PORTFOLIO MANAGEMENT AND TRADING

While individual personalities and goals can influence one’s trading and portfolio management techniques to some degree, sound buying and selling strategies, appropriate diversification, and prudent hedging are of importance to all investors.

Of course, good portfolio management and trading are of no use when pursuing an inappropriate investment philosophy; they are of maximum value when employed in conjunction with a value-investment approach.

STOP-LOSS ORDERS

Some investors place stop-loss orders to sell securities at specific prices, usually marginally below their cost.

If prices rise, the orders are not executed. If the prices decline a bit, presumably on the way to a steeper fall, the stop-loss orders are executed.

Although this strategy may seem an effective way to limit downside risk, it is, in fact, *crazy.
Instead of taking advantage of market dips to increase one’s holdings, a user of this technique acts as if the market knows the merits of a particular investment better than he or she does.

Selling: The Hardest Decision of All

Many investors are able to spot a bargain but have a harder time knowing when to sell. One reason is the difficulty of knowing precisely what an investment is worth.

An investor buys with a range of value in mind at a price that provides a considerable margin of safety. As the market price appreciates, however, that safety margin decreases; the potential return diminishes and the downside risk increases.

Not knowing the exact value of the investment, it is understandable that an investor cannot be as confident in the sell decision as he or she was in the purchase decision.


To deal with the difficulty of knowing when to sell, some investors create rules for selling based on specific price-to-book value or price-to-earnings multiples. Others have rules based
on percentage gain thresholds; once they have made X percent, they sell. Still others set sale price targets at the time of purchase, as if nothing that took place in the interim could influence the decision to sell. *None of these rules makes good sense. *

Indeed, there is only one valid rule for selling: *all investments are for sale at the right price.*

If selling still seems difficult for investors who follow a value investment philosophy, I offer the following rhetorical questions:

- If you haven’t bought based upon underlying value, how do you decide when to sell?
- If you are speculating in securities trading above underlying value, when do you take a profit or cut your losses?
- Do you have any guide other than “how they are acting,” which is really no guide at all?

Liquidity considerations are also important in the decision to sell.

For many securities the *depth of the market as well as the *quoted price is an important consideration.

You cannot sell, after all, in the absence of a willing buyer; the likely presence of a buyer must therefore be a factor in the decision to sell.

As the president of a small firm specializing in trading illiquid over the-counter (pink-sheet) stocks once told me: “You have to feed the birdies when they are hungry."

Decisions to sell, like decisions to buy, must be based upon underlying *business value*. Exactly *when to sell – or buy* – depends on the *alternative opportunities* that are available.

Should you hold for partial or complete value realization, for example?

- It would be *foolish to hold out for an extra fraction of a point of gain in a stock selling *just below underlying value* when the market offers *many bargains*.

- By contrast, you would not want to sell a stock at a gain (and pay taxes on it) if it were still *significantly undervalued* and if there were *no better bargains available*.

Although specific investments have a beginning and an end, portfolio management goes on forever.

An investor's portfolio management responsibilities include maintaining appropriate diversification, making hedging decisions, and managing portfolio cash flow and liquidity.

Once you choose to venture beyond U.S. Treasury bills, whatever you do with your money carries some risk. Don't think you can avoid making a choice; inertia is also a decision.

It took a long time to accumulate whatever wealth you have; your financial wellbeing is definitely not something to trifle with. For this reason, I recommend that you adopt a value-investment philosophy and either find an investment professional with a record of value-investment success or commit the requisite time and attention to investing on your own.

OPPORTUNITY COST

The trick of successful investors is to sell when they want to, not when they have to.

Investors who may need to sell should not own marketable securities other than U.S. Treasury bills. If what you hold is illiquid or unmarketable, the opportunity cost increases further.

The most important determinant of whether investors will incur opportunity cost is whether or not part of their portfolios is held in *cash. *

Maintaining moderate cash balances or owning securities that periodically throw off appreciable cash is likely to reduce the number of foregone opportunities.

Another way to limit opportunity cost is through *hedging.* A hedge is an investment that is expected to move in a direction opposite to that of another holding so as to cushion any price decline. If the hedge becomes valuable, it can be sold, providing funds to take advantage of newly created opportunities.

While most other investors are preoccupied with how much money they can make and not at all with how much they may lose, value investors focus on risk as well as return.

Risk and return must, however, be assessed independently for every investment.

It is only when investors shun high-risk investments, thereby depressing their prices, that an incremental return can be earned which more than fully compensates for the risk incurred.

By itself risk does not create incremental return; only price can accomplish that.

Unlike return, however, risk is no more quantifiable at the end of an investment than it was at its beginning.

Risk simply cannot be described by a single number. There are only a few things investors can do to counteract risk:
- diversify adequately,
- hedge when appropriate, and
- invest with a margin of safety.

ONLY ONE VALID RULE FOR SELLING: ALL INVESTMENTS ARE FOR SALE AT THE RIGHT PRICE

There is only one valid rule for selling: all investments are for sale at the right price.

Decisions to sell, like decisions to buy, must be based upon underlying business value.

APPROPRIATE REACTION TO PRICE FLUCTUATIONS

There is nothing inherent in a security or business that alone makes it an attractive investment. Investment opportunity is a function of price, which is established in the marketplace.

The *single most crucial factor in trading* is developing the appropriate reaction to price fluctuations

In my view, investors should usually refrain from purchasing a “full position” (the maximum dollar commitment they intend to make) in a given security all at once. Those who fail to heed this advice may be compelled to watch a subsequent price decline helplessly, with no buying power in reserve. Buying a partial position leaves reserves that permit investors to “average down,” lowering their average cost per share, if prices decline.

There is only one valid rule for selling: all investments are for sale at the right price.

Decisions to sell, like decisions to buy, must be based upon underlying business value.

PRUDENT DIVERSIFICATION

Even relatively safe investments entail some probability, however small, of downside risk. The deleterious effects of such improbable events can best be mitigated through prudent diversification.

The number of securities that should be owned to reduce portfolio risk to an acceptable level is not great; as few as ten to fifteen different holdings usually suffice.

The number of securities that should be owned to reduce portfolio risk to an acceptable level is not great; as few as ten to fifteen different holdings usually suffice.

My view is that an investor is better off knowing a lot about a few investments than knowing only a little about each of a great many holdings.

The fact is that a diverse portfolio of overpriced, subordinated securities, about each of which the investor knows relatively little, is highly risky.

Diversification, after all, is not how many different things you own, but how different the things you do own are in the risks they entail.

MANAGING LIQUIDITY

When your portfolio is completely in cash, there is no risk of loss. There is also, however, no possibility of earning a high return.

Investing is in some ways an endless process of managing liquidity.

When the securities in a portfolio frequently turn into cash, the investor is constantly challenged to put that cash to work, seeking out the best values available.

When investors do not demand compensation for bearing illiquidity, they almost always come to regret it.

Because the opportunity cost of illiquidity is high, no investment portfolio should be completely illiquid either.

Most portfolios should maintain a balance, opting for greater illiquidity when the market compensates investors well for bearing it.

PORTFOLIO MANAGEMENT

An investor’s portfolio management responsibilities include
- maintaining appropriate diversification,
- making hedging decisions, and
- managing portfolio cash flow and liquidity.

All investors must come to terms with the relentless continuity of the investment process.
Although specific investments have a beginning and an end, portfolio management goes on forever.

Since no investor is infallible and no investment is perfect, there is considerable merit in being able to change one’s mind.

Companies get into financial trouble for at least one of three reasons:
- operating problems,
- legal problems, and/or
- financial problems.

Information generally follows the well-known 80/20 rule: the first 80 percent of the available information is gathered in the first 20 percent of the time spent. The value of in-depth fundamental analysis is subject to diminishing marginal returns.

The time other investors spend delving into the last unanswered detail may cost them the chance to buy in at prices so low that they offer a margin of safety despite the incomplete information.

The presence of a catalyst serves to reduce risk. If the gap between price and underlying value is likely to be closed quickly, the probability of losing money due to market fluctuations or adverse business developments is reduced.

Out-of-favor securities may be undervalued; popular securities almost never are.

What the herd is buying is, by definition, in favor. Securities in favor have already been bid up in price on the basis of optimistic expectations and are unlikely to represent good value that has been overlooked.

Since they are acting against the crowd, contrarians are almost always initially wrong and likely for a time to suffer paper losses. By contrast, members of the herd are nearly always right for a period.

Value investing encompasses a number of specialized investment niches that can be divided into three categories securities selling at a discount to :
- breakup or liquidation value,
- rate-of-return situations, and
- asset-conversion opportunities.

A bargain should be inspected and re-inspected for possible flaws.

Value investing by its very nature is contrarian

An analysis of cash flow would better capture the true economics of a business.

Nonrecurring gains can boost earnings to unsustainable levels, and should be ignored by investors.

An analysis of cash flow would better capture the true economics of a business. By contrast, nonrecurring gains can boost earnings to unsustainable levels, and should be ignored by investors.

What something cost in the past is not necessarily a good measure of its value today.

Liquidation analysis is probably the most appropriate method for valuing an unprofitable business whose stock trades well below book value.

A closed-end fund or other company that owns only marketable securities should be valued by the stock market method; no other makes sense.

Net present value would be most applicable, for example, in valuing a high-return business with stable cash flows such as a consumer-products company; its liquidation value would be far too low.

Similarly, a business with regulated rates of return on assets such as a utility might best be valued using NPV analysis.

At times when interest rates are unusually low, however, investors are likely to find very high multiples being applied to share prices.

Investors who pay these high multiples are dependent on interest rates remaining low, but no one can be certain that they will. This means that when interest rates are unusually low, investors should be particularly reluctant to commit capital to long-term holdings unless outstanding opportunities become available, with a preference for either holding cash or investing in short-term holdings that quickly return cash for possible redeployment when available returns are more attractive.

While a great many methods of business valuation exist, there are only three that I find useful.

1. The first is an analysis of going-concern value, known as net present value (NPV) analysis. NPV is the discounted value of all future cash flows that a business is expected to generate.

2. The second method of business valuation analyzes liquidation value, the expected proceeds if a company were to be dismantled and the assets sold off.

3. The third method of valuation, stock market value, is an estimate of the price at which a company, or its subsidiaries considered separately, would trade in the stock market. Less reliable than the other two, this method is only occasionally useful as a yardstick of value.

For every business that cannot be valued, there are many others that can. Investors who confine themselves to what they know, as difficult as that may be, have a considerable advantage over everyone else.

A closed-end fund or other company that owns only marketable securities should be valued by the stock market method; no other makes sense.

How do value investors deal with the analytical necessity to predict the unpredictable?

The only answer is conservatism. Since all projections are subject to error, optimistic ones tend to place investors on a precarious limb. Virtually everything must go right, or losses may be sustained. Conservative forecasts can be more easily met or even exceeded.

Investors are well advised to make only conservative projections and then invest only at a substantial discount from the valuations derived therefrom.

Value investing is simple to understand but difficult to implement.
The hard part is discipline, patience, and judgment.

There are three central elements to a value-investment philosophy.
- First, value investing is a bottom-up strategy entailing the identification of specific undervalued investment opportunities.
- Second, value investing is absolute performance-, not relative-performance oriented.
- Finally, value investing is a risk-averse approach; attention is paid as much to what can go wrong (risk) as to what can go right (return).

Selling is the hardest part:

- Since valuation is imperfect, knowing what price to sell at is also imperfect.
- “There is only one valid rule for selling: all investments are for sale at the right price.”
- Should be based on underlying value, alternative opportunities, liquidity.


“Returns must always be examined in the context of risk.”

calvintan posted this thread after a long disccourse on Netx.
It is ironic and hilarious.
calvin's incessant promotion of Netx was based on speculation after all.
So much for his full vision. :-)

>>>>>
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥

>>>>

NETX MISSION STATEMENT (Official email enquiry by Calvin Tan to Ms Penelope of Netx) Calvin Tan Research | I3investor
https://klse.i3investor.com/web/blog/detail/www.eaglevisioninvest.com/2019-11-09-story234573-NETX_MISSION_STATEMENT_Official_email_enquiry_by_Calvin_Tan_to_Ms_Penelope_of_Netx_Calvin_Tan_Research

>>>>
Big biggest fool in Next from 2019 to 2021 was calvintan of Singapore fame.

8.11.2019 39 sen per share
24.12.2020 14 sen per share
24.12.2021 12 sen per share
21.12.2022 7 sen per share

9 hours ago



Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥

>>>
Stock: [NETX]: NETX HOLDINGS BHD

2019-11-13 10:48 | Report Abuse

>>>

Calvintaneng wrote:

Nov 13, 2019 9:50 AM | Report Abuse

Target price for Netx

8 sen

15 sen

30 sen

Go go power ranger!!!

>>>>


NetX has outstanding 3.5 billion shares.

At 8 sen = Market cap of $304m
At 15 sen = Market cap of $525m
At 30 sen = Market cap of $1.05 billion


The smartest person in the forum is the manipulator indeed.

>>>>


Market cap of Netx today is RM 59 million

8 hours ago
>>>>>>

>>>
Hate the Spammers in i3
jaychua

Summary
Total comments
1,058
Past 30 days
535
Past 7 days
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Today
63

>>>>


So many posts in 1 day and hundreds in a week. Is "hate the spammers" also another spammer too? :-)

Jaks has huge debt, with little cash flows; thus servicing its debt maybe problematic. Maybe asset rich. Will need to monetise its assets.

>>>

CharlesT

Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > 2 hours ago | Report Abuse

kudos to otb for avoiding JAKS when it was hyped by KYY.

I think OTB brought more to Holland in Jaks 2.0....

35 minutes ago

>>>


Alright, my apologies. I did not know the second half of this story.

kudos to otb for avoiding JAKS when it was hyped by KYY.

>>>
Stock: [NETX]: NETX HOLDINGS BHD

2019-11-13 10:48 | Report Abuse

>>>

Calvintaneng wrote:

Nov 13, 2019 9:50 AM | Report Abuse

Target price for Netx

8 sen

15 sen

30 sen

Go go power ranger!!!

>>>>


NetX has outstanding 3.5 billion shares.

At 8 sen = Market cap of $304m
At 15 sen = Market cap of $525m
At 30 sen = Market cap of $1.05 billion


The smartest person in the forum is the manipulator indeed.

>>>>


Market cap of Netx today is RM 59 million

>>>>

NETX MISSION STATEMENT (Official email enquiry by Calvin Tan to Ms Penelope of Netx) Calvin Tan Research | I3investor
https://klse.i3investor.com/web/blog/detail/www.eaglevisioninvest.com/2019-11-09-story234573-NETX_MISSION_STATEMENT_Official_email_enquiry_by_Calvin_Tan_to_Ms_Penelope_of_Netx_Calvin_Tan_Research

>>>>
Big biggest fool in Next from 2019 to 2021 was calvintan of Singapore fame.

8.11.2019 39 sen per share
24.12.2020 14 sen per share
24.12.2021 12 sen per share
21.12.2022 7 sen per share

Top 5 lessons from the book “The intelligent investor”

1.The most important lesson from "The Intelligent Investor" is the concept of "margin of safety," which suggests that investors should only buy securities when they are trading at a significant discount to their intrinsic value. This helps to protect against potential losses if the security's value decreases.

2.Another key lesson is the importance of diversification. Rather than putting all of your eggs in one basket, the book recommends spreading your investments across a variety of different assets to reduce the overall risk of your portfolio.

3.The book also emphasizes the need for long-term thinking when it comes to investing. Rather than trying to make a quick profit, the book suggests taking a more measured approach and holding onto investments for the long term.

4.In addition, "The Intelligent Investor" emphasizes the importance of regularly reviewing and rebalancing your portfolio to ensure that it remains in line with your investment goals and risk tolerance.

5.Finally, the book advocates for the use of a professional financial advisor to help guide investment decisions. This can be particularly helpful for those who are new to investing or who may not have the time or expertise to manage their own investments.

>>>>>
Hate the Spammers in i3
jaychua | Joined since 2013-11-04

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Today
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>>>>>



"Hate the spammer" becomes the spammer today. :-) Berserk.

Stay collected.

Berkshire Hathaway looks for companies with a good profit margin and those that produce unique products that can’t easily be substituted. As Warren Buffett once said in a letter to his shareholders, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

What is your intrinsic value for HEIM?

Fiscal year is January-December.
2021 2020 2019 2018 2017
5-year trend
All values MYR Millions.
Sales/Revenue 1,979 1,762 2,320 2,030 1,930
Net Income 246 154 313 283 270
Net Operating Cash Flow 341 230 412 349 358
Capital Expenditures (104) (61) (108) (81) (77)
Free Cash Flow 242 173 310 272 287
Free Cash Flow Yield 0.69% - - - -

Total Equity 396 349 394 371 361
Total Shareholders' Equity / Total Assets 36.23% 33.20% 35.64% 39.47% 41.52%

Total Assets 1,092 1,052 1,106 940 868
Return On Average Assets 22.91%

http://myinvestingnotes.blogspot.com/2022/12/how-and-why-do-companies-pay-dividends.html

How and Why Do Companies Pay Dividends?

Warren Buffett Is More Important Now Than Ever

KEY POINTS

A bear market is an excellent time to invest in the stock market.

Invest in businesses with some type of competitive advantage.

A long-term mindset helps correct for the natural volatility of the stock market.

>>>>
calvintaneng

Happy morning to all Investors of Tsh Resources

At Rm1.04 with 3+8 sen = 11 sen dividend for year 2022 is over 10%


This is the best so far

Today all will receive this excellent dividend

Can spend this joyfully for year end or reinvest into more undervalue Tsh shares

Have a blessed day

Greetings
Calvin

>>>>


A recurrent simple mistake of Calvin is highlighting such dividends as a badge of a good investment. The simple truth is different.

The biggest spammer in TSH the last few days was "hate the spammer." How ironic!


In investing, always remember Buffett's rules:
Rule 1: Don't lose money
Rule 2: Remember Rule 1


PPB
2000 RM2.00
2022 RM17.18

TSH
2000 RM 0.74
2022 RM 1.04

PPB versus TSH
How clever is calvintan's research, if any?

PPB
2000 RM2.00
2022 RM17.18

TSH
2000 RM 0.74
2022 RM 1.04

The opportunistic cost of not investing in a great company for the long term is indeed huge.

tsH
the latest of many many promotions in i3 by calvintan.

Why is he mentioning Robert Kuok and PPB in his promotion of TSH? If he has been smart, he should have been invested in PPB for decades today. I have been a long term investor in PPBOil and FFM for years. Today, I continue to hold my investment in PPB.

After many years of investing, it is my observation that each invests differently from others. It is the philosophy in them that drives their investing. Those with sound and safe investing philosophy which have proven to be profitable for a long time should continue to do so. These long term survivors are in many cases outliers in the distribution curve of the investing population.

Hate the spammers has gone more berserk today. ;-)