy companies. He says follow his FA and TA, have trust in his super duper record sure make money one.
ME: YOU ARE JUST A PIECE OF SHIT COMPARED WITH HIS PAST RECORD. YOU STILL DON'T KNOW ABOUT IT?
me? I am Business Sense, Good management then numbers guy....in that order........No wonder I and that OTB guy like oil and water.....
ME: WHAT DO YOU KNOW ABOUT BUSINESS SENSE? PLEASE WRITE AN ENLIGHTENING ARTICLE ON IT. TO ME YOUR BS IS ALL ABOUT BULLSHIT.
GOOD MANAGEMENT GUY? HOW YOU EVALUATE MANAGEMENT WHETHER IT IS GOOD OR BAD? WHY DO YOU THINK JAKS AND SENDAI HAVE GOOD MANAGEMENT? YOU HAVE BEEN SHOUTING SAILANG AND MARGIN ON THEM. SURELY YOU CAN WRITE SOMETHING ABOUT HOW GOOD THEIR MANAGEMENT IS.
YOU AND OTB GUY LIKE OIL AND WATER? YOU LIKE WATER? MORE LIKE SAI WATER TO ME.
2018-09-25 23:32
qqq3 ignorance and arrogance can also produce a lot of profits....at times. But we all know this is not sustainable.
Everyone has been trying to find a more sustainable way, no one has perfected it. If one is found, it will soon be broken by others.
okh....this article not just about luck or skill and hard work? But “Mild success can be explainable by skills and labor. Wild success is attributable to variance.”
So, don't be too seduced by people who shows you super duper records especially ones based on ignorance and arrogance.
25/09/2018 22:20
2018-09-25 23:47
qqq3 stock market can be like fighting an enemy with no form.
ignorance and arrogance is easy
but the more you know, the more you know you don't know. can be very frustrating.
25/09/2018 22:43
https://klse.i3investor.com/blogs/qqq3/175056.jsp
2018-09-25 23:49
kc....your dream career....
https://vimeo.com/250990345
but in reality a less harmful form of Jho Low
2018-09-25 23:49
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Good write-up KC.
I don't see why value investing won't work in Bursa (or any other market) as long as the business is generating free cash flow which eventually transformed to growth or paid-out as dividend. It is very logically.
2018-09-23 20:10