I don't really like high capex businesses like hospitals where the key ingredient specialist doctors are in short supply. That's like the the jet fuel of private hospitals.

I don't know about you, but the only reason why I go to private hospitals other than because general hospitals are badly maintained death houses is because I have my private doctors and recommendation by close friends.

Note how we never choose private hospitals because of the brand name, we choose it because of the reputation of the doctors in the hospitals.

That basically means you have to spend a lot of money to grow a little bit, no pricing power, no ability to grow the business consistently. Not enough specialist doctors.

I don't like buying any big hospitals or clinics. If you look at the growth of similar comps like KPJ and TMCLIFE, you will notice that most of them are overvalued dinosaurs with high pe (KPJ is lowest of the group) where investors buy because they thought that because private hospitals charge so high they make a lot of money.

They don't.

I wouldn't touch ihh. They have been making mistake after mistake and utilizing shareholder equity in horrible ways. The management is horrible

Dear SSLee,

Great that you liked it! It gives old men like me some form of security that I can compete with the young smart ciku in the realm of investing. Success has nothing to do with age, and everything to do with trying out everything, learning, reading and updating oneself until the day opportunity comes, then strike!

>>>>
Dear Mr. Philip,
Thank you for the below link:
https://ideas.ted.com/what-can-we-learn-from-people-who-succeed-later-...
r: “Random idea”
Q: “Ability to turn an idea into a discovery/useful product.”
S = Qr
Hence success is the product of an idea “r” meets with “Q” the ability of turning idea into a great discovery/great product/great business
Or in common saying success occurs when preparation meets opportunity.
Totally agree with you.

I have stopped listening to stockraider ever since I realized he is a broken record. Just because I put a TP of 12 does not mean I have to act on it. I am fine with my full capital allocated right now in the 5 stocks I own.

All I am is agreeing with Icon888 and looking at the growth factors inherent in hengyuan to achieve above average return.

However I am not looking for above average return. I am spending the balance of my life perfecting my chosen craft in businesss valuation and I am looking for outperformance, instead of above average return.

You by your own admission am not looking for outperformance in INSAS and merely a rerating of your fundamental valuation of INSAS. It probably will work out as you seem confident about it. You can go about looking for your above average return.

I wont live forever, I prefer to make the best use of what time I have in finding and choosing the best stock, then act. I enjoy finding a good company grow into a great one, and be proud of being the shareholder who kept the faith.

Youung ciku like you will never understand. I'll stop wasting my time replying trolls like you from now on.

DEar SSlee,

for your kind reading:
https://ideas.ted.com/what-can-we-learn-from-people-who-succeed-later-in-life/

This gives old people like me much hope!

Haha my apologies fortune bull.

I could have told you the answer at the beginning, but it would be too boring.

The secret to handling stress in a stressful environment is simple: just avoid it.

And if you are not stressed out, there would be no need to scream at people.

I hope you have a great weekend!

Thanks, and very well noted. I don't think you need to clear up your name, your analysis was spot on on hengyuan after the tradewinds changed.

I just didn't agree on getting on the boat if raider is the promoter.

In fact, I refuse to get on any boat that raider is promoting. The day he promotes QL is the day I sell and jump ship.

Although in all honesty, now would be the best time to invest in Hengyuan, after crude oil price crater again, and the fixing upper is almost done.

But again, market irrationality strikes.

Lets say you lost your pants to hengyuan before in 2018.

Would you "invest" this time in hengyuan?

Know your reasons why. Dont buy a stock just because Raider or KYY promoted it.

Dear probability,

sure if you put it that way. But if you see a rocket ship going up that fast are you telling me you would have not bought more after quarterly reports? And would you have invested in it in the first place at RM3 after shell sold 51% of the business to china company below RM1.8 per share?

The hardest thing in investing to do is sometimes simply to just do nothing.

Sadly, I also read through some of the irrationality and anger you put in when you were a shareholder in HY as well probability.

Luckily you learned and understood.

The other "investors"? They lost all their investments on margin calls and dissapeared from the forum forever.

I hope more new investors start learning that investing is more about watching paint dry than it is to drive a sportscar.

And its important to note there that everyone see PE and earnings as an OVERRIDING reason to buy a stock or its undervaluence.

No such thing. You need to understand a business first and foremost. Where it started. And where it is going. Then you make a play.

The objective is to not lose money. If you don't understand compounding of profits then it might be better not to do investments in stock market.

The problem is, people who buy too many stocks without thoroughly understanding the business that they are in intimately, tend to become too irrational and try to make numbers suit the story that they have built in their heads, instead of the other way around.

With all respect for an elder, KYY is one such example. He had a great system, but thought that he was better than his system, and invested in multiple companies at bigger margin multiples than was his circle of competency, in terms of financially as well as business sense.

In the end he wiped out years of smartly built capital gain in one jaks.

But as I believe he has a great Q x R ratio. He will definitely be back and more focused than ever.

I know, I've been there.

I'm predicting RM12 in 5 years for Hengyuan, on the back of their chinaman style of doing upgrading works at cheaper prices than western companies. I'm also predicting it based on low prices of crude oil in hengyuan, and hopefully a delay in competitiveness of RAPID.

But would I buy this company? Definitely not.

After reading this I will be changing my name to John Fenn!

https://ideas.ted.com/what-can-we-learn-from-people-who-succeed-later-in-life/

I loved reading this article. This was basically the sum of my life. Keep failing in stock investments and techincal analysis and value investing buys. Doing stupid things over and over. Almost giving up.

Operating word being ALMOST.

In the end, I attribute more to the fact that I never stopped reading and learning and keep trying to invest in the stock market that I finally have the success today.

Most new investors come into the forum, start posting up their value and strategies and technical indicators, then when things go wrong they quickly give up and move on to something else.

I just stuck with it.

He thinks investing in just simple numbers gain without think about the business sense of how a REIT really makes money. Fixed deposit is worth holding because the rates and benefits are fixed. For REITs they entice you with high dividends then rights issue your ass to the wall. Do you think your earning 10-15% returns, eh? See what happens long term.

Once you catch on to business sense it's addictive, no?

Aiyah 3iii I was just about to do another follow up post about this to show how shallow stockraider idea of investing is when you posted it. Now I can't even look smart anymore:

3iii>>>

How good are the returns from REITS?

Here is a nice table depicting the returns from 22 Singapore REITS. This table was posted in this blog:
http://cgmalaysia.blogspot.com/2011/11/reit-myth-busted.html



18 of these REITS were launched before 2009, 1 in 2010 and 3 in 2011.

How would you even know that when the result of quarterly report not even out?

Stockraider got crystal ball is it? If got crystal ball how come 2010 never join me sailang topglov and keep buy until today?

Your crystal ball rosak la. If you couldn't predict performance of insas Vs topglov 10 years ago what makes you so sure you know exactly how they will play out 1 year from now?

No one can predict.

Not even me. That's why I keep buying for 40 quarters straight after every quarterly report good results.

Now if only stockraider can predict for me his crystal ball when my plane will arrive.

Btw, I visited dynaquest before long long ago when they were releasing the spg. I bought the first edition at mph. I've even met the analyst team before. I know their analysis is not always right.

Wrong. I am comparing between 2 companies that generate 10% dividend yield and 1% dividend yield.

Then I add in backstory so you can have some business sense.

After I explain then it is clear to see.

Those who know, they know lo. Good for you.

But my article is not meant for people like you.

How am I misleading? It is a given fact that REIT company's are being sold today to uneducated investors by spouting high dividend yields of 10% even today.

I am only being fair and not causing another ruckus by not comparing QL Vs INSAS dividend yields.

As some investors seem to have a mindset that high dividend paying companies are better than low dividend paying companies.

And they keep comparing that Nestlé and QL is a bad investment because it pays a low dividend.

Those who never buy good stock before always think it is overvalued. When pe was 27 you say nestle overvalued, when pe 53 you again say overvalued.

But ask you again, the double story house you buy last time in Damansara when it was 300k now worth 2.7m do you say it is overvalued?

Do you suddenly go and sell it? Of course not, because where to find double story in Damansara for 300k anymore??

Funny how outlooks for pieces of paper and property assets are suddenly so different when comparing real world.

You want to go auction and wait for cheap house to sell by bank valuer be my guest. After you buy then you realize why it is at auction, and what a crap deal you got. The only houses left you can find for 300k is due for demolition.

Moat = competitive business advantage.
This can be very good business management (Warren buffet in a dying textile industry)
It can be the most efficient lowest cost producer (GEICO, topglov, Amazon)
It can be vertical integration ( 3M, QL, Nestlé, Unilever)
It can be first mover ( Apple, uber, alibaba)
It can be branding ( Nike, coca cola)
It can be corruption ( MYEg)
It can be stability ( public Bank)
It can be innovation ( Google)

The entire basis of growth investment is based on competitive advantage. If you have secret sauce and the other guy has ketchup, in the long run the guy with secret sauce will grow, simple as that. It is the one constant in business. You will never ever see a business that does not have a competitive advantage not do well, unlike some of the other indicators of business performance.

How can moat be overrated? Cash and assets is overrated, if unutilised. PE is overrated, because companies and businesses in different industries are afforded different pe. Margin of safety is overrated, because Amazon and Google showed you how.

I like how probability thinks, because I totally agree. That's why I'm expanding my ideas of competitive advantage.

I have just finished reading through 30% of kcchongz blogs. Very interesting reading. To be honest I am very glad to finally have the guts to start posting on i3 investor after being an invisible reader for the last 5 years.
All the comments and replies from everyone has led me to more investing knowledge and learning.

I had thought that I should get 5 years of stock portfolio performance from my 4 stocks before starting to comment on i3. Knowing what I do now and what happened, I probably should have started earlier.

I don't believe in mutual funds. The management fees, transfer fees and stock picking quality is going to eat up any compounding gains long term.
I believe in carefully choosing a week picked, well researched stock that has just gained is competitive edge over competitors, but is small enough that huge growth can be predicted. We don't have a vanguard index fund type in Malaysia with their 0.04% fees per annum.

With that in mind, I would like to recommend ( notice how I never recommended anyone to buy ql,pbb,yinson and topglove to anyone as those are stocks which I have bought and kept for many years now), really RECOMMEND to buy as a long term investment: NASDAQ: STNE.

One stock to rule them all.
It is 32% of my shareholdings, I bought 200k shares in January 4th 2019 @usd19.15 per share.

I believe the portfolio size is on par with the multitudes of stock that Jon choivo has, probably also similar to the trading portfolio of stockraider, and of hopefully comparable to KC investment portfolio and CalvinT stuck portfolio in terms of churn and volume.

I hope to be around in 5 years it 10 years time to compare the total return.

FYI. I have found the bursa market to be out of moat stocks. I'm just keep the moats I have. Make of that what you will.

Dear SSLee,

After many many painful lessons I have finally learned not to listen to fund managers and research houses on their recommendations. Their goals and yours are never aligned, so they will trumpet their good calls and hide away their bad investment ideas. No skin in the game in it for them.

As for Jon choivo, as he is using his friends, family and parents skin ( he is to have any important skin of his own to risk) he has slightly higher personal and reputational risk and therefore can be listened to with half an ear.

Just be wary whenever you get prior charging you for information or charging you management fees for stocks you own.

Trust in your own knowledge and learning. If INSAS works out, then it works out. If it doesn't, then you can bring me out for some subang ss15 rojak and I'll be glad to tell you why.

But don't trust anyone, build your own knowledge.

But apologies Stockraider, sslee and Jonathan choi in advance, feeling a bit stressed here after there was a mixup in my flights arrangement from LaGuardia airport. Been stuck here for hours waiting plane resolution to no avail.

Hengyuan going from a 4rm company to 18 in less than a year is not a goreng stock raider? Got margin of safety raider? How come your margin of safety goal post keep changing first say intrinsic value is 45, then now say more than 13 need to sell? You know nothing about investing in margin of safety.

On that thought didn't Jon choivo also do the same thing exactly? Buy low, sell high buy higher then watch as the entire stock collapse because of non existing fundamentals.

I remember a very smart guy named sir Isaac Newton who did the exact same trade with south sea capital.

Charge me for his advice indeed. With his investing acumen. I have fund managers from ta, Maybank, HL and pbb coming over giving me ideas all the time and asking me to give them money for their fund. Even they don't dare to charge upfront but based on performance.

Charge me indeed. Malu lah!

Choivo, your advice is patently wrong. From long experience and data, it is very clear after recession, yes penny stocks and small caps rise up quickly, buy they are also shown to deflate quickly as well. While quality companies go down, but they soon become very sought after for their earnings and dependability ( try explaining why after Malaysia recession and political uncertainty investors jumped into ql and NESTLE in 2017-2018 doubling share price).

I don't know if you have a financial times subscription or if you can read, but this is fact driven information. Here is probably a free look for you.

https://www.google.com/amp/s/amp.ft.com/content/f291702a-f244-11da-b78e-0000779e2340

Dear Jon choivo, any advice you give is worthless if not backed with results. As so far your investing period is short, your margin loan returns are unimpressive, and your total portfolio gains are still negative, I would refrain from charging anyone any money. Once your biggest investment call (rcecap) start returning multi baggers in portfolio gains in 3-5 years, then you may start charging.

Fyi, my biggest Investment right now in 2018-2019 at 32% is in NASDAQ:STNE. I did not ask people to invest in pe50 companies or value at all costs. I ask people to invest in quality companies with ql an example.

You seem to not understand the difference. Right now STNE is a pe 22 company. If in 5 years it becomes a pe50 company, please don't tell me I am buying at all costs.

I'm saving this conversation so I can bring it up yearly and start to do 1 year performance comparisons between a rcecap and STNE.

I wouldn't pay you for your advice, but I'll let yearly stock performance do the talking.

But to be perfectly honest, my personal investment life changed after I stopped looking for undervalued cigar butts and decided to look for undervalued premium growth companies.

I can literally say I made millions participating in the long term, compounded performance of good companies.

I will not say if my method is better or Stockraider method is wrong, because that would be silly. To be honest we are both doing the same thing, looking for the margin of safety in a stock.

The difference is where we do the looking.

If Stockraider can look sslee,3iii and me in the eye and say he made millions by investing in his cigar butt way, I will immediately cut a 1 million dollar cheque to a charity of his choice.

That is verbatim.

For those that remember the Asian financial crisis of 97, I was there. Imagine multiple hengyuans being sold at low pe, high nta, big asset base. You were making good money buying basically anything and everything.

And even until the end, aokam perdana had huge nta with 10,000 hectares of timber land. Renong with its plant assets far far more than its bankruptcy price. Etc etc.

My point being high margin of "safety" stocks only seem safe, until it's not.

Did you think hengyuan at 18 had high margin of safety?

Did you think xingquan with oodles of cash has high margin of safety?

Think about it. If you really wanted to, you could turn numbers around to mean anything you want.

If a company is doing badly and the shares tank, it could mean that it's undervalued. But it can also mean that the business prospects changed and it's going to go bankrupt soon, right?

The problem with Stockraider is he thinks I am a rookie and have never tried his investing methods. Guess where I was in the 90's? Watching and reading security analysis and intelligent investor just like him. Did you know security analysis changed the theories, examples and applications for every edition based on latest data? I know, I've read every edition to try to understand the differences of investing in the the thirties (first edition), the fifties (third edition) and the late eighties ( sixth edition). Now why did I do that?

I was realizing when I tried technical analysis to trade stocks that I found a counter pattern. Each time I tried a new indicator that worked, after a few weeks and months suddenly the trade signals would change on me and I went from making money to losing money again.

Then I realized something. Each time I tried margin of safety value buying, it always seemed I was buying a penny stock. When I set my stock selling at 80% of intrinsic value, the market changed on me at 50%. When I started selling at 50%, things changed on me at 20% intrinsic.

I may have been too blind to realize it, but penny stocks are subject to syndicate behaviour. And obviously they too know exactly what is a cigar butt. They used it every day to make money off idiots like me.

Again SSLee no one is grabbing your hand here asking you to invest in QL or nestle. The entire purpose here is for you to please finalize understand that numbers only will not a good business make.

It is what you do with the understanding of numbers into the business that gives you insight into how the business will perform over time.

Obviously when I bought QL in 2009 it was not pe50. But if you ask me to sell it now I will think you are crazy. It's like asking Warren to sell coca cola.

Anyway, learn to use a bit of business sense.

Just because pe is high does not mean it is a bad business.
Just because pe is low and they have a lot of cash also does not mean it is a good business. I'm looking at you xingquan, xidelang etc.

But if you shut your mind just because pe is high, you will automatically lose out on investing in public Bank, nestle, ql, topglove, hartalega, yinson and all the other premium companies just because you think price is what you pay. Value is what you get.

Hi ppteh,

It's not very difficult to get the graph. You only need to go to financial section of the aeon credit or supermax and click on summary.

It's right next to quarterly and yearly data. Then when you see the chart you can start playing around with the data you want to look at and download.

Cheers

Philip

I would argue that uncertainty is bigger when holding more stocks, not less. Therefore even more risk.

But believe what you will.

Or better yet, read Jon choivo annual letter, he has 28 stocks right? How is his stock performance doing?

Investing and betting is very different thing. Game theory is game theory.

Just because every ball come your way doesn't mean you have to hit everything. If you find one in the right place and hit, sure chun chun win la.

Risk only applies to those who don't know what they are doing.

Betting implies more luck less analysis.

Investing implies more analysis, less luck.

Very simple question which I faced through during 3 financial crisis:

When a crisis happened, which recover faster? Quality companies or cheap ones. And if you know it is quality companies, then my question is if you buy in bulk, you can get a high ratio of quality companies meh?

Average investors get average returns.

As for takaful, have you ever thought deeply on what it does as a business? What does roe of 25% yearly tell you about the business?

Do you use the service? I doubt not. Do you use their general and motor services? Definitely not. If GEICO had such insane roe every year how fast would you think it would have grown? And yet ql grows is revenues faster.

And I personally believe at those roe levels, takaful is simply a scam to take money from uneducated Muslims with sweet sounding words of religion.

You have to understand the quality of the business and the growth opportunities(bigger piece of the pie) to know why ql, topglove and nestle is afforded higher pe,

Takaful will never interest non Muslims, and those who know how insurance works realize that insurers make their money from float and investment funds return.

How will you perform in bursa stock if I tie your hands and say you can only invest in shariah compliant companies? ( Ql is one. Hint.)

Instead of just thinking takaful is undervalued, try going a bit further and try to understand why the investing market is giving takaful a lower pe.

But I do have a point to make. Cigar butt investing has inherent risk in that when you buy such a stock, you are buying knowing that something is wrong with the company for it to deserve a low valuation.

By that fact alone you will never have the confidence to put more than 15% of your networth in such a stock, because the inherent risk can pull the carpet underneath you.

And if you want to discuss topglove, I put 50% of my networth in it on margin loan in 2010, and went all in.

My question is, how would you have the confidence to do something crazy like that unless you were convinced you were buying a wonderful company at a fair price?

My only opinion is if I don't like owning a cigar butt company like talam for ten minutes, why would I even want to touch the stock in the first place?

And if I like the stock enough, why put in small measly amounts that do nothing in the long run?

Icon, please show me where I have said that my investing method is the one and only way? I believe I have never said such a thing.

However many people including yourself automatically shy away from investing in premium stocks simply because it feels wrong.

I merely show another way of investing that works for me.

Make of that what you will.

Just ask CalvinT when he buy cigar butt talam for 4 cents. Now become 2.5 cents. Sounds cheap? Not when you lose almost 50% net worth.

How to sleep well at night?

Reality is there is a reason why cigar butt thrown on the floor. You never know when your 10% gain become 100% loss...

A key component to growth stock is sometimes counter intuitive.

Fisher argued that numerous studies over the previous 35 years had shown growth stocks—those that reinvested in growth rather than paying dividends—had outperformed stocks that did pay high dividends. Specifically, over a five- or 10-year span, growth stocks had done “spectacularly” better in increasing their capital value. In addition, after a reasonable time, the growth stocks were paying superior dividend returns as well.

And to those who only know bargain hunting, cigar butt searching and low pe, high nta stocks, read this:

https://www.gurufocus.com/news/781497/phil-fisher-growth-stocks-vs-cigarbutt-stocks

Would you have bought amazon at pe50?

This is in no way any shape or form asking the i3 community to suddenly go around hunting for pe50 companies and going hog.

What I am merely trying to imply is that pe is just what the public is paying to get a ride on the boat.

The trick is to identify the boat early and getting on at the right time before it leaves.

How to identify that is more than just numbers on a financial report.

You really need to apply some business sense in understand how a business runs and works.

If you see numbers for numbers you will just end up buying a low(or high) pe company for the wrong reason and feeling stupid about yourself.

Personally what I believe is that crude oil and gas sooner or later will run out. When it runs out, the most efficient form of sustainable fuel in large quantities is palm oil. I wont be foolish enough to guess when, but one day palm oil prices will be hitting RM4000 per ton when demand is more than supply. When that happens, I hope to still own QL. In the meantime, look for other businessses and monitor everything closely.

candlestick never lies. until it does.

Palm oil pricing for me is very simple story. It is the same with oil prices.
Oversupply, lack of consumer confidence, market demand. As long as crude oil prices are low, the number of products that can be converted by palm oil will always be more expensive than using refined oil products. when oil prices were at 10 year high, indonesia, vietnam, SEA had not gone all in planting. natural demand and supply shortage.

You can draw a chart between the price of crude oil and the price of palm CPO increase. It is almost in tandem.

When the number of planters reduce, or the number of uses increase, or the next replacement of crude oil becomes more expensive than palm oil, then the boom cycle will come again.

you huat sp500 go from 2900 drop to 2450, do you know why? or you think you can time the market buy at 2300 and now go up to 2600?

buying s&p500 index can be just as risky, if you don't know what you are doing.

if you buy s&p500, you are just hoping weighted stocks the big 4 FB,APPLE,AMZN, GOOGL can pull up everything forever. But if you dont know your tech industry business well, when crash you also cry... and dont know why.

maybe yes maybe no, do you know how much auric earned in singapore the last 10 years growth? if you do know its a simple of addition and subtraction and estimation. In either case private limited companies dont normally show their P&L to just about anyone,

maybe potential ghost knows how much auric 5 year equity growth is worth and can share the info to i3 community? I'm sure you have read through it extensively right?

I repeat here in verbatim.

Number 2, please.

AUDIENCE MEMBER: Hi. I’m Bob Kline (PH) from Los Angeles.

Pursuing your earlier comments on sigmas from a different angle, the conventional wisdom in the investment world is that an investment risk can be measured by the volatility of the price of the investment in the marketplace.

To me, this approach has it backwards. Since changes in price are determined by the changes in the opinions of investors in the marketplace, why would a rational investor substitute the opinions of the marketplace, as reflected in the volatility of the price, for his own assessment of the risk of the investment?

Consultants take this idea further by tracking the volatility of a portfolio manager’s results in an attempt to measure risk. So could you guys expand on your thoughts on this?

WARREN BUFFETT: Yes. Volatility is not a measure of risk.

And the problem is that the people who have written and taught about volatility do not know how to measure — or, I mean, taught about risk — do not know how to measure risk.

And the nice thing about beta, which is a measure of volatility, is that it’s nice and mathematical and wrong in terms of measuring risk. It’s a measure of volatility, but past volatility does not determine the risk of investing.

I mean, actually, take it with farmland. Here in 1980, or in the early 1980s, farms that sold for $2,000 an acre went to $600 an acre. I bought one of them when the banking and farm crash took place.

And the beta of farms shot way up. And, according to standard economic theory or market theory, I was buying a much more risky asset at $600 an acre than the same farm was at 2,000 an acre.

Now, people, because farmland doesn’t trade often and prices don’t get recorded, you know, they would regard that as nonsense, that my purchase at $600 an acre of the same farm that sold for 2,000 an acre a few years ago was riskier.

But in stocks, because the prices jiggle around every minute, and because it lets the people who teach finance use the mathematics they’ve learned, they have — in effect, they would explain this a way a little more technically — but they have, in effect, translated volatility into all kinds of — past volatility — in terms of all kinds of measures of risk.

And it’s nonsense. Risk comes from the nature of certain kinds of businesses. It can be risky to be in some businesses just by the simple economics of the type of business you’re in, and it comes from not knowing what you’re doing.

And, you know, if you understand the economics of the business in which you are engaged, and you know the people with whom you’re doing business, and you know the price you pay is sensible, you don’t run any real risk.

And I don’t think Charlie and I — certainly Berkshire — I don’t think we’ve ever had a permanent loss in marketable securities that was, what, 1 percent, maybe, half a percent of net worth.

I made a terrible mistake in buying Dexter Shoe, which cost us significantly more than 1 percent of net worth where I bought an entire business then.

But I was wrong about the business. It had nothing to do with the volatility of shoe prices or leather or anything else. It just was wrong.

But in terms of marketable securities, I cannot recall a case where we’ve lost that kind of — I mean, we’ve done a lot of things in things — in securities — that had a very high beta. We’ve dealt with a lot of things in securities that had a low beta.

It’s just the whole development of volatility as a measure of risk, it has really occurred in my lifetime. And it’s been very useful for people who wanted a career in teaching, but it is not — we’ve never found a way for it to be useful to us.

I was reading the transcript of the 2007 afternoon session of Berkshire Hathaway annual meeting. Something interesting came up on the concept of risk. Some considered buying with a margin of safety to be less risky, and securities that were volatile were considered very risky.

Warren had this to say about Beta:

things are only risky if you don't know what you are doing.

In my opinion,if you know all your 20 securities intimately and you know what you are doing exactly in buying them, then it is not risky to hold many stocks.

Problem is, people tend to think in prime concepts: if I diversify, it is safe because if one stock loses at least there are others that will win. This has been proven to be patently untrue.

If you don't know what you are doing in buying your stocks, then there risk, no matter how many stocks you hold.

Maybe I should rephrase my sentence, the majority of stocks in bursa is not rubbish, however majority of them provide average returns. Even if you were to invest 10 million in 20 stocks, if they are average stocks, you get average returns. Compounding will turn average returns into rubbish.

But well put together writing, I enjoyed reading it.

Cheers!