Posted by kcchongnz > 2013-06-27 20:07 | Report Abuse

With the good performance of Magni in term of ROIC, and selling that cheap at an earnings yield of 31% with the price of 2.03, I would want to make Magni a significant part of my holding. Joel Greenblatt will also definitely use his magic formula to buy this stock to form part of his portfolio.

Yeah no point spread into so many stocks if amount of investment not so much. Then you have to look "chun chun".

Posted by Wei Xin > 2013-06-27 20:21 | Report Abuse

I can see Bonia is potential. But price is too high...EPS 28.29 for 6 quarters

Posted by kcchongnz > 2013-06-28 07:39 | Report Abuse

Does Bonia meets the Magic Formula? Yes, it does.

Posted by Wei Xin > Jun 27, 2013 08:21 PM | Report Abuse
I can see Bonia is potential. But price is too high...EPS 28.29 for 6 quarters

Bonia's return of invested capital has been quite steady at about 19% (>12%) for the last few years, much hihger than its cost of capital. At the close of 2.40 yesterday, and 2012 EBIT of 73.5m, its enterprise value (after adding its total debts and less excess cash), the earnings yield (EBIT/EV) is 15.3% (>10%).

Posted by Ooi Teik Bee > 2013-06-28 08:21 |

Post removed.Why?

Posted by kcchongnz > 2013-06-28 10:59 | Report Abuse

Ooi,
This was my previous comment on magni and prolexus. After their quarterly result recently, my view remains the same.

Posted by kcchongnz > Apr 16, 2013 04:11 PM | Report Abuse X

The old fashion garment manufacturing industry seems to see some light recently when their financial performance is improving for the last couple of years.

Magni Prolexus
Revenue 43% 61%
EBIT 38% 78%
NI 40% 25%
Equity 18% 31%

Both Magni and Prolexus grow at very high rate both in terms of revenue and profit last year as shown in the table above. Prolexus appears to grow at a higher rate, mainly because of its smaller size.

Profitability Magni Prolexus
Gross Margin 14.5% 15.4%
EBIT margin 8.3% 7.5%
NI margin 6.4% 6.9%
ROE 17.1% 18.7%
ROIC 22.1% 34.0%

In terms of profitability, both companies did very well with ROIC and ROE well above 15%. Again Prolexus appear to do slightly better, mainly because of its tax credit benefits from losses some years before. What about their market valuations?

Market stats Magni Prolexus
No. of shares 108488 40000
Price 1.53 1.36
Mar Cap 165986.64 54400
MEV 87818 34471
EPS $0.322 $0.311
P/E 4.7 4.4
MEV/EBIT 1.9 2.0
DY 3.9% 2.3%
P/B 0.81 0.82

Again both companies present superb investing opportunities with their low market valuations; PE less than 5; P/B <1.0, and extremely low EV/Ebit <2. Both companies also have healthy balance sheet. So which would you prefer?

I personally prefer Magni because of its more stable return and longer history in operations. It has a higher market capitalization and has been giving higher and good dividend yield for a long time.

Posted by Najib Zamry > 2013-06-28 11:06 | Report Abuse

Hi KC ChongNZ,does Century Bond fulfill the requirements?

Can it become another HPI?

Posted by kcchongnz > 2013-06-28 11:19 | Report Abuse

Najib, Cenbond? Yes and Yes!

Posted by kcchongnz > Jun 3, 2013 10:26 AM | Report Abuse X

Cenbond, is it a good company? Is it a good investment?

By looking at how its share price jumped from 90 sen to RM1.61 at the close of the market on 31/5/2013, there must be something about this company, isn’t it?

Cenbond business includes paper packaging, plastic packaging, contract manufacturing and packing sale of household care products and adhesive products, and investment and property holding.

Revenue for fy ending March 31 2013 shows an improvement of just 3% from 182m to 187m. However its net profit jumped by 32% to 20.6m. Margin improved by 2.6% which is substantial for this type of industry which could positively affect its bottom line. This helps in its return of total capital which improved from 15% to 17%, way above its cost of capital.

Is Cenbond reasonably priced after the jump in its share price recently. Yeah of course. Below is my assessment whether Cenbond is a good company and a good investment.

Cenbond a Good company? 1.610
Good governance ?
Durable business Yes
Growth Yes
ROE Yes 13% >12%
ROTC Yes 17% >WACC
Balance sheet Yes D/E 0.03
Cash flow Yes

Screens for investing
ROTC Yes 17% >WACC
P/B Yes 1.3 <2.0
PE ratio Yes 10.1 <20

Posted by Najib Zamry > 2013-06-28 11:24 | Report Abuse

Thanks KC for the indepth analysis. We will wait for the good news then.

Posted by houseofordos > 2013-06-28 23:56 | Report Abuse

Muar Ban Lee (Based on 2012 annual report)

EBIT = 17121
Enterprise value = 65952
Fixed assets = 17800
Net Working Capital =30148

Return on Capital = 35.7%
Earnings Yield = 26% (based on share price of RM1.12)

Posted by houseofordos > 2013-06-29 00:07 | Report Abuse

Another company that meets the criteria is Willoglen MSC

EBIT = 18212
EV = 91947
Fixed assets=5193
Net working capital = 34405

Return on capital = 46%
Earnings yield = 19.8% (Based on share price of RM0.495)

Posted by houseofordos > 2013-06-29 00:39 | Report Abuse

What about EKSONS ? It looks undervalued and its mainly in the timber business (plywood) which could be see some recovery with the US housing market starting to recover.

Posted by kcchongnz > 2013-06-29 10:48 | Report Abuse

houseofordos,

You are the only one so far appear to use the excel spreadsheet. Your computation for the Magic formula for MBL and Willowglen, I will give a grade of "excellent".

Just a small comment for Willow. Your net working capital for Willow should also include "amount due from contracts" and also "Amount due to contract customers" as these are also receivables and payable respectively. I am not sure if you have done that because your ROIC differs slightly from mine.

Enterprise value should exclude or less off "investment properties" and "investment securities" in the "non-current assets" as they are not consolidated in the financial statements; or not the "ordinary business" of Willow.

So MBL and Willow meet Greenblatt's magic formula easily. If you can have a portfolio of these stocks meeting the magic formula consistently, i am very sure (seldom I express such confidence in stock investment)you can earn extra-ordinary return from the market.

Please email me if you find new stocks like that so that may be we can discuss and hopefully profit together in the long-term together.

Posted by Khek Yang > 2013-06-29 11:10 | Report Abuse

Hi kc,
I personally like the numbers on KFIMA as well, but I haven't bought into them for the time being. I am of the view that the economic horizon doesn't present a clear sky in the near - medium term future. Hence, I'm considering to wait a decent amount of time before dipping.

I'm wondering what was your price of entering KFIMA.

Thanks!

Posted by plumberii > 2013-06-29 11:46 | Report Abuse

I read Joel's book some months ago and tried out his method. Results of his 2 parameters listed in order are as below. I used the normal formula for the cals. Only realised at the end of the book that he used slightly different formula for the 2 parameters. Didn't repeat the calcs as it is quite some work to sort and group them.

My hesitation in using the results as they are based on 1 yr data (that yr could be either good or bad and thus not representative). Yes, should do this for a few years. Will see if I can automate this sorting one day.

The other problem is, there are other important parameters not directly covered in Joel's 2 parameters method. It should be used with other tools to come up with the final list of companies worthy of investment.

My 2 cents.


Tecnic group 4
Zhulian 5
Coastal contracts 5
FIMA Corp 8
Perstima 9
LUXCHEM 9
Padini 10
Hing Yiap 14
Malayan Flour 15
Hock Seng Lee 17
Harrisons Holdings 18
JT int 18
Paramount corp 19
Hai O Enterprise 22
Hartalega hold 22
PIE Industrial 22
CB Industrial 23
Apex Health 23
CCM Duopharama 23
Uchi Tech 23
Dutch Lady 24
NTPM 24
SKP Resources 25
Kumpulan Fima 26
DIGI 27
APM Automotive 28
Chuan Huat (steel) 29
New Hoong Fatt 29
LTKM (poultry) 30
Scientex 30

Posted by kcchongnz > 2013-06-29 12:22 | Report Abuse

plumberii,
Excellent list of companies you have screened using Joel Greenblatt's Magic Formula. I personally have analyzed some of the companies and commented before in other threads such as "In search of excellence", "Value growth companies", "5 yardsticks of Cold Eye", etc. I will look into some of those in the list which I have not looked into before.

I believe the two "different formulas" you mentioned are basically the same, especially for the computation of enterprise value, and if there is any difference, especially in invested capital, it is minor. for example, I sometimes use the formula for excess cash as
cash and cash equivalent - Max (0, CL-CA (excluding cash)).
Some people may include deferred tax and tax payable etc in the calculation of working capital.

Yes, may be we should look at its ROIC for a few years instead of just last year for consistency. But Joel I believe just use the last year ROIC and he re-balance his portfolio every year basing on his magic Formula.

Joel used these two parameters for simplicity. Actually he used the magic formula to screen all the stocks in the US market and invests in say the top 10% of those stocks in his annual re-balanced portfolio. Here we try to use his magic formula to choose good ROIC company and yet trading at high earnings yield.

So what other important parameters you think should be incorporated? May be we can discuss here the pros and cons of them here.

Posted by plumberii > 2013-06-29 13:38 | Report Abuse

Noted.

Not the final yardstick I am afraid. E.g. Uchi Tech came up at 23rd (out of the 100+ companies I screened through). 23rd is considered pretty good BUT when you look at the details, the final total return to shareholder (capital + dividends) has been poor (@6% last 11 yrs @-7% for last 5 yrs). Yet, it came up at 23rd position. That is because only 1 yr data was used.

I take Joel's method as initial filter and then check with other parameters to finalise the list.

Cheerio.

Posted by gark > 2013-06-29 14:15 | Report Abuse

Ha.. nice to see you here plumberly..good contribution.

Posted by kcchongnz > 2013-06-29 14:58 | Report Abuse

Yeah the magic formula is not the final yardstick to select individual stocks.

Greenblatt used it to rank stocks to invest in a portfolio. His portfolio outperformed the S&P500 by a wide margin for the 22 years from 1988 to 2009. The Magic formula outperformed S&P 17 out of the 22 years and achieved a CAGR of 23.8% as compared to the 9.6% of S&P.

I am sure in your case when you used the magic formula to rank stocks and invest in the say top 10 of your list, you would have made extra-ordinary return compared to KLSE.

Actually Uchi-tech and many stocks in certain industries like Berjaya Toto, BAT, DIGI, Zhulian, Haio, Dutch Lady, Jobstreet, etc have very high ROIC and hence they meet the first criterion of the magic formula by a wide margin. However, not many have as good metrics as the second criterion of earnings yield. In Uchitech's case, using its latest price of 1.28, its enterprise value worked out to be 370m; and earnings yield based on last year's ebit of 40.5m, is about 11%. This just misses my criterion of 12% and hence it won't be a stock in my magic formula.

As for other criteria which I may look further into is growth for discussion purpose, a minimum expected growth rate of say 4% in accordance to the growth of economy, or inflation rate may be required. Uchitech missed that for the last two years. Uchitech paid all its cash flows out as dividends every year which many people like very much. But that left nothing for capital expenses for growth and stifled its growth prospect.

Anyway, thanks for your input, especially your list based on the magic formula. Good to see feedback from people like you. Very rare indeed.

Posted by plumberii > 2013-06-29 15:09 | Report Abuse

Yes, see that Uchitech has been paying high dividends in the past, attracting dividend seeking investors, not knowing the full story. Heard about this company from a friend who wanted to invest in it and thus I studied it.

No problem in sharing. One of the things I want to practise is

Smart people learn from experience
Wise people learn from the experience of others

I want to be a wise man. Ha.

Cheerio.

Posted by kcchongnz > 2013-06-29 15:32 | Report Abuse

Posted by Fat Cat Tim Buddy > Jun 29, 2013 03:03 PM | Report Abuse
hey kcchong.. can you reveal whats the other stocks you holding other than skpres,kfima,ecs? :)

Fei Mau, why you want my stocks? Want to compare? I tell you yours would probably have done much better. Mine, ok lah, no multi-bagger but considerably better than KLSE.

It is not about yours or mine again. It is about sharing of knowledge, experience and thoughts here, and hopefully together we find some good stocks to invest. Hope you can contribute yours here. I am sure you have found some good stocks to invest with the spreadsheet. I know, you may have your own instinct or principles in your investment, not necessary to be the same as mine.

Really want my other stocks. Just go to kcchongnz portfolio (revised) posted in i3investor here. I didn't post it but Tan KW did it. For other stocks not there, if you have read my postings, you would have found some there.

Posted by plumberii > 2013-06-29 15:40 | Report Abuse

FCTB,

Noted and thanks.

No, I do not mean I will do what others do or say. My rule no 1 is, don't just listen and do what others say. I should digest and study it, and see whether I am convinced of its merit or not. Learn from the experienced gurus like KCChongNZ and gark, their successes and failures (if any).

Posted by kcchongnz > 2013-06-29 16:11 | Report Abuse

Mudajaya past performance was fantastic but share price disappoints. They have credibility problem a couple of years ago. I guess they must have problems in Indian power plant too. Few foreign companies make money in India. I have the call warrant of Mudajaya, small outlay hoping for big payoff, beauty of leverage.

Scientex performed very well, in its business as well as share price. I think the business will continue to do well for the near future. Well done for you.

NTPM, stable and durable business which would last for long time. but at 55 sen I think a bit expensive as earnings yield (ebit/ev) is only 10%, less than my required 12%. But then again because of the durability of its business, it may not be expensive according to Charlie Munger; like when they bought Coca cola at quite high price.

WCT, don't know much though I have the company warrants bought because it was cheap in relation to the underlying share. If I have Pintaras, a niche foundation company share which the business I know well and they have been doing well, and continue to do well, why need another construction company?

SOP and TDM are my two favorite plantation companies; SOP for its growth, and TDM for its value (growth seems to come soon too). No more holding them for a few months already.

You missed out my other stocks like Plenitude, Jobstreet,Pantech, Kimlun, Prestariang which I have recently disposed off.

Others good companies and at low valuation which I discovered through others in i3investors are magni, mbl, willow, cbip, Johore Tin, Haio, Cenbond, Apollo, and Lii Hen etc. This shows I didn't waste my time in i3.

Posted by houseofordos > 2013-06-29 16:27 | Report Abuse

KC, when deciding price to sell, do you rely on the intrinsic value or do you base on a certain target earnings yield based on magic formula above ?

Posted by Tipster > 2013-06-29 16:39 | Report Abuse

what about eksons (action)...

Posted by kcchongnz > 2013-06-29 16:41 | Report Abuse

house, good question. Very often i sold because of itchy fingers when I found that i have already made considerable profit. That is the problem of the ease of internet trading. And it may end up I bought back again because I find that the price is still way below the intrinsic value.

So I normally base on the price in relation to intrinsic value, and 30% margin of safety is my norm. But intrinsic value is also a moving thing, when its revenue and earnings grow each year, its intrinsic value grows too. A fast growing company may still have high margin of safety even though earnings yield is low say less than 10%. So the magic formula, like what plumberii mentioned, is more of a guide.

Posted by plumberii > 2013-06-29 16:41 | Report Abuse

KC,

Hope that you won't mind sharing on these 2:

a. SOP Govt link (the Sarawak White Hair guy)does not worry you? Or you see it as an advantage? My fear is they can pull out or change things for their own benefits.

b. Jobstreet - mind sharing why you sell this as it is on my to-buy list?

Thanks.

Posted by kcchongnz > 2013-06-29 17:14 | Report Abuse

SOP is not government link as far as I know. go read their annual report on the major shareholders. If it is related to White hair, i won't touch it myself.

sold Jobstreet? Itchy fingers again. Jobstreet share price has gone up by leaps and bounds recently. At 3.90 now, the earnings yield (Ebit/EV) is not attractive anymore at 7%, basing on last year's financial performance. It is continuing to grow but in my opinion, the market may be paying too much for this expected growth.

Posted by kcchongnz > 2013-06-29 18:13 | Report Abuse

Posted by houseofordos > Jun 29, 2013 12:39 AM | Report Abuse
What about EKSONS ? It looks undervalued and its mainly in the timber business (plywood) which could be see some recovery with the US housing market starting to recover.

Eksons doesn't impress me. Its earnings and cash flows are not stable. If using the magic formula, and based on its latest financial results ending 31/3/2013, it fail its first criterion on ROIC at about 7% only (<<12%).

Posted by Tipster > 2013-06-29 18:26 | Report Abuse

They r also into property dev but the profit doesnt seem to show...

Posted by fatinvest > 2013-06-29 18:29 | Report Abuse

Sarawak Plantation is related to white hair, not Sarawak Oil Palm

Posted by gark > 2013-06-30 00:08 | Report Abuse

Sop is related to white hair cronies and family members.....

Posted by gark > 2013-06-30 00:13 | Report Abuse

Tdm isalready fully valued after the recent bi and share split. However the new plantation and hospital will fuel further growth but needs time at least until 2014

Posted by kcchongnz > 2013-06-30 08:45 | Report Abuse

Thanks gark for the comments on SOP and TDM.

Sop related to White hair? Didn't know about it. I don't like this type of cronies kind of relationship.

TDM fully valued? Probably, haven't look at it for some time already.

See if more people contribute, we are more informed.

Posted by inwest88 > 2013-06-30 10:14 | Report Abuse

KC Chong, I really appreciate the comments and contribution on the status of the companies as many others just simply give their views that the prices of certain shares will go up or down. You deserve to make money from the market with so much time, energy and effort put in. I am sure a lot of people will learn and benefit from your observations. Keep up the good work.

Posted by kcchongnz > 2013-06-30 18:58 | Report Abuse

Posted by Khek Yang > Jun 29, 2013 11:10 AM | Report Abuse
Hi kc,
I personally like the numbers on KFIMA as well, but I haven't bought into them for the time being. I am of the view that the economic horizon doesn't present a clear sky in the near - medium term future. Hence, I'm considering to wait a decent amount of time before dipping.
I'm wondering what was your price of entering KFIMA.
Thanks!

Khek Yang, invest in the market only if you are comfortable about it. But to me there will always be uncertainties in the economy, here and all over the world. The thing is that even renounce economists can't even among themselves what the future direction of the economy will be. Half of them have completely different views. It is also proven again and again this stuff is hard to predict and there is no statistical evidence that anybody can predict this stuff consistently correctly. So how? Wait until when? Meanwhile it has been shown that the equity market returns about 10% a year.

What is the price I bought for Kfima? I started investing in this stock since about 4 years ago when it was 70-80 sen. I even bought some when it went up to 2.20+. But what price I bought should not be your benchmark.

The way I decide what price to buy is first to study if the business is durable that it is likely to last many years to come. Then I analyze if there is economic moat; that it has high return of capital, good earnings and good quality of its earnings. Is there alignment of interest among the management and shareholders? How management allocate capital and may be if there is growth in the business. If all the above is affirmative, what price am I willing to pay? That means I must have a feel of the intrinsic value of the business.

So I think maybe it is good if you can think and analyze along that line, rather than the historical prices of Kfima. Company business changes, revenue and earnings may grow, margins may have expanded/shrinked as time goes on, and hence its intrinsic value changes from time to time.

Hope I have answered your question.

Posted by cmlooi > 2013-06-30 19:29 | Report Abuse

Sometimes I wonder if those American books with lots of ideas and "proven" techniques could be applied here in Malaysia. Business and politics ways are different over there. Yeah, I have Greenblatt's little dark blue book too. Anyway it would be good to see if it works locally.

Posted by kcchongnz > 2013-06-30 19:46 | Report Abuse

The Greenblatt magic formula is simple technique, buy good company at low price. Don't you think it is plausible? Don't you think it should work everywhere? Should it be limited to US market?

Posted by kcchongnz > 2013-07-04 18:53 | Report Abuse

Posted by plumberii > Jun 29, 2013 04:41 PM | Report Abuse
KC,
Hope that you won't mind sharing on these 2:
a. SOP Govt link (the Sarawak White Hair guy)does not worry you? Or you see it as an advantage? My fear is they can pull out or change things for their own benefits.

b. Jobstreet - mind sharing why you sell this as it is on my to-buy list?

Thanks.


plumberii
when I first talked about Jobstreet was less than half a year ago when its share price was just RM2.40 a piece. See link below.

http://klse.i3investor.com/servlets/pfs/13147.jsp

At today's closing, it is RM4.18. It has risen by a whopping 74%, in less than half a year! At this price, it is trading at a PE of 22.5 (20), and enterprise value 16 (>>8) times earnings before interest and tax. These are very high value.

One reason the market gives such a high valuation for Jobstreest is its high growth expectation. But even if i assume it can grow by 17% for another 5 years, like what it had achieved each year for the last 7 years, it is already fully valued at the price of 4.18. Meaning there is no more margin of safety investing in this share. furthermore, I doubt it can grow at such a high rate.

The other reason is the herd mentality. Investors were chasing the price of Jobstreet probably because of its bonus issues. Insiders would have known about this exercise long time ago. But to me bonus issues does not create value for the company and hence should not affect the share price. But that is how the market behaves.

Posted by houseofordos > 2013-07-05 00:10 | Report Abuse

How about Keladi Maju ?
Property developer with projects mainly in Kedah as well as some business in palm oil upstream activities.

Based on 2013 annual report:-
• Earnings Yield = 26%
• ROIC = 19%

Using the magic formula, the effects of the one-off gains from re-measurement of associates recently were excluded and still showing good value ?

EV/EBIT=3.2
FCF/Rev = 15%
CFFO/NI=28%
Div yield = 1.9% (kind of poor)

Cash backing of RM0.16 per share
Net asset backing of RM0.32 per share

Looks like value buy for me ? Any comments ?

KC,
Just some feedback on your spreadsheet. I believe that for example shown for KFIMA the par value is RM1 hence no of shares (B53 in Table2 BS tab) =common stock. But for some stocks where par value is less than RM1, for in the case of Keladi Maju, then the number of shares = Common Stock * Par value. Took some time to figure that out cause I got like 10x the expected NTA initially using your spreadsheet in the original condition.

Posted by houseofordos > 2013-07-05 00:11 | Report Abuse

correction no of shares = common stock / par value

Posted by kcchongnz > 2013-07-06 16:21 | Report Abuse

plumberii, used the Magic formula and ranked his stocks. Thanks plumberii for sharing his list.

The company doing plastic molding, Technic, came up top of the list. So is Technic worthy of investing according the Magic Formula? Certainly.

Just to recall the Magic Formula. The key driving formulas used by Greenblatt for his Magic Formula are:

• Earnings Yield = EBIT / Enterprise Value
• Return on Capital = EBIT / (Fixed Assets + Net Working Capital)

Basing on the last financial year ended 31/12/2012, ROIC is 17.6%, which is above my requirement of at least 10%.

With ebit of 22.8m and enterprise value of 127m, earnings yield of Technic is 18%, way above my 12% requirement.

But how is it compared with another plastic molding company, SKP Resources? the table below shows their comparisons according to the Magic formula:

SKPRes Technic
ROIC 33.9% 17.6%
ROE 20.3% 17.4%
EY 27.3% 18.0%

So which would you prefer basing on the above?

Posted by sephiroth > 2013-07-06 22:04 | Report Abuse

skpres is supreme on all fronts (high net cash=superb balance sheet, attractive valuation), just that china slowdown is making skpres investors nervous, current price is very good for long term investor like me, 1 sen div will be announce in a month or 2 and FY14 div is est at 2.6 sen = 8.25% yield at current price

Posted by kcchongnz > 2013-07-28 06:10 | Report Abuse

My personal experience.Does the magic formula useful in picking stock?


Posted by kcchongnz > Jul 27, 2013 05:20 PM | Report Abuse X

Now that each of us (OTB, Fat Cat, kcchong) claimed that his portfolio made impressive return from the stock market, let’s see whose return is the best. Before that let me just lay down some points here first.

1) The purpose here is not really trying to compare who is the best stock picker, because while the skill in stock picking cannot be ruled out, but frankly speaking, the good/bad return could have a big portion of it in lady luck too.

2) While this is not for the purpose of boasting or discrediting the prowess of anybody in stock picking skill, it also should serve the purpose of shutting up some of the people here who have been condemning others about their sharing in the stock market. I, for one, has been under vicious attacks by a couple of people here recently regarding my sharing in the forums about the business of some companies, and most of the time when asked by others. It took a lot of time to analyze and wrote my opinion in responses to those queries. However, I don’t remember I have recommended anyone to buy any share.

3) I acknowledge that there are many people out there in i3 who may have done much better than those described here.

4) Three portfolios put up in i3 here about the same time six-eight months ago and the prices then and now are all there and are transparent. No tipu-pusing-bullshit can be done.

5) For the portfolio of kcchong, the total return of each stock include dividend which the average dividend yield worked out to be about 2.2%. for OTB’s portfolio, I assume the same dividend yield . For Fat Cat’s portfolio, I put in an additional percentage point in dividend yield (3.2%)due to its large holding in Reits.

6) Kcchongnz’s investing strategy is based on fundamentals, mainly trying to buy good companies stocks at a low and reasonable price. OTB’s strategy is based more on technical analysis couple with some basic fundamentals. Fat Cat appears to be fundamental but more interested in high dividend yields.

7) KLSE started at the beginning of the year at 1637. As at 26/7/13, it closed at 1808, or a gain of 10.4%. With an estimate dividend yield of 1.6%, the total return so far is 12%.

Fat Cat total return so far is 29.6%. Well done Fat Cat. You outperformed the KLSE by a whopping 18% for this nine months. I think you easily beat many fund managers with this return.

Kcchong’s portfolio returned 38.0% in the seven months, it is even better than Fat Cat fabulous return. Who said kcchong recommended ( I never recommend anything) losing stocks? Who said my fundamental approach in investing is hopeless, useless? Who who who?

However, OTB’s portfolio return 55%, way above the two portfolios above. So how? Can you say OTB recommended lap sap stocks. OTB was under attack by more , many more people than I encountered. What I can say is “well done OTB”.

Now I want to reiterate here again, the out-performance of all the above could have been a big portion due to luck factor while of course their skill could also be a big factor. If not how could they out-performed the market by such a wide margin?

One thing I notice that OTB has the most number of big winners (>50% return), Prestariang, Naim, Huayang, Alam and KHSB. Kcchong has a number of big winners too in Pintaras, Jobstreet, Kimlun and Prestariang. Fat Cat has the biggest winner in Poweroot (108%).

My conclusion is as OTB is a technician, trading stocks basing on momentum could yield better return in a bull market.

So is technical analysis always better than fundamental analysis? Yes, in this particular six-eight months when the stock market is on the rise, a good run indeed. Is technical analysis always a better approach is investing. No, I don’t agree. Bear in mind that OTB is a good technician compared to many novice ones. Well I know many people would not agree with me. I expect that. But we can always discuss sometime later if anyone wish to.

Posted by hsong > 2013-07-28 17:38 | Report Abuse

AS the GE is over and market is more stable, what would be the recommended counters for the next 6 months as some of them may have appreciated substantially?

Pls share & Thanks

Posted by kcchongnz > 2013-07-28 17:58 | Report Abuse

You have any company which meets the magic formula as described above,one with high ROIC and earnings yield? please share.

Earnings Yield = EBIT / Enterprise Value
Return on Capital = EBIT / (Fixed Assets + Net Working Capital)

Posted by ipomember > 2013-07-28 18:05 | Report Abuse

I wanna talk something about SKP resources, in which i happened to hold for some time and lastly i decide to realise my losses. Why?? Alright, first i need to admit until now i also not really understand the business for SKP, i do not know its competitive advantage as well. All that i know is it is very highly dependent on DYSON and its financial for the past few years is really good after i conducted my analysis through my own spreadsheet. If we look into the valuation, SKP P/E ratio is always trading at single digit even it posted double digits growth YOY,net cash,good OCF and etc. Does anyone wonder? Now the market is all time high and we can simply find any good stocks trading with high valuation,what makes you think that SKP is still trading at low valuation if it is so good? Do you think that you are the only few who found this "hidden gem"? IF we look into furniture industry, there are a lot of stocks which is financially sound but also trading in low valuation? I would think that maybe this is because of their cyclical business(i take this industry merely for illustration purpose). As for SKP, i believe there is still some reasons that the market do not fancy on it, maybe because of its main customer, DYSON is venturing into CHINA market as CHINA market is huge but not easy to success. Retailers like wal mart, tesco or parkson is not doing well there. So in picking stock, it is important to find a fundamentally sound company, but the business itself is rather important too. I would think that SKP business will remain stagnant unless DYSON can do well in China, which is highly doubtful as for now. Oh ya, the latest financial result showed marginal growth only. Just my worthless 2cents

Posted by kcchongnz > 2013-07-29 10:30 | Report Abuse

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

ipomember, you have your point. But if you are using Greenblatt's magic formula to evaluate if SKPRes is worth investing or not based on its recent past performance, it is hard to argue that it is doesn't qualify. It has wonderful growth, operating efficiencies and selling at attractive earnings yield. Btw, it doesn't mean that 100% of the stocks meeting the criteria of the magic formula will go up. Nobody can get even closed to 70% of his stocks up in a long-term.

Why is it that its share price has been stagnant when the market has been up? How the hell I know? I don't know the motive of that Datuk Gan keep on selling. I don't know if its business in China is doing well. Only the insiders will know. If you have the additional information of how SKPRes is doing in the near future, you then only have the advantage.

Posted by samchew1950 > 2014-05-19 09:48 | Report Abuse

Hi KC !! I am new to 3i & trying to learn the above skills from you. At 64, my learning is slow but I have plenty of time since I am retired !!! May I take this opportunity to congratulate you for being such a wonderful analyst !!! Sam

Posted by samchew1950 > 2014-05-20 09:29 | Report Abuse

KC, Tried to email to ckci3invest@gmail.com but received failure notes a few times in return. Do you have another email address ? thks

Posted by AyamTua > 2014-07-01 19:23 | Report Abuse

i love magic formula .. kikiki