Posted by Intelligent Investor > 2014-06-29 17:01 | Report Abuse

Hi Mr Chong,

Do you plan to rebalance your portfolio now?

Will you plan to take some profit from the multi-baggers like Datasonic, Prestariang and Pintaras Jaya; and buy more on the laggard like Tien Wah and Haio?

Posted by AyamTua > 2014-06-29 18:34 | Report Abuse

i always believed in kcchongnz - the way, the truth and the magic in bursa !! thanks kcchongnz. God bless you.

Posted by AyamTua > 2014-06-29 18:36 | Report Abuse

for newbies: to read kcchongnz idealogy, you will win half of bursa battle !

Posted by 爱丽斯 梦幻世界 > 2014-06-29 19:14 | Report Abuse

Kcchongnz, u are the Best!

Posted by AyamTua > 2014-06-29 19:16 | Report Abuse

kcchongnz - seacera group berhad. needs your kind and honest opinion..
preceeded with gratitudes and thanks,
AT

Posted by AyamTua > 2014-06-29 19:19 | Report Abuse

dearest intelligent investor - kcchongnnz minds never speaks of future or hope. he speaks of now. thanks

Posted by wwwcomment > 2014-06-29 20:36 | Report Abuse

Wah amazing.

Posted by Intelligent Investor > 2014-06-29 22:17 | Report Abuse

Hi Ayam Tua, it is not about future prediction. It is about portfolio management.

Posted by Pak Lah > 2014-06-29 23:15 | Report Abuse

KC, like others, I read the above with interest. I have a few questions.

(1) The magic formula suggests that a portfolio should exclude utility and financial stocks. Can you please share with us the reasons why the magic formula is not applicable to these stocks?

(2) The performance of your portfolio is indeed impressive – Congrats! Do you follow the “Greenblatt’s ritual” in investing, i.e. accumulate 2-3 positions per month over a 12-month period, re-balance your portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark, etc.?

(3) What is the maximum level of debt in the balance sheet that is considered comfortable to investors?

(4) As per your description, the Earnings Yield = EBIT / Enterprise Value. Is the EY equivalent to the inverse of the P/E ratio? Please advise.

Posted by Intelligent Investor > 2014-06-30 00:00 | Report Abuse

I have include the magic formula to my excel template. Feel free to review and make use of it. http://intelligentinvestor8.blogspot.com/2014/06/magic-formula-on-financial-statement.html

Posted by kcchongnz > 2014-06-30 00:01 | Report Abuse

Posted by Intelligent Investor > Jun 29, 2014 05:01 PM | Report Abuse
Hi Mr Chong,
Do you plan to rebalance your portfolio now?
Will you plan to take some profit from the multi-baggers like Datasonic, Prestariang and Pintaras Jaya; and buy more on the laggard like Tien Wah and Haio?

I actually make use of the principles of Greenblatt magic formula to buy good companies at cheap price rather than following his quantitative approach in investing. I am a hunter rather than a farmer. I sell off those stocks which have risen fast in price and no longer having large margin of safety and buy new stocks which I think meeting my hunting criteria.

So I don't actually do the rebalancing required in Greenblatt's quantitative approach.

I have taken taken for Datasonic and Prestariang, both have risen in price too fast too soon way ahead of their fundamentals, in my opinion.

Haio is an interesting stock to look at now at the present price.

Posted by Intelligent Investor > 2014-06-30 00:06 | Report Abuse

Hi Mr Chong,

Thanks for your reply.

How about PTARAS? In view of the stock price risen so much on pass year, the EY is now < 15%. I am using 10-Jun-14 data (stock price 4.09) on my excel - http://intelligentinvestor8.blogspot.com/2014/06/magic-formula-on-financial-statement.html and the EY should be much lower based on latest closing price of 4.39.

Should a hunter move on from this stock and perform hunting on another context?

Posted by kcchongnz > 2014-06-30 00:10 | Report Abuse

Posted by Pak Lah > Jun 29, 2014 11:15 PM | Report Abuse

KC, like others, I read the above with interest. I have a few questions.

(1) The magic formula suggests that a portfolio should exclude utility and financial stocks. Can you please share with us the reasons why the magic formula is not applicable to these stocks?

I GUESS UTILITY IS A HEAVY ASSET KIND OF BUSINESS AND HENCE LOW ROIC. FINANCIAL INSTITUTIONS HAVE VERY DIFFERENT BALANCE SHEET STRUCTURE WITH ASSETS AND LIABILITIES DIFFICULT TO SEPARATE AND IDENTIFY. VERY ARGUABLE IN COMPUTATION OF METRICS SUCH AS INVESTED CAPITAL, ENTERPRISE VALUE ETC.

(2) The performance of your portfolio is indeed impressive – Congrats! Do you follow the “Greenblatt’s ritual” in investing, i.e. accumulate 2-3 positions per month over a 12-month period, re-balance your portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark, etc.?

THOSE ARE QUANTITATIVE APPROACH IN INVESTING. I ONLY MAKE USE THE PRINCIPLES OF MAGIC FORMULA SUCH AS HOW TO IDENTIFY GOOD COMPANIES WITH ROIC, AND CHEAP STOCKS WITH EARNINGS YIELD. SO I AM NOT FOLLOWING GREENBLLATT'S QUANTITATIVE APPROACH IN THE STRICT SENSE.

(3) What is the maximum level of debt in the balance sheet that is considered comfortable to investors?

DEBTS SHOULD NOT BE MORE THAN EQUITY.

(4) As per your description, the Earnings Yield = EBIT / Enterprise Value. Is the EY equivalent to the inverse of the P/E ratio? Please advise.

YES, EARNINGS YIELD IS THE INVERSE OF PE IF YOU ARE TALKING ABOUT JUST FOR EQUITY SHAREHOLDERS. GREENBLATT USES THE WHOLE FIRM, SO HE USES EBIT/EV AS EARNINGS YIELD WHICH WILL TAKE INTO CONSIDERATION OF DEBT HOLDERS TOO.

Posted by Pak Lah > 2014-06-30 05:56 | Report Abuse

KC, thanks for the reply. One more question, I’m interested to know how to spread your portfolio? Say your fund is RM1mil and you are buying into 10 stocks. Do you put 100k into each stock?

Clearly your investment strategy is able to consistently yield the impressive return. That cannot be due to luck or coincidences.

After “trips” to your postings, many would naturally be feeling inspired to learn more, and I think this is just scratching the surface. Be that as it may, it really changes the way we are doing things now.

I’m determined to make sure that all the pieces are there and all the engines are firing in the right direction. I look forward to participating your investment course this July.

Posted by kcchongnz > 2014-06-30 06:22 | Report Abuse

Posted by Intelligent Investor > Jun 30, 2014 12:06 AM | Report Abuse
Hi Mr Chong,
Thanks for your reply.
How about PTARAS? In view of the stock price risen so much on pass year, the EY is now < 15%. I am using 10-Jun-14 data (stock price 4.09) on my excel - http://intelligentinvestor8.blogspot.com/2014/06/magic-formula-on-financial-statement.html and the EY should be much lower based on latest closing price of 4.39.

Should a hunter move on from this stock and perform hunting on another context?

If you think the stock prices has risen too much above its fundamentals, yes move on to other stocks.

But remember EY or ROIC do not take into consideration of growth potential. I normally do not pay for growth expectation because it is just an expectation. But in Pintaras case, I think the growth potential is visible.

Posted by kcchongnz > 2014-06-30 06:23 | Report Abuse

Posted by Pak Lah > Jun 30, 2014 05:56 AM | Report Abuse

KC, thanks for the reply. One more question, I’m interested to know how to spread your portfolio? Say your fund is RM1mil and you are buying into 10 stocks. Do you put 100k into each stock?

Clearly your investment strategy is able to consistently yield the impressive return. That cannot be due to luck or coincidences.

After “trips” to your postings, many would naturally be feeling inspired to learn more, and I think this is just scratching the surface. Be that as it may, it really changes the way we are doing things now.

I’m determined to make sure that all the pieces are there and all the engines are firing in the right direction. I look forward to participating your investment course this July.


Pak Lah,
Try Kelly's Formula for your portfolio allocation which I have talked about in i3. Or you can easily goggle it.

Posted by stockoperator > 2014-07-04 11:40 | Report Abuse

Since company with Good Business value is far and few, our job is so CLEAR.

Posted by Steven Yong > 2014-08-04 15:22 | Report Abuse

KC, any shares you monitor moving forward?

Posted by Azura11 > 2015-11-13 11:43 | Report Abuse

Hi KCchongnz sifu, can you kindly share how do you screen for stocks based on magic formula? as I cant find any screeners that screens for EY and ROC..

your input would be invaluable to me, as I'm a newbie in investing ..

Thanks in advance!

Posted by kcchongnz > 2015-11-13 12:05 | Report Abuse

Azura,

I don't know of any screen. May be try gurufocus. Did you email me?

Posted by Azura11 > 2015-11-13 13:02 | Report Abuse

yes, I did :)