Posted by AyamTua > 2014-06-22 10:45 | Report Abuse

read it .. company b is cheap can buy in large quantities ..
company b : how many units to buy to make?
i understood your post but .. teach me how to buy company A ...
thanks

Posted by AyamTua > 2014-06-22 10:54 | Report Abuse

say for company B usually buy 10,000 shares
company A ? how much to buy to have same impact as company B?

Posted by kcchongnz > 2014-06-22 11:14 | Report Abuse

AyamTua my good friend,
Since you like to gamble, I introduce you this Kelly formula:

f* = {bp - q}/{b} = {p(b + 1) - 1}/{b}

where:

f* is the fraction of the current bankroll to wager;
b is the net odds received on the wager ("b to 1"); that is, you could win $b (and get a return of your $1 wagered) for a $1 bet
p is the probability of winning;
q is the probability of losing, which is 1 − p.

If say you think you have 80% chance of winning by buying company B share (p = 0.80, q = 0.20), and you reckon that you will make 50% on it in a year(b = 0.5), then you should bet 40% of all your money (f* = 0.40), in order to maximize the long-run growth rate of your money.

But bear in mind that I never imply that you should buy company B, but on the contrary. If you go to Holland doing that, please don't blame me.

Posted by AyamTua > 2014-06-22 11:23 | Report Abuse

kcchongnz: then company A how many to buy to have same impact as company B??

Company B: 10,000 shares
Company A : 5,000 shares or 1,000 to have the same impact as Company A?

I do have dream to buy $1.00 stock but too expensive lah to buy 10,000 shares or 50,000 shares like I buy EAH (0.120) in mass quantities .. when up one sen .. magic!

ha ha ha

i just need guide to buy "expensive shares" thats all .. how many units/shares/lots ...
thank you my Spiritual Guru and Mentor Bro. KCChongnz

Posted by AyamTua > 2014-06-22 11:28 | Report Abuse

how to buy good shares price over $3-$4 in "good quantities" still a question mark to me .. if can teach me I promise stop gambling .. ha ha ha

Posted by AyamTua > 2014-06-22 11:33 | Report Abuse

bottomline of your post bro in layman term: stop gambling invest in real good companies .. but problem too expensive lah .. i dont have much capital to play $4.00-$5.00 stock that needs at least 40k or 50k to buy 100 lots to break even ..... hope you get my point my beloved Kcchongnz :-)

Posted by kcchongnz > 2014-06-22 11:34 | Report Abuse

"You will be surprised many “investors” think B is much cheaper than A because it is trading at 83 sen compared with RM4.85 of A, no kidding."

This was what I said in the article here. How true is it?

Sorry although you are my good friend, I didn't give you positive response when you asked me about EAH last time. I was just being frank. You better listened to the famous finance blogger who has been promoting his stock since years ago.

But yes, if EAH goes up by one sen, magic as you said. But what if it goes down by 3 sen? Also magic?

As whether you should buy company B or not, I also never made any recommendations. You have to judge yourself. If you are interested to know my opinion, please read my article again.

As how much to bet, use the famous Kelly formula. What do you think the probability of winning, and how much is the winning. Then bet your money according to the Kelly Formula.

Posted by AyamTua > 2014-06-22 11:39 | Report Abuse

ok noted my beloved kcchongnz and thanks for formula ...

for your info as your testimony:
i survived because of all your investing theories

and i thank you for that.

Posted by Leong Hong Haye > 2014-06-22 12:20 | Report Abuse

Thanks for your investment analysis. Really an in depth article for the investors.

Posted by emperor > 2014-06-22 12:20 | Report Abuse

Dear mr chong, I found that the regression line EPS for company A is sloping downward compare to company B which sloping upward. Are there something wrong with this figure 1, blue color indicate company B while red one is company A?. Thanks

Posted by kcchongnz > 2014-06-22 12:25 | Report Abuse

emperor, recent years are on the left side. You are looking the other way

Posted by 爱丽斯 梦幻世界 > 2014-06-22 12:40 | Report Abuse

Nice, obviously A- Apollo, B-L Biskuat.

Posted by emperor > 2014-06-22 14:28 | Report Abuse

Opps, my mistake mr chong. Anyway good posting and really enjoy yr clear and concise writeup. Appreciate if you can post up some analysis on small cap gem like mmsv and ocncash as I heavily invest on it. EAH reccomended by Ayamtua is one of a good stock if the coming EPS consistently increase and it worth Rm 0.2 at the moment based on graham number.

Posted by ksng0307 > 2014-06-22 15:03 | Report Abuse

Mrchong, where can i get the industry average pe ratio etc, thnks

Posted by kcchongnz > 2014-06-22 15:27 | Report Abuse

ksng0307,
I hope someone can tell us about the industry average from Bursa. I use the Reuters Financials which is more for US stocks.

Posted by ksng0307 > 2014-06-22 16:52 | Report Abuse

ok, thanks anyway

Posted by sunztzhe > 2014-06-22 19:09 | Report Abuse

Kcchong, Thanks for sharing the well written and thought out article. First and foremost I am not married to any stocks. I focus only on CAPITAL GAIN. If good dividends come along it is an added bonus.If the stock price goes up and continues to go higher, I will hold. When to sell? I will rely on TA to exit partially or wholly.

In the event that the stock price goes down by -5% of my investment cost, I will cut out 50% and if the price continue to slide further to -8% I will cut out completely.

My first objective is preservation of my invested capital.
My second objective is Capital Gain.

Posted by kcchongnz > 2014-06-22 19:33 | Report Abuse

sunztzhe,

Thanks for your comments. Yes I can see that your investment strategy is completely different from what I have written.

You see stocks as a piece of paper with Ringgit signs. RM up you hold or let your RM runs; RM down by 5% you cut half and down some more by 8% cut all. Good strategy!

But why 5% cut half, and 8% cut all. Ah never mind, I respect your investment strategy.

Posted by stockraider > 2014-06-22 19:51 | Report Abuse

Definitely CO B is has the best value loh.........!!
In fact it offer the greatest margin of safety this time.........!!
CO A more expensive.....but still investable compare with the industry norm loh.........!!

The measurement given by KC..........raider think is good......but i notice......something is lacking.....!! DIVIDEND YIELD ??

Raider will bet big on B.......if get dividend yield above 4% pa.!!
But raider will be cautious.............if B no dividend loh...!!

Posted by kcchongnz > 2014-06-22 19:59 | Report Abuse

Interesting comments from stockraider. How I wish if there are more people contribute their thoughts here.

Posted by Seek > 2014-06-22 20:51 | Report Abuse

Stockraider, epmb 4cts dividend. Share price only 74cts.

Posted by calvintaneng > 2014-06-22 21:01 | Report Abuse

It takes time to think and figure out what is the best investment. Since many don't want to do tough work the easy way out is to listen to tips and rumours.

I met a guy in OSK who shouted, "Aiya, PCCS just moved up. I thought of buying this morning! And aiyo see, MUH also moved up already!" I asked him,"What is MUH doing?" He replied, "I don't know. I chase whatever shares that moved."


He is typical of so many here in i3 - just chase the next moving target - doesn't matter what it may be.

So KCChongNz, don't be discouraged. Someday, after getting burnt they will finally wake up. I was once like that - chasing BUBBLES with my friends in KLSE. And during the Asian Financial Crisis One Lost RM5 Millions, One Lost RM3 Millions & One more lost RM500K. I also lost by a smaller margin after someone warned me to Get Out of the market completely.

Only after that I bothered to study and learn investing - as opposed to random punting.

I think Company A is definitely a safer investment. Co B is speculative. I will buy Company B on these conditions:

1) What Is The Quality of Its Assets? Some Companies have Assets That Are very valuable. Example prime lands & equipment/vehicles.

Lands in Hot Spots and not in rural inaccessible area.

For example in Bkt Timah Singapore, Yeo Hiap Seng own factories near Prince Edward Park. The Business of bottling soft drinks was just so so only. But in the Property Boom of Singapore YHS(Spore) relocated their factories and converted the factory lands into Premium Condos. The Fortunes of YHS also changed for the better.

Company Vehicles/Inventories. Popular Japanese Vehicles would command a higher price than continental ones like Renault & Peugeot. So there is a higher value in disposal. So are excavators & dump trucks.

2) Management might be mediocre but if they are not dishonest there may yet be hope for a turnaround. Of course not all turnarounds are successful. But some do.

Posted by sunztzhe > 2014-06-22 21:31 | Report Abuse

Kcchong,
Preservation of Capital is of paramount importance to me. I am willing to lose only 6.5% loss on my invested capital. With this objective, I always limit by loss to invest another time that will deliver the capital gains in future.

Now coming back to your two companies, I would take note of the two financial performance info but would rather focus on trying to understand the mindset of the driver of the two companies.

I will invest in any of the two companies on this important criteria:

Does the Driver of the company possess a strategic business mindset, manages by objectives, possess the people management skills that can drive up the value of the company business. Does he/she empowers the people and has the organizational skills to take the business to a much higher level? What is the current biz strategy, current biz model, future biz strategy, future biz model.

Too often, we rely on published accounts info but little do we know much about how the organization is being driven.

Posted by stockoperator > 2014-06-23 00:45 | Report Abuse

In the short term please bet everything you have as it is a voting machine as you always aim for one time 50%-100% gain.

In the long term, it is far better to Buy a wonderful company at a fair price than a fair company at wonderful price. This is weighing machine.

Posted by stockoperator > 2014-06-23 00:55 | Report Abuse

If we have any interest in investing in Business as a Businessman,the first thing we look at is Balance Sheet. And under the Balance Sheet the first thing we look at is Debt. This is One item that can kill the Business. This One item can drag down the share price from above Rm10 to below Rm1.

Posted by stockoperator > 2014-06-23 01:02 | Report Abuse

The 2nd items to me is free cash flow as this item is filtered from Revenue, filtered from Profit Margin, filtered from Cost Management, filtered from capital expenditure and so on and is attributed to shareholders and we must determine if any free cash flow will add to market value of the company.

Posted by stockoperator > 2014-06-23 01:10 | Report Abuse

EY of 13% coupled with DY of 5% is definitely very very attractive. This is the Only metric that we should use If we like the Business.

Posted by stockoperator > 2014-06-23 02:37 | Report Abuse

Do we really think doing Business is easy?

1. Is this a low entry market and so highly competitive
2. IS the product beneficiary to society as a whole? Is this a junk food Business? Or we should invest in a company that produce more healthy and balance food?
3. Naturally growing market? yes? Consumer trending?
4. What is the Business Model? Export oriented? How they penetrated their market?
5. IS cost the concern? High capital expenditure?
6. Is there any economy of scale? Profit margin squeezed?
7. Owner shareholding and management initiative to create value?
8.Recession proof that means earning and top line and bottom line will change very slowly.
9. Branding or Generic products? Consumer loyalty?
10. Recurring income? Dependent on distributor or retail or wholesale?

Well, who can answer all these questions if the list goes on and on SO i guess we have No choice again but to invest in Cheap Cheap company.

Or

Nope we swear by heaven and earth that we will only invest in Good Business that will only bring benefits to mankind and ADD MO MORE pain in our investment experience?

It is a Decision. No more pain feeding pain. No More Hypocrisy.

Posted by Pak Lah > 2014-06-23 05:47 | Report Abuse

Hi kcchongnz. You have rightly pointed out that many retailers are ignorant of investing – that include myself. I have started to appreciate “value investing”, and the trading experiences you have been sharing with us in the i3investor have benefitted many immensely – thank you. Learning this isn’t easy, and, for me, that is a long way from here. I’m determined to pick up the knowledge at my own pace.

Like many forumers, I read your above posting with interest. Can you further describe the metrics of price-earnings growth, price-to-sales and price-to-CFFO? How to derive these metrics? What are their purpose/significance?

Posted by kcchongnz > 2014-06-23 05:51 | Report Abuse

Posted by sunztzhe > Jun 22, 2014 09:31 PM | Report Abuse

Kcchong,
Preservation of Capital is of paramount importance to me. I am willing to lose only 6.5% loss on my invested capital. With this objective, I always limit by loss to invest another time that will deliver the capital gains in future.

Now coming back to your two companies, I would take note of the two financial performance info but would rather focus on trying to understand the mindset of the driver of the two companies.

I will invest in any of the two companies on this important criteria:

Does the Driver of the company possess a strategic business mindset, manages by objectives, possess the people management skills that can drive up the value of the company business. Does he/she empowers the people and has the organizational skills to take the business to a much higher level? What is the current biz strategy, current biz model, future biz strategy, future biz model.

Too often, we rely on published accounts info but little do we know much about how the organization is being driven.

Sunztzhe,
thank you very much again on your valuable comments. I hope more others can give comments similar like that.

Now your stop loss is even more precise now, 6.5%, with a decimal point. Just curious of how often do you get in and out of a trade.

Yes of course, how an organization is being driven is one of important considerations to invest or not in a company. Sorry that we are now steering away from your stop loss and price movement thingy. Buffet and before that Philip Fisher, places a lot of emphasize on the credibility of the management. Fisher spent most of his time analyzing the management. My question is how you personally approach this? Do you mean meeting them, drink with them and find out their plans etc?

For me I am no Fisher nor Buffet. I have no such luxury. Management of the company won't talk to me before I invest in their companies, even if I kneel down and beg to see them. But seriously I also don't have the time to do that if they invite me. What I do is to look through the past performance and see the actions of the management through the company's performance, their capital allocation, what they said and reported in their annual reports. Yeah I know I know, these are published old reports. But that is what the most I can do as I have explained.

If you look through all the analysis I made on company B above, to me I am very sure I can see through the management and I don't need to meet them. I got all my answers to your questions below:

Quote {Does the Driver of the company possess a strategic business mindset, manages by objectives, possess the people management skills that can drive up the value of the company business. Does he/she empowers the people and has the organizational skills to take the business to a much higher level? What is the current biz strategy, current biz model, future biz strategy, future biz model.} Unquote

Meeting them will be more of listening to bullshits, seriously. Sorry to try to get you to read in details what I said about the companies past performance.

Once again appreciate your above feedback very much.

Posted by Pak Lah > 2014-06-23 06:58 | Report Abuse

Hi kcchongnz,

I totally agree with you that what is prescribed in the text book is not practical in real life, i.e. seeing/making a trip to the companies we want to invest in would not come to fruition. Even if the management is willing to meet up, they may just talk the things we want to listen, growth stories may be fabricated to entice us, which is very dangerous. We may have already put in a small amount of money into the company. After the meeting, we may decide to buy the story and put in a larger amount of money. As an analogy, we were trapped in a small pit, we jumped out from this small pit, and ended in a deeper pit.

Relying on annual reports is one of the realistic ways to make an investment decision. Declaration of dividends is an endorsement that they actually make money. Good management would only do things that they are good at. I prefer to companies that are growing organically. Any acquisition (in organic growth) should be at least 60% similar to the businesses they are now running. Recent news on water company Salcon venturing into Broadband, citing the needs for diversifications. Broadband and water works have zero similarity. If I have owned Salcon shares, I would have run away upon hearing this news.

My personal experience in corporate world taught me many things. A crook will always remain as a crook. They are not going to repent even you have given them another 10 years to do so. Yes, we can only trust those with good track record!

Posted by Pak Lah > 2014-06-23 07:07 | Report Abuse

I would like to share with you a true story that took place 40 years ago or so. A shoemaker ventured into a tin mining business. This shoemaker had the required financial capacity to undertake this new business. The consultant reports showed that this was a sure-make money venture. This poor shoemaker had no knowledge about mining, completely relying on his managers and workers to carry out day-to-day operations. Losses were recorded in the first year operation. And this continued in the second year. Into the third year, the shoemaker reminded himself that this tin mining business was not sustainable and decided to put the mining area for sales. Surprisingly, the buyer was the shoemaker’s manager who handled the mining activities over the years. This manager was able to rake in handsome profits as soon as the first month of operation! In the past, this manager used the resources his boss provided to pave the way for this future. When he discovered the areas with high tin density, he put a mark on it, and moved on to other areas doing the same. That was why he became instant millionaires immediately after he purchased the mining rights from his ex-boss.

That is why I hate companies venturing into businesses they do not know.

Posted by cheongcy > 2014-06-23 09:24 | Report Abuse

Just run a DCF for both company, one should be able to justify which is better for investment.

Anyway, I recommend a good link:

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/data.html

Professor Aswath Damodaran has done a very good job in compiling all the data e.g. PE, Beta, Cost of Euquity, etc for listed companies in US, Asia, etc etc.

The data can be a little bit academic, but for those who love to make PE comparison for companies in the same industry, or to look for a reference cost of capital for their DCF model, it can be quite useful.

Posted by kcchongnz > 2014-06-23 09:40 | Report Abuse

Posted by stockoperator > Jun 23, 2014 01:10 AM | Report Abuse

EY of 13% coupled with DY of 5% is definitely very very attractive. This is the Only metric that we should use If we like the Business.



I would give high marks for this comment.

Posted by kcchongnz > 2014-06-23 09:56 | Report Abuse

Posted by Pak Lah > Jun 23, 2014 05:47 AM | Report Abuse

Like many forumers, I read your above posting with interest. Can you further describe the metrics of price-earnings growth, price-to-sales and price-to-CFFO? How to derive these metrics? What are their purpose/significance?

PEG was popularized by Peter Lynch. Basically a growth company should be accorded a higher PE. So he divide PE by the expected growth rate:

PEG = PE/Growth. for example a stock with PE ratio 10 and grow at 10%, its PEG is 10/10 or 1. Any PEG below 1.0 as you can see should be a good buy.

Some companies have no sales, so how to value? So some people come out with P/Sales ratio. So a P/S below 1.0 may have potential when the business turn around.

Net income is just an accounting earnings, not hard cash. CFFO is the net cash in less cash out in the financial year, hard cash. Some companies always make money every year, but every year no cash and have to get it from shareholders or banks. Many investors prefer CFFO than net income. So Price-to-CFFO is used. CFFO can get from the cash flow from operating activities from the cash flow statement.

Pak Lah, are you interested in my online investment course? You will learn all these stuffs plus a lot more, for a very meager amount of money, like peanut.

Posted by Pak Lah > 2014-06-23 11:20 | Report Abuse

Thanks kcchongnz, please provide your email address. I'll be in contact with you. Thanks.

Posted by kcchongnz > 2014-06-23 11:37 | Report Abuse

Posted by Pak Lah > Jun 23, 2014 11:20 AM | Report Abuse

Thanks kcchongnz, please provide your email address. I'll be in contact with you. Thanks.

ckc14invest@gmail.com

Posted by kcchongnz > 2014-06-23 12:16 | Report Abuse

Posted by stockraider > Jun 22, 2014 07:51 PM | Report Abuse

Definitely CO B is has the best value loh.........!!
In fact it offer the greatest margin of safety this time.........!!
CO A more expensive.....but still investable compare with the industry norm loh.........!!

The measurement given by KC..........raider think is good......but i notice......something is lacking.....!! DIVIDEND YIELD ??

Raider will bet big on B.......if get dividend yield above 4% pa.!!
But raider will be cautious.............if B no dividend loh...!!


Stockraider is well respected as a value investor here. I respect him too. However, I wish Stockraider can have a second thorough read of my article above and provide his opinion.

Ragarding if company pays dividend or not I think it is immaterial. If you read my article thoroughly, you may understand why I say so.

Posted by kcchongnz > 2014-06-23 15:42 | Report Abuse

Posted by Pak Lah > Jun 23, 2014 05:47 AM | Report Abuse
Hi kcchongnz. You have rightly pointed out that many retailers are ignorant of investing – that include myself. I have started to appreciate “value investing”, and the trading experiences you have been sharing with us in the i3investor have benefitted many immensely – thank you. Learning this isn’t easy, and, for me, that is a long way from here. I’m determined to pick up the knowledge at my own pace.

"I have started to appreciate “value investing”"

That to me is the great mindset you have for building wealth for retirement.

In a paper titled “The Super Investors of Graham and Doddsville”, Warren Buffet showed the track records of each of nine disciples of Benjamin Graham showing that they all generated annual compounded returns of between 18% and 29% over track records lasting between 14 to 30 years. Please read here:

http://klse.i3investor.com/blogs/kcchongnz/50988.jsp

All of us know that Ben Graham and his most famous disciple, Warren Buffet, and the other nine disciples are all value investors who have earned extra-ordinary return from the market over a long period of time.

Can someone name me some other investors who have the same achievement or even close to those people above following other strategies besides value investing?

Posted by kcchongnz > 2014-06-24 03:33 | Report Abuse

Posted by Pak Lah > Jun 23, 2014 06:58 AM | Report Abuse
Hi kcchongnz,
I totally agree with you that what is prescribed in the text book is not practical in real life, i.e. seeing/making a trip to the companies we want to invest in would not come to fruition. Even if the management is willing to meet up, they may just talk the things we want to listen, growth stories may be fabricated to entice us, which is very dangerous. We may have already put in a small amount of money into the company. After the meeting, we may decide to buy the story and put in a larger amount of money. As an analogy, we were trapped in a small pit, we jumped out from this small pit, and ended in a deeper pit.

Relying on annual reports is one of the realistic ways to make an investment decision. Declaration of dividends is an endorsement that they actually make money. Good management would only do things that they are good at. I prefer to companies that are growing organically. Any acquisition (in organic growth) should be at least 60% similar to the businesses they are now running. Recent news on water company Salcon venturing into Broadband, citing the needs for diversifications. Broadband and water works have zero similarity. If I have owned Salcon shares, I would have run away upon hearing this news.

My personal experience in corporate world taught me many things. A crook will always remain as a crook. They are not going to repent even you have given them another 10 years to do so. Yes, we can only trust those with good track record!


ME: Every sentence above makes plenty of sense. With this type of mindset in investing, you would avoid most of the pitfalls in investing.

After avoiding these pitfalls, your investing battle is already half won. You don't need to be a genius to be successful in investing.

Posted by stockraider > 2014-06-24 10:58 | Report Abuse

Posted by kcchongnz > Jun 23, 2014 12:16 PM | Report Abuse

Posted by stockraider > Jun 22, 2014 07:51 PM | Report Abuse

Definitely CO B is has the best value loh.........!!
In fact it offer the greatest margin of safety this time.........!!
CO A more expensive.....but still investable compare with the industry norm loh.........!!

The measurement given by KC..........raider think is good......but i notice......something is lacking.....!! DIVIDEND YIELD ??

Raider will bet big on B.......if get dividend yield above 4% pa.!!
But raider will be cautious.............if B no dividend loh...!!


Stockraider is well respected as a value investor here. I respect him too. However, I wish Stockraider can have a second thorough read of my article above and provide his opinion.

Ragarding if company pays dividend or not I think it is immaterial. If you read my article thoroughly, you may understand why I say so.

RAIDER AFTER READING KC...POSTING....RAIDER COME TO THIS CONCLUSION LOH....!!

IF U R A PRACTIONER GRAHAM VALUE INVESTMENT TECH...U SHOULD PICK B..!!
BCOS OF ITS DEEP UNDERVALUATION.....!!

IF U R A PRACTIONER..OF W BUFFET INVEST TECH U SHOULD...PICK A...FOR IT STABLE PERFORMANCE....!!

FOR RAIDER PICK B WHY ?
B IS TRADING AT A DISCOUNT TO ITS ASSETS & MARKET VALUATION & LOW PE..BUT HANG ON....PEOPLE MAY SAY B USELESS BCOS OF ITS WEAK CURRENT
RATIO ?

BUT IS IT REALLY TRUE ? RAIDER SAY NO LOH....!! WHY LEH ?....THE VIRTUE OF B BEING DEBT FREE LOH....!!

SOME PEOPLE....MAY SAY B....HAS HIGH FIXED ASSETS AND IT IS BAD ?
IT ALL DEPENDS...LOH...IN INFLATIONARY.....IT IS BETTER....TO HAVE HIGHER CONTENT OF FIXED ASSETS...WHERE ENVIRONMENT WHERE CASH IS KING...IT IS BETTER TO HAVE HIGHER CONTENT OF CURRENT ASSETS.

IF B HAS A HIGH CONTENT OF PROPERTIES...U CAN COUNT UR YOURSELF....PICKING ON A BARGAIN...THIS I SEE OUR CALVIN...HAS A KNACKED OF PICKING .

WHY RAIDER MODIFIED B GRAHAM INVESTMENT TECH TO INCLUDE PROPERTIES ?
U MUST NOTE WHEN B GRAHAM FORMULATE HIS STRATEGY...IT IS DURING THE GREAT DEPRESSION TIME WHEN INTEREST RATE IS AS HIGH AS 25% PA...BUT TODAY INTEREST RATES IS ABOUT 4% PA.
GIVEN HIGH INTEREST RATE CONDITION.....U MUST HAVE HUGE LIQUID ASSETS TO PROTECT...THATS WHAT B GRAHAM DID ?

COMING TO B....IT IS DEBT FREE....THEREFORE...IT SHOULD PASS SOME LIQUIDITY TEST TOO....IN ADDITION HAS CAPACITY TO GEAR UP LITTLE BIT.

Posted by NOBY > 2014-06-24 11:11 | Report Abuse

stockraider, how can you tell that company B is debt free from reading the article by KC ? If anything, the low current ratio suggests that it is laden with debts..

Posted by stockraider > 2014-06-24 11:21 | Report Abuse

NOBY...U READ KC ARTICLE LOH...!!

Posted by NOBY > 2014-06-24 11:24 | Report Abuse

What am I missing ?

"Balance sheet

Looking at the balance sheets of company A and B, A is debt free with plenty of excess cash, while B is laden with increasing debts every year and negative net working capital. The solvency and long-term financial strength ratio below shows the vast difference in their financial health "

Posted by Pak Lah > 2014-06-24 11:25 | Report Abuse

Kcchongnz, I have yesterday sent an email to you with regards to the investment course you conduct. I have still not received your reply. Did i send to the correct email address ckc14invest@gmail.com? Please advise.

Posted by sunztzhe > 2014-06-24 11:41 | Report Abuse

ROIC(B) + ROE(B) + EPS(B) ==> Downtrend from 2006 to 2013.
ROIC(A) + ROIC(A) + EPS(A)==> UPTREND since 2011
ROIC(A) + ROIC(A) + EPS(A) >> ROIC(B) + ROE(B) + EPS(B)==> BUY A
Continuous downtrend for Company B over 7 years period indicate serious performance issues possibly related to strategic gaps, management isues or trust issues.

If I had invested in B, I would have cut out with Max -6.5% loss. I would not endure the pain for 7 years and still hope for a miraculous recovery. In share investment, if you had made a wrong selection, it is better to bite the bullet, cut out and move to better stocks.

What will be the opportunity cost for any investor holding onto B for 7 sevens. The minimum opportunity cost is the interest rate forgone over 7 years. This is only a feel good figure to massage the wounded ego.

I disagree with this performance benchmark as the opportunity cost must be benchmarked against your individual performance.If your average performance is say 25% a year, then the opportunity cost will be 7 years x 25%= 175%. Why? It is very simple. If you had cut out much earlier with -6.5% loss, you would have the opportunity to make +25% per annum since your true average is +25% per annum.

kcchong, Just as a matter of curiosity, did you buy and hold company B for 7 years and is still holding the stock?

Posted by calvintaneng > 2014-06-24 12:06 | Report Abuse

I want to share again my experience with KPS (Kumpulan Perangsang Selangor).
I think it was in year 2006 when Dynaquest Recommended it in its monthly digest to buy at 50 cts.

Reasons for buyings were

1) Selangor water utility co & Govt Own. Water is recession proof
2) High NTA of over RM2.00
3) Pays a 5% dividend
4) Reasonable P/E.

So A Mr. Tay & myself both bought at 50 cts.

Now after buying KPS dropped to 45 cts or a 10% loss. Mr. Tay decided to cut loss (Stop loss at 10% down.)

I went in to buy more instead. Then to my surprise KPS dropped to 42 cts - another drop of 7%. Now Mr. Tay chided me for not following him to cut loss at 45 cts.

One Day It was rumoured that Thailand might go into Capital Control. KLSE Crashed 30 points in panic & KPS dropped to 39 cts (39 Cts is the all time low). I dare not buy more as I thought KPS might even fall further - why catch falling knives?

Now after some time KPS doubled in price again & I started to sell. And sold all when it touched RM1.20.

After selling off KPS at RM1.20 a stranger arrived in OSK Johore. He was very excited telling us a nice good tip to buy.

What is that nice good stock you proposed, Mr. Ong? Mr. Ong replied, "KPS"
BUY KPS AT RM1.20!"

Only he bought KPS at RM1.20 then. And he was correct. To our surprise KPS shot up from RM1.20 to RM2.20 When Mr. Ong sold for a Ringgit profit.

However, after that to our great surprise KPS still move upward to RM3.00.
Now KPS at RM3.00 the entire Stock Broking House is ringing with shouts of KPS! KPS! KPS! Lai Liaw!

KPS Moved up to cross RM3.90. Up 10 times from the lowest at 39 cts.

KPS at Over RM3.00 The Market is Euphoric but when KPS was 39 cts there was silence - yes silence as the grave yard.

So if I know the fundamental of a share if OK - buy more as the price moves lower - it really doesn't matter even if the whole world is against buying.

Posted by stockoperator > 2014-06-24 12:13 | Report Abuse

Suntzthe

There is Only One way to be Super Super Rich

1. Long term Compound= It implies that you Buy and Hold for very Long term.
2. Buy in Big Quantity=It implies that you have to accumulate the stock everytime during retracement. Pick a number you like 20% 30% 40% of retracement. You can Only do it One time.

TQ

Posted by sunztzhe > 2014-06-24 13:04 | Report Abuse

stockoperator,
Sometimes I do wonder whether we can apply Warren Buffett teachings here in BURSA. Take for example his COCA COLA investment. He started invested in this company many years ago and after the WW2 the whole world needs COCA COLA as there was no real competition as COKE is a brand name that sells. Warren invest in low risk companies ie. consumer companies where the business model is simple where any idiot can manage but the products has VERY strong brand franchise ie. strong moat.

Does BURSA has any product with strong brand franchise in the consumer products business??

Posted by sunztzhe > 2014-06-24 13:37 | Report Abuse

kcchong: I will rely on my EQ to get info on background of company controlling shareholders/ competency levels/trustworthiness from people in the know. Although the financial info may look quite good, I will be wary of investing long term with these companies especially companies as described below

Key message I would like to share with you are as follows:
- When the controlling shareholder had really shown "HE IS A GOOD BLOKE BUT REALLY BOH LIEW COMPETENCE" level, please don't invest long term. Please don't hope that he can suddenly "GOT LIEW"
-When a father has had bad reputation and the son now running the show also show traits like the father, please avoid
-Be aware of company periodically calling rights to inject highly inflated assets into the company as you will be poorer than when you started investing in that company. Why? the main objective is to line his many personal BIG SIZE pockets
-Be aware of companies that were successful in the past because of good handout projects but may not be so now.