Posted by NOBY > 2014-05-28 15:03 | Report Abuse

GWPLAST can rule out. Its ROE is very high cause it sold off its stretch film business to SCIENTX. It is now a shell company.
CAP is a China stock. Can be ruled out as well.
PRESBHD just underwent a bonus issue, you calculations took into account the increased share base ?

Posted by Intelligent Investor > 2014-05-28 15:12 | Report Abuse

Thanks noby for your feedback.

Posted by johnny cash > 2014-05-28 16:22 | Report Abuse

then i think another indicator you can put in that is momentum.. means strength of bullishness

Posted by Intelligent Investor > 2014-05-28 16:26 | Report Abuse

hi johnny cash, i don't know how to derrive the momentum. feel free to add in the ratio on the selected stock.

Posted by kcchongnz > 2014-05-28 18:51 | Report Abuse

Yes, rule out those red chips like CAP and Maxwell.

Then it will be a good list to explore further.

One thing it is natural to borrow money and make money in the corporate level, not the personal level.

Don't shun debts as you can see leverage (in corporate) can amplify return. Just make sure the debt is not excessive to the extend that there is high bankruptcy risk, say debt not more than equity.

Debts can actually go higher if the business has steady and predictable cash flow, eg cash flow from operations at least 5 times interest payment. And consistent free cash flows.

Posted by Intelligent Investor > 2014-05-28 20:28 | Report Abuse

Mr Chong, thanks for your comment.

If the operating cash flow > 5 times interest payment, the financial leverage can be as high as 2?

But, if both ROE is same, do you favor the company with lower financial leverage?

Posted by kcchongnz > 2014-05-28 20:55 | Report Abuse

II,

Yes to both questions.

If ROE is higher by certain margin, I prefer company with high ROE with higher leverage. The key is the clever use of leverage by management to enhance shareholder value.

Posted by profit profits > 2014-05-28 22:20 | Report Abuse

I remember Australia SeekAsia buys Jobst, so is the ROE is before the selling or after selling ? TQ

Posted by stockoperator > 2014-05-28 23:01 | Report Abuse

Two questions always remains:

1. High ROE/Profit Margin still remains a single Digit Number=It can be up trending or Down trending. It can still be down trending like Hartalega.

2. What price do we pay?

Posted by stockoperator > 2014-05-28 23:05 | Report Abuse

You still cant invest if you dont know their Business well. Buy One lot each?

Posted by stockoperator > 2014-05-28 23:09 | Report Abuse

Remember as well You will gain much more if your investment Now is a single digit ROE company then ONE day it improved to DOUBLE digit ROE.

Isn't it Better?

Posted by stockoperator > 2014-05-28 23:14 | Report Abuse

In that sense you will be becoming better Investor because you are NOW Businessman with Business mind. Study some corporate development and Learn how Businessman do Business ya.

Posted by stockoperator > 2014-05-28 23:28 | Report Abuse

Correct or Not? IF you know the Business well like KC knows about Pintaras, he knows it will improve from single digit to double digit then from 20 to 30. IF you don't know the Business well, you will never know How come my investment in ROE went down from double digit to single digit OR down trending.

Posted by Intelligent Investor > 2014-05-28 23:59 | Report Abuse

Hi stockoperator, I agree that I might lack of business mind and I am not able to predict which company can growth from single digit to double digit.

I will accept the fact and trying to look for good company from the pass performance.

And, I am just aiming a 15% CAGR. I believe a good company with solid track record should able to help me to achieve my goal.

Last but no least, buffett did mentioned that "In the business world, the rearview mirror is always clearer than the windshield."

I start to filter out good company by looking at the ROE and I will further drill down slowly. I remember buffett say "if you want to reduce unforced errors (reduce losing investments), it helps to get familiar with stable, predictable businesses with long histories of producing above average returns on invested capital."

Posted by Intelligent Investor > 2014-05-29 00:06 | Report Abuse

Maybe you can share with us how you going to perform the forecast on the business? I would like to hear from you on this and hope that I can improve as well.

Most of the time, I would agree on what Seth Klarman say - "The number of things that can go wrong (in business) greatly exceeds the number that can go right." And, it make the forecast a difficult jobs.

And, John Kenneth Galbraith argue that "We have two classes of forecasters: Those who don't know - and those who don't know they don't know." while Howard Marks did mentioned "In both economic forecasting and investment management, it's worth noting that there's usually someone who gets it exactly right... but it's rarely the same person twice."

Posted by stockoperator > 2014-05-29 00:18 | Report Abuse

Now you have much better process of thinking. Remember what you just said and you will be doing well.

Posted by stockoperator > 2014-05-29 00:30 | Report Abuse

Since you are with me at this hour and so hard working. Pick a sector you like. Study all the company in that sector. List down all its strength and weakness. Also the latest development of that sector Or company. See if that strength is the Economic Moat that will last for years and years to come.

Posted by stockoperator > 2014-05-29 00:38 | Report Abuse

Is it Not every Businessman will do before they invest in a Business?

Posted by Lance > 2014-05-29 10:23 | Report Abuse

lol

Posted by youlee > 2014-05-29 13:47 | Report Abuse

Yeah, Maxwell!!!Anyone??

Posted by Intelligent Investor > 2014-05-29 13:55 | Report Abuse

Hi stockoperator, thanks for your suggestion. I will try to work on this after I finish my current exercise. In this moment, I will focus on rateing the company based on its pass performance.

Posted by Intelligent Investor > 2014-05-29 13:59 | Report Abuse

I think most of the retailer do not have confidence on the red stocks. We can only analysts the financial statement if we know that we can trust the financial statement.

There are around 1000 companies listed in bursa, we can find some companies that is suite our own taste. And, for me I like to pratices "When in doubt, just walk away....."

Let's hear what Mr. Chong comments on the red stocks. I would like to hear his advice too.

Posted by stockoperator > 2014-05-29 15:39 | Report Abuse

Well compare apple to apple within the same sector Not apple to orange. Then you know today Loser can be tomorrow Winner and today Lower will be tomorrow Winner as well.

Posted by Intelligent Investor > 2014-05-29 16:47 | Report Abuse

hi stockoperator, thanks for your comment. I hope that you can share your exercise with us and I can use it as a sample to start mine later.

Posted by NOBY > 2014-05-29 16:56 | Report Abuse

II, pick up the book by Pat Dorsey on Little Book that Builds Wealth. There is some detail explanation there on how to identify the sources of economic moats.

Posted by Intelligent Investor > 2014-05-29 17:07 | Report Abuse

Hi noby , thanks for the recommendation.

I will take a look if time availalble. There is too much to learn.

In the meantime, I have compiled some note on moat and franchise. Feel free to review and it will be appreciated if you can let me know if I make any mistake or missed out any important point.

http://intelligentinvestor8.blogspot.com/2014/05/moat.html

http://intelligentinvestor8.blogspot.com/2014/05/franchise-value.html

Thanks!

Posted by stockoperator > 2014-05-29 17:35 | Report Abuse

Dear Intelligent and NOBI, that is why I ask you all reads tons of Annual Report Only then you will find One which is different.

It is what Mr Fong Siling did through his life, this is what Warren and Charlie did as well through out their lives, reading and reading Annual Report.

And to be good in fundamental analysis like KC, you need to do tons and tons of analysis as well.

There is No short cut around.

Posted by mk88 > 2014-05-29 18:08 | Report Abuse

interesting topic, any goody, good and cheap?