Posted by Kelvin Loh > Oct 15, 2015 09:57 PM | Report Abuse
Thanks KC. A very good article. I like that you have added some sense of humor to deliver your message here. Do you ever think to publish book about investing? If you do, I will definately get one.

Thanks Kelvin for your good words. Yes, the book will come out soon. You will be inforrmed.

Posted by okdoke > Oct 14, 2015 10:04 AM | Report Abuse
I have been reading your prudent articles for more than a year. Excellent and keep the good deeds...anyway, any lessons what went wrong with Pantech. thanks in advance

I don't think much has gone wrong with Pantech. There was a growth story, and the share price was chased up to more than RM1.00 which even with that growth story, it didn't worth that much. It was a double whammy when the story didn't materialized due to the steep fall in oil prices.

Another thing is cash flow wise, it was not good then.

But Pantech is still a good company in my opinion, but not a fantastic company. It has good dividend yield.

Posted by Caroline Ang > Oct 15, 2015 04:39 PM | Report Abuse
Thanks...I wish that someone that I recently took a TA course from, would read your article. He laughed at me for believing in FA. Told me, TA is good enough...no need FA :( Anyway, I try to do my own analysis nowadays and not rely on tips. Even I though I receive 6 months subscription of the lecturer's newsletter, I don't even open the email any more.

Your TA lecturer would laugh at me also.

Posted by valuelurker > Oct 15, 2015 11:50 AM | Report Abuse

Kcchongnz, good article as always... I respect your decision to keep your teachings on a retail level, but I hope you will change your mind in due time. When that time comes, feel free to contact me test.diit@gmail.com as I have start-up strategies for the value investing initiative.

Now time for more serious business - how would you value Banks - a simple P/B or... Furniture, property and other miscellaneous sectors have been covered

Yes, P/B would be the way, basing on its return on equity. The other one is dividend discount model.

http://klse.i3investor.com/blogs/kcchongnz/83959.jsp

Maybe you can let me know the details of your initiative.

Posted by speakup > Oct 15, 2015 09:02 AM | Report Abuse
kcchongnz, u forgot another dangerous myth : u can make quick money by following forumers in i3investor


One can make quick money following someone who has a lot of money at his disposal who keeps on buying the stocks, no matter whether the price is reasonable or not. We can't dispute that. On the flip side, if ones buy based on that and that person decided to realize his profit and starts selling, those who have followed him and have bought at the peak, would of course lose money. That is also indisputable.

The problem is you won't know when he will stop buying and when will he stop selling. If you think you can also follow him to sell when the quarterly report shows reduced profit, I think you certainly must know you are the patsy.

Posted by jassmen > Oct 15, 2015 10:24 AM | Report Abuse

5.You can’t do that kind of fundamental value investing in Malaysia. They are not applicable here. You can’t earn good long-term return in Bursa. Bursa is different.
Some years ago, I read about if you were to invest in Public Bank, yes a bank, you would have a compounded annual return of 23% for 20-30 years. RM10000 invested in PBB for 25 years would become RM1.77m, or a total return of 177 times.

KC,
does this mean, I invest the it divident by buying the same stock ? And at what price? Wait for the original purchased price or buy at quoted price at that time?


You put in RM10000 to buy say 10000 shares at RM1.00 25 years ago. What ever dividend you received you just buy its shares at the prevailing price then. Your repurchase prices will be different at different time when the dividends were received each year. After 25 years, your RM10000 grows to RM1.77m.

Posted by paperplane2 > Oct 15, 2015 01:52 AM | Report Abuse
Not just me notify this kcchongnz. OTB, rosmah, etc all identify this stock also. I just want your view on cash flows.
I saw high depreciation, but also high staff benefit. Pro can con here.


High depreciation is because of its high capital requirement in its business. More important, over a period of few years, is there positive FCF? Is its recent high capex justifiable?

The answer seems to tilt towards the affirmative. But still the future is uncertain and unknowable.

The difference between KESM and V.S are:

1) KESM is a net cash company whereas VS is net debt. A safer company to invest in. In investing, and as a "small investor", I care more of downside than the upside.
2) VS appears to earn higher return on capital now. But its cash flow is not pretty. Anybody just brushing off the peril of persistent poor cash flow, in my opinion, doesn't understand it.
3) KESM was cheap when it was selling at RM2.83 a few months ago when it was first written by a course participant of mine. It has gone up by a lot since then. Notice nobody peddles this stock then and now and tell you buy buy buy except some noises? You have to judge by yourself and make your own decision if the price is still cheap.

Always remember, even a good company is not necessary a good investment. It depends on the price. If you have bought Microsoft, one of the greatest companies in the world in early 2000, you may still be losing a substantial amount of money.

Posted by paperplane2 > Oct 13, 2015 11:23 AM | Report Abuse
kcchong, can help do study on KESM?
I SAID RM16 much achievable they don't trust.
High depreciation is depreciation..........strong cashflow is main thing

One of the course participants of one of my online courses has made a detail fundamental analysis of KESM just a few months ago when it was RM2.83. He knows much more than me about KESM. See if he can help you.

KESM is cash rich which makes it appealing, besides a plausible growth story. But RM16 when it is trading at RM4.27 now?

"When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'" - Charlie Munger

Posted by paperplane2 > Oct 13, 2015 09:33 PM | Report Abuse
Kcchong, I always have doubts! Let's take kuchai as an example of study here. Using your thoughts above, yet the return might not seems good. The stock is better privatised, yet I dunno why it is still listing. It has lots of assets, but little income. Yet, people holding this stock hoping for good return using value investing method is not getting the desired results. It might some years even under perform an FD in bank. How?

Kuchai really have to "slow slow wait". Even I have lost patience on it. That is also how one could be wrong in his assessment, I said could be. And hence there is no sure thing in investment.

Intelligent Investors has aptly answered your question.

Posted by Intelligent Investor > Oct 13, 2015 10:43 PM | Report Abuse
Paperplan, "Be patient". It take time to unlock the value. Cold eyed's article rang the bell too - http://klse.i3investor.com/blogs/kianweiaritcles/84321.jsp

And, don't forget to enjoy the the free lunch in the investment - diversification.

Yes, three years, San nien, a beautiful song when my grandfather used to sing when he was courting my grandmother. I love the song too.

And I love to invest like this song.

Posted by Ezra_Investor > Oct 11, 2015 10:51 PM | Report Abuse

"Sigh, it is hard to find people willing to learn about fundamentals investing nowadays." - kcchongnz

Dear Kc, don't worry, you're not alone. I share your frustration as well.
When I first started investing, a friend of mine once told me - "Bursa is full of people with gambling mentality, not investing."
I didn't really believe at first, but what he said was indeed true.
Even till today, I don't see many who really learn how to use fundamental analysis, instead tons of speculating and gambling.

However KC, it's rare but there's still people like YiStock, Frank, and many more who still adhere to FA. And many of us love reading your articles. Please do not give up, and continue writing more articles to enlighten us.


Glad you like to read my articles. Some say they are boring, repeating. Some, even some seemingly very successful stock market players say fundamental investing won't work, or won't work alone, or even it works in the US, it won't work in Bursa, despite i have repeatedly explain the plausibility of its use, and even provided my own successful experience as published in i3investor a few years ago.

No, I am not frustrated, why should I? The disinterest about fundamental value investing in Bursa, precisely will still continue to provide us the good opportunity to earn extra-ordinary return from investing in the stock market in the long term, as this good opportunity is not arbitraged away.

Posted by james_owk > Oct 10, 2015 10:48 PM | Report Abuse
Hi KC, thanks for the sharing, its very informative! btw wondering what is your view on their low order book as most of their projects are at tail end?

James, this article is about the dividend discount model, using Pintaras as an example. It is not about recommending to buy Pintaras or sell it.

It isn't about how much is the order book for the coming year, or the next couple of years. Definitely the sum of discounted future dividends which gives its intrinsic value is not about its predicted profit for the next quarter, or next year, or the next two years. Anyway, I don't have to predictive power, although i acknowledge that the order book for this year will probably will be less, and so is its profit and cash flows and free cash flows.

But study carefully the dividend discount model,are the earnings for the next year, or next couple years an input in the model? To put it more specifically, are the dividends for next year, or next couple of year have a significant effect on its intrinsic value?

Not unless if you are speculating, not investing, for its profit growth for the next quarter, the two quarters after that, or one or two years.

Well, I never say one cant make big money speculating.

Posted by paperplane2 > Oct 8, 2015 10:06 PM | Report Abuse
I only have one question.. Both doing similar thing, you do piling, other ppl also doing piling, and they both no longer new company. Why one is giving 20% margin and another 10%?? I wonder why.

Posted by paperplane2 > Oct 8, 2015 10:08 PM | Report Abuse
It is like both selling cakes, one can earn rm10, another rm20, the size, the materials , the workman hours same! Still one return lower! Why?
It is like u teach 2 students, one understand it in 1day, another students need 10days! Why?
I think for this case, another company is purely INCOmpetent!!!


No, I don't agree with you. It is just a preference for each company. Pintaras focus on getting higher margin for his jobs, whereas Econpile is looking for higher turnover. The end result is the same, a high return on equity. Pintaras has a better reputation in the market. So it can afford to choose and pick its jobs.

Of course I am not ruling out Pintaras may be more efficient in its works. However, in a capitalism market, it is difficult to persist as competition will crop in. As you can see Econpiles has been grabbing most of the jobs now, and Pintaras margin has decreased last year, but still at high margin.

Posted by Newbhere > Oct 8, 2015 02:10 PM | Report Abuse
Hi KC, based on the formula and example you quoted above for DDM, am I right to say that if we substitute the Div amount with EPS, this would then equate to a DCF computation? Both DDM and DCF uses mostly the same data.

Posted by kcchongnz > Oct 8, 2015 03:15 PM | Report Abuse X
I started the article with this quote below which is self-explanatory.
“A stock dividend is something tangible-it is not earnings projection; it is something solid, in hand. A stock dividend is a true return on the investment. Everything else is hope and speculation.”

I tried to answer you with the quote above, that "A stock dividend is a true return on the investment. Everything else is hope and speculation.”

You can use anything for DCFA, whether it is free cash flows, owner's earnings, dividends, a hybrid FCF and a terminal earnings multiples etc. What I mean is EPS is not cash flow, unless it is converted to real "cash" because earnings often are hidden in additional working capital, and the need for capital expenses, and often little cash is left behind like what I have written here.

http://klse.i3investor.com/blogs/kcchongnz/83784.jsp

So EPS will not be what you will receive eventually, unlike dividends, FCF.

I thought you would understand what I meant by

"A stock dividend is a true return on the investment. Everything else is hope and speculation.”

But instead you came with this statement:

Posted by Newbhere > Oct 8, 2015 05:02 PM | Report Abuse
Thanks KC for your sense of sarcasm and effort in replying to my simple request and suggestion. An ordinary investor wouldn't have bothered to write so many articles in I3 and even offer to educate interested people in value investing. I am disappointed. But let's move on, as neither of us have any real obligation to one another.


Anyway, thanks Intelligent Investors and Noby for being very courteous and patient in explaining on my behalf. i am proud of you guys.

Posted by Intelligent Investor > Oct 8, 2015 10:04 PM | Report Abuse
Mr. Chong, the subtitles have some mistake ~ DuPont Analysis of Pintaras Vs Kimlun.
I think it is better to use the ROIC instead of ROE as pintaras invested capital is way below the equity.

II, thanks for the correction. I have amended it in the article.

Yes, ROIC will be more appropriate but let us just keep it simple here.

Posted by TylerDurden > Oct 8, 2015 09:50 PM | Report Abuse
KC,
Would you mind to share your views regarding the outlook/future profitability of Pintaras Jaya?
Do you think that Pintaras is able to maintain its FCF of RM 40+ million a year in the next few years?
If Pintaras FCF is halved to RM 20 million, should we put a new valuation on it?

Nobody can tell you that, not even Dr Chiew of Pintaras Jaya. Revenue will likely to drop the coming year but construction industry seems still to be okay, but not forever.

I am a small retail investor, and I have no resources to predict the future, or make a comprehensive study of the company, its risks which also concern the industry risks. That will answer your next question. Tons of research has shown that even analysts are very poor in predicting the future. They often even got the direction wrong. Hence I don't place emphasis on anyone who says he is good in predicting the future.

Posted by Newbhere > Oct 8, 2015 04:27 PM | Report Abuse

"KC, I understand what the articles says. But a straightforward reply on whether DPS can be replaced with EPS to change DDM to DCF wouldn't have been too difficult?"

No, that would not be difficult at all. But it has not much use to you since you don't need to think.

"On the 2nd suggestion, it is okay for you to share your experience on the banking, oil and gas, plantation, industrial or any other sectors you are familiar with. I am not asking for tips, punt strategies or a doctorate write-up. Just merely your past and current experience and future expectation. It is okay to just say you are busy or you are not interested in writing such articles at this time. Cheers and take it easy."

No, I am not good at those as I am just an ordinary investor.

gbk5566,

The core business of Scientex includes properties and PVC/PP/PE. Hence any investment related to both core business are also considered as capital expenses, not only purchase of PPE. But still interpretation of this is also an art, and not an exact science.

Posted by Newbhere > Oct 8, 2015 02:10 PM | Report Abuse
Hi KC, based on the formula and example you quoted above for DDM, am I right to say that if we substitute the Div amount with EPS, this would then equate to a DCF computation? Both DDM and DCF uses mostly the same data.


I started the article with this quote below which is self-explanatory.

“A stock dividend is something tangible-it is not earnings projection; it is something solid, in hand. A stock dividend is a true return on the investment. Everything else is hope and speculation.”


"On a side note, it would be great if we could have write-ups on Industry plays, cyclical plays, penny stock plays."

Sorry, I am not an analyst, or someone peddling stocks here, but merely sharing some thoughts about investing. I don't play play here.

One of the best articles. I would say everyone dabbles in the stock market must read.

Posted by gbk5566 > Oct 7, 2015 08:32 AM | Report Abuse
Could anyone show me how to calculate the Capital Expenses in the Table 1. I am new to fundamental Analysis. Thank you.

Capital expenses are shown in the cash from from investing activities in the cash flow statement.

Posted by slater > Oct 7, 2015 02:14 PM | Report Abuse
Hi KC Chong,
Good Evening !
I would like to ask for your valuable advice regarding 9822 SAM
All their contracts to manufacture plane parts is in USD
What if our ringgit stabilize on next year will it make the company profit drop or turn into losses ?
Thank You

Slater, maybe you can tell me if Ringgit is going to go up, down or remain the same, when will it happen, and how much does it affect SAM's bottom line, if it goes up, down, or stabilized.

Posted by valuelurker > Oct 7, 2015 02:26 PM | Report Abuse
Mr Kcchongnz, thanks for the analysis, however with all due respect your sharing should move on from merely sharing DCF, DDM, ROIC theory to actual stocks in Bursa that have good cash flows, substantial margin of safety etc - a shortlist so to speak, and then move to do a crowd-sourced analysis - I'm sure there will be willing participants in this endeavour. Where you will have active critiques and debates on the financial statements, assumptions made etc
Take it to the next level.
That is where you will be a true champion of the people, Malaysia's very own Value Investing guru.

I am just a small time investor. But I do know something about finance and investing, whether theoretically, or practically, or like some businessmen. So I try to cari makan by teaching those who wish to learn about fundamental investing. I have a little record in i3investor in investing results. In case anyone ridicules me about bullshitting, I can pull those out to make a defense. I am no analyst. Hence I am not in a position to be like any of them, nor to provide anyone with analysis and making recommendations of stock purchase. I a not good at that, although i often share my thoughts in i3investor.

Are my sharing on DCF, DDM, ROIC all merely theories, and no practical use? Can't theory be used in practice. so what others use for practice? Aren't my sharing of theories below used for real stocks in Bursa? i thought I have been doing it all the time.

Posted by fattycat > Oct 6, 2015 07:52 AM | Report Abuse
Sorry kcchongnz , fcf/ic ,how to count ic(invested capital) actually? I mean from which part we can find the amount ? Pls guide ^^ thanks

You can't "find the amount" anywhere. You have to estimate it. Here is a way of estimating IC.

IC = Fixed Assets + Net Working Capital

Posted by citychew_1886 > Oct 3, 2015 03:57 PM | Report Abuse

Hi KC ,
thanks for the reply.
let me give an example here .
let say company A have total invested capital of rm1000 ,and the EBIT is rm200 ,so the ROIC is 20% . ( EBIT/total invested capital) and company A is zero debt . but company B have the same ROIC as company A but company B have rm500 debt in the balance sheet.so are they still have the same "goodness" ?


Thanks Probability for the clarification.

Same "goodness" but is the "cheapness" the same? Remember, good company doesn't mean good investment and vice versa.

So to determine which is cheaper, you should read this article.

http://klse.i3investor.com/blogs/kcchongnz/49016.jsp

This article is one of the least popular article of mine in i3investor, but one of the most important, in my opinion. So many people talk about the simplistic PE ratio. You hardly even read anything from professional analysts talk about enterprise value.

Posted by Ezra_Investor > Oct 3, 2015 04:11 PM | Report Abuse

Thank you KC. Just to confirm, if I get what you're saying right, in my case it should be "Cash and Cash Equivalents" instead of "Cash and Bank Balances", right? Because it's not only cash in the balance sheet.


You are right.

Posted by citychew_1886 > Oct 3, 2015 10:45 AM | Report Abuse
Hi KC ,
as you said "Quantitatively, the requirement of stable and consistent earnings and cash flow from operations and free cash flow, a healthy balance sheet stay. And the difference is, instead of using return on equity (ROE) as a measure of a good company, I prefer the return on invested capital (ROIC). For cheapness, I use EBIT multiple, instead of the price-to-earnings ratio. "

But how about if a company with high debt ? does the ROIC alone still apply to such high debt company ? or you still need to add in (EBIT multiple = Enterprise Value / EBIT) to make it work better ?


ROIC, or return on invested capital measures the "goodness" of a company, the whole firm, unlike ROE which is just for the equity shareholders. Invested capital includes all capitals put in by the shareholders as well as debt holders and lenders. Hence ROIC has taken care of all capitals, whether it is high debt or low debt.

The above only measure "goodness". A good company is not necessary a good investment. Hence we have to look at if it is cheap enough to invest, even it is good. EV measures all market values including equity shareholders, debt holders, minority interest, but less of non-operating assets. So it is the price of all the stakeholders. Same thing for EBIT. it is the earnings of the whole firm. Hence all these numbers are in consistent with each other. Yes, you should also consider the price in term of EV/Ebit, similar to P/E, but for the whole firm.

Posted by saschl > Oct 2, 2015 10:06 PM | Report Abuse
Am just a beginner in Stock Market, consequently feeling very much carried away by this KC analysis and becoming very much confused and beaten down bec not sure if this analysis will have adverse effects on this counter or not. It sounds to me KC Chong's real agenda is telling people this is not a good counter to buy and its current price is overvalued! I regard the cursing words he put upfront in his write up is showing his contempt/jeering attitude towards this counter, bec how can a guru class like him would have missed out a counter if it has been regarded as good in his mind?
Also, find that his write up is beating around the bush too much, obscuring the jist of his whole write up which is?????? Still blur what really he wants to tell, sorry plse don't scold an amateur and substandard stock market goer like me, cheers!

I no guru class, and I no contempt any stock, but merely sharing my thoughts. Missed out such a good counter? I have "missed" out many many counters, not only VS.

Beating around the bush? Still blur on what I am trying to tell? Is it my fault or your own?

No, I never scold anybody. Only myself often kena scolded. But it is okay.

Posted by Probability > Oct 2, 2015 08:54 PM | Report Abuse
KC...this time your article has a lot of humor! he he..
keep it up :)
Ohh...its not easy to learn the fundamentals KC!
But all I can say is...once one learns and truly understands them.
U will never look at a stock w/o FA,
Its same like u r asked to drive your car blindfolded.


Great to hear that FA is useful for you. But do you really think "its not easy to learn the fundamentals"? Or it is because generally people are not wiling to put in time and effort to learn something that is so useful for their personal finance?

Fundamental investing always revolves around buying good companies at good price. You don't need to learn many things on how to measure a good company, and how to determine if a price is cheap or expensive. You must know the limitations of each measure is though. It always revolves around just a few things. So much so that this statement was made.

Posted by kcstone > Sep 24, 2015 09:34 PM | Report Abuse
“topic repeated dozen of times. only change title. boring. zzz”

Having said that there are many who dropped out from the course after two or three months. Yeah, no time, and busy on work.

Yes, it is not easy for most people because of work and other personal commitments and choices. But I think it is not because the thing to learn is difficult.

And precisely because of this, fundamental investing continues to work and not easily arbitrage away.

Excess cash is cash not required for the ordinary operations of the company. It can be just taken out without affecting the core business, and EV is about the core business.

So for me, excess cash is not only cash in the balance sheet, but investment in equity, investment in property for a non-property firm, investments in associates, JV etc.


Posted by Ezra_Investor > Oct 2, 2015 09:39 PM | Report Abuse

Mr Kcchongnz, there's something I would like ask regarding EV.

In the US, EV is calculate by:

EV = market value of common stock + market value of preferred equity + market value of debt + minority interest - cash and investments.

When translated to MY, it means:

EV = Market Value of Equity + Minority Interest + Debt – Excess Cash

Here's the question, when we speak of Excess Cash, do we refer to Cash and Bank Balances? Or do we refer to Cash and Cash Equivalents in Bursa?

Thank you for your time and explanation in advance.

Posted by Simon Ngiaw Wei Si > Sep 29, 2015 03:21 AM | Report Abuse
where can you get the PE ratios for each industry?


You may be able to get from Reuters Financials, Bloomberg, Yahoo Finance etc. for some US benchmarks. For local companies, I am not sure where you can get, maybe ask your brokers.

Posted by yungshen1 > Sep 25, 2015 07:50 PM | Report Abuse
kcchong u in well fundenmental analze.well done.many newbie will learn from u.

The truth is unlike in more advanced markets, few, very few people in Bursa have any urge to learn about something so important for their financial well being. Look at the comments below:

This one hopes for tooth fairy in Bursa.
Posted by Flintstones > Sep 24, 2015 09:26 PM | Report Abuse
kcchong, it has been a while since you recommend us new stock picks. Why not do one?


This wants excitement which in reality, true investing is like watching paint dry:

Posted by kcstone > Sep 24, 2015 09:34 PM | Report Abuse
topic repeated dozen of times. only change title. boring. zzz

This one has been a big loser following everything blindly, without reading and understanding what is the message transpired.

Posted by donfollowblindly > Sep 24, 2015 10:34 PM | Report Abuse
Finally admitted he lost all his money punting in Maybank , AirAsia and Mudajaya CW.

The same loser here only know what price is without knowing what is value. He just can't understand anything I have written in those articles explaining what these instrument are and how they work.

Posted by donfollowblindly > Sep 24, 2015 10:43 PM | Report Abuse
BIMB-W & MRCB-W are some of his 2014 stock picks which still lose money until today.


But these are the exactly reasons why fundamental value investing still work, and it will continue to work for a long time to come.

So anyone wishes to have an edge in investing in Bursa, there is no other way.

Posted by Ezra_Investor > Sep 25, 2015 05:36 PM | Report Abuse

Mr kcchongnz, may I ask a simple question?
Can you count EBIT by using profit before tax add back finance cost?
(Instead of Revenue - Operating Expenses or Net Income + Interest + Taxes?)


Just look at a typical income statement below then you may be clearer what is EBIT, or operating income.


*000 2014
Revenue 1590472
Cost of sales and services -1298151
Gross profit 292321
Other operating income 9189
Selling $ distribution -39590
Administrative expenses -72300
Other expenses 0
Profit from operation, EBIT 189620
Finance costs -7142
Share of associates 3789
EBT 186267
Taxation -34766
Net Income 151501

Posted by cherry88 > Sep 25, 2015 05:18 PM | Report Abuse

Structure Warrants ? Why not trying Call / Put KLCI Warrants. It works in the volatile market recently.

Call and put warrants, aren't they structured warrants?

If you understand and are good in them, go ahead and punt them in the US market, Hong Kong market, or maybe the Singapore market where there is less manipulations or just can't be manipulated. For example in the US market where there is liquidity, and plenty of structured warrants with calls and puts of the same underlying share with same expiry dates, where put-call parity exists. But are you as good as, or even close to others? How much do you know about option?

In Bursa, as I have said, it is best just to avoid them as described in this article.

How many people make or have lost money in call or put warrants in Bursa, percentage wise? Your input is appreciated.

Posted by value88 > Sep 25, 2015 12:13 PM | Report Abuse
Hi KC, what about the net-net stocks, do they work in Bursa ?
People invest in net-net stocks with the "hope" that something good will happen in near future so that their asset value can be realised. But the "hope" may not realise in Bursa or takes too long until the return is minimized. Although net-net stocks work for Walter Schloss in USA many years ago, I wonder can it work in Bursa in present years ?

I have written an article about my experience in Graham net net investing in Bursa here:

http://klse.i3investor.com/blogs/kcchongnz/56472.jsp

Here is an update of the return of the portfolio and individual stocks in the portfolio. The portfolio returned an average of 25.2% and a median of 17.1%, compared with the 5.3% of the broad market. There were only two out of 10 stocks have negative return of 17.5% each. There were huge positive return for KESM (+108%), KSL (+60.4%), and Hezxa, +47.2%.

So balance sheet investing is about Heads I win, Tails I don't lose much. Sounds good?

Graham net net return
No. 25/9/2015 Ref price Now Dividend Gain/loss return
1 Daiman 2.630 2.050 0.120 -0.46 -17.5%
2 KSL 1.010 1.520 0.100 0.61 60.4%
3 Plenitude 2.100 2.000 0.120 0.02 1.0%
4 Insas 0.552 0.710 0.020 0.18 32.2%
5 PMCorp 0.150 0.190 0.000 0.04 26.7%
6 Hexza* 0.635 0.845 0.090 0.30 47.2%
7 Prkcorp 2.820 2.730 0.300 0.21 7.4%
8 Kuchai 1.200 1.230 0.020 0.05 4.2%
9 KESM 2.040 4.180 0.060 2.20 107.8%
10 FACB 1.260 0.970 0.068 -0.22 -17.6%

Average 1.44 1.64 0.09 0.29 25.2%
Median 17.1%
KLSE 1627 1615 98 86 5.3%

Posted by Flintstones > Sep 24, 2015 09:26 PM | Report Abuse
kcchong, it has been a while since you recommend us new stock picks. Why not do one?


This was what an investment coach, Safal Niveshak said when asked to give tips, well said Safal:

Short answer – Please spare me!

Long answer – See I told you, the stock market is not a place for you. You will ask for my tips, and God forbid, I give you some, you will blindly invest in them. Then, when those stocks fall and you lose money, you will abuse me and tell me what a fool I am.

So, let me tell you upfront that I am a fool with no good stock tips to offer. Plus, I have been wrong many times in the past. As Jesse Livermore is supposed to have said:

Tips! How people want tips! They crave not only to get them but to give them. There is greed involved, and vanity. It is very amusing, at times, to watch really intelligent people fish for them. And the tip-giver need not hesitate about the quality, for the tip-seeker is not really after good tips, but after any tip. If it makes good, fine! If it doesn’t, better luck with the next.

It has always seemed to me the height of damfoolishness to trade on tips.

Tips are just that. Tips. Following blindly is setting you up for epic ruin. First of all you have no idea what position that tipper is in. He may not even hold the stock he is recommending. Even if he is, you have no idea when he will unload his lot. Suppose he is selling his stock to you. Then you would be forced to dump it to someone else for a higher price.

Got it? No? So again, please spare me!

Posted by cpng > Sep 24, 2015 08:09 PM | Report Abuse
幸好这里还有像KC CHONG 的股市明灯，值得我们尊重。


Thanks for your kind words.

Seriously I see you are a very experienced hands on type of investors. Your comments (not the above, but others) are very useful, I would say extremely useful, for wanna be get rich quick investors.

Posted by slater > Sep 20, 2015 06:24 PM | Report Abuse

Hi kcchong ,

A Good Day to you !

What is your views on your skpres ?

Their PE is above 20

Do they have good returns on capital like VS

Please advice


SKPResources's return on capital is definitely much better than V.S. V.S can't even get close.

It is just that whether the price is right. SKP Resources seems to have high earnings visibility. So PE of > 20 may not be expensive in view of its contracts secured and its future, and its high return on capital.

Posted by digiuser016 > Sep 20, 2015 10:12 PM | Report Abuse

Hi Kcchong

Reinvestment rate=(capex- depreciation+ change in working cap)/ebit(1-t)

What if it is a mature company? the depreciation >(capex+change in working cap).

Therefore, you end up getting -reinvestment rate.How do you adjust the reinvestment rate?or you get negative growth rate?


Capex, change in net working capital, etc. are lumpy in nature. You shouldn't just look at one year figure. On average, and over a long period, depreciation can't be more than capex. How can it be when only there is capex, then only you have depreciation.

Posted by bsngpg > Sep 16, 2015 06:53 PM | Report Abuse

My opinion: An worldwide renowned elite group can achieve 5 yrs @6.94%, 20 yrs@7% and 41yrs@16%. As ordinary investors, I opine benchmarking 7% is a very outstanding target already.


When you compare return, you should compare to the broad index, not a big investment company like Tamasik.

The long-term nominal return of most matured equity market has been around 10%-12% a year. If you can't get that, you are under-performing the market. The super investors of Graham and Dodd had made very long-term return of more than 20% a year, using the value investing strategies.

Of course most retail investors under-performed the market, even by very big margin, that is because most retail investors are not investing the right way, and they do not have the right mind set. But if one follows a proven investing strategy, and with the proper mind set, it is likely that he can over-perform the market.

Compare with a big elephant like Temasik with heavy burdens, small retail investors with the right investing strategy is likely to be able to do much better. Just like Berkshire Hathaway, it has done so well in the past because it was small then. It is so big now that it is very difficult for it to make 10% a year now.

Posted by ks55 > Sep 16, 2015 04:51 PM | Report Abuse

kcchongnz -- Very good write up for the retirees. I believe many will benefit from this write up.

What is your opinion regarding my asset allocation?
My properties yield [(4% x 3) - (4% x 1 for self use)].
My RMB dominated collectibles grow at 25% annually.
My ROI for share investment say 10% per year.
My yearly expenses say 60% of net income from liquid asset not including collectibles.
Using 1m as base unit, what is your comment?
# All the above was achieved very consistently for past years if not better.


Asset allocation is more of individual preference. What suits me may not suit you, and vice versa. For example, i do not like to invest in properties, nor collectibles, and you do. I invest in fixed income like FD, ASM, and you don't. Each of us has different personal risk profile. I have mine and you shouldn't follow me. But as long as your diversify into different asset with different liquidity and risk, I think it is generally ok.

Posted by unclejoe > Sep 14, 2015 10:10 AM | Report Abuse
Thank you KC, keep up the good works!
For me, I will buy my freedom thru' investing, and I will remain active as a investor after achieving my goal.

Investing, besides preserving wealth and fighting inflation, it is also a great past time and good hobby during retirement. But make sure investing through the save way through fundamental investing, and invest first with the this motto,

Take care of the downside first, and let the upside takes care of itself.

Posted by charlie82 > Sep 14, 2015 05:48 AM | Report Abuse
morning 888
i 2 m retired, have less and moved back to nz
i have heard many stories that our generation worked and saved so much; suddenly left this wonderful world without enjoying much -most recent a 59yo bro of a friend who built a war-chest (US$ multi-millionaire with many properties) may he R.I.P.
please remember spend time to pamper yourselves or do give back to charities, for the latter better with your time & effort omitofo/amen/etc ^_^


Charlie,
Well said. And especially in NZ, you don't need much money to enjoy a wonderful life. Health is better wealth. Giving is happiness. Friends are great assets.

Posted by Intelligent Investor > Sep 13, 2015 12:23 PM | Report Abuse

I think some blue chip with good fcf should able to provide a healthy dividend yield and capital gain if he don't intend to take more risk.

To name a few ~ gab, nestle, digi, amway, etc...


Good point. However, one must buy them only if they are selling at reasonable price, better at cheap price. Hence one must know how to evaluate if they are selling cheap or expensive now.

One cannot depend on others to tell them. he has to equip himself to evaluate himself. As I always say, there ain't no tooth fairy in Bursa.

Posted by ks55 > Sep 10, 2015 08:54 AM | Report Abuse

kcchongnz -- May I make a small request if you can write something for the benefits of those who are retiring or already retired.

I believe they are really in need of help now as ringgit shrunk so much and still shrinking fast. Inflation like it or not, will be uncontrollable in near future. Hope this new thread will serve a life line for them.

I am retired and already well prepared financially. I believe you too have passed your 60's. I will chip in if necessary. TQ


I did write something for a young person here:

http://klse.i3investor.com/blogs/kcchongnz/77460.jsp

and that also was because he asked me. But for retirees, most of them are so well to do and they probably have much more wealth than me. Some of them have acquired enormous wealth from the share market using their own methods. Am I qualified to tell them how they should manage their finance?

Posted by Tan KW > Sep 9, 2015 11:24 AM | Report Abuse

kc, what is yst?

Young Sweet Thing.

Posted by limko1 > Sep 8, 2015 04:23 PM | Report Abuse

In front of the YST, men can't think any more with their big head!

Chonghai,

Beauty is in the eye of the beholder.

Actually this is what I said about those stocks as extracted from the article.

"Note most of these weren’t and aren’t bad stocks. Some of them were even touted as “the most undervalued stock I have even known” type."

What you mentioned has certain truth in it as otherwise their share prices wouldn't have dropped so badly.

You are my leader then. You practice much longer than me in value investing. 18 years ago, I practiced rumours, hypes and hopes investing. Thanks for your comments.

Posted by bgoon99 > Sep 8, 2015 04:08 PM | Report Abuse

hmm.. let me guess, second M is margin of safety?


From what you guesses, you sound like a close follower of my articles in i3investor, or probably a course participant of my online course.

Posted by bigheadsheng > Sep 7, 2015 03:18 PM | Report Abuse
please do not start the battle here. ur understanding is appreciated.

I have no interest to argue here. It is because someone seems to be looking for me. I just happened to see his remarks.

I will stop here as I have no time. Before I go off, I just want to say that it may be good for you to have different opinions in investing. Confirmation bias and cult mentality is not good for investment outcome. Anybody can be wrong too.

If you care to read what I write, everything I talk about V.
S. or other companies, is about its business, its performance and financial position in my point of view, and nothing about whether its price will go up or go down. I have no interest to push down its price, nor jack it up.