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Value Investing Principles
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peterng
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02-Mar-2007 09:35
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All must BEAR in mind that not to buy shares in the early stage of the correction, price will drop further when force selling and margin call by securities firms next week. |
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peterng
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02-Mar-2007 09:34
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All must BEAR in mind that not to buy shares in the early stage of the correction, price will drop further when force selling and margin call by securities firms next week. |
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soonchew
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02-Mar-2007 08:25
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May I know currently what are the examples of good value company to invest in? A lot of theory here, hope got some examples too. |
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l_tan888
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02-Mar-2007 07:56
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musicwhiz5, You mentioned "why bother about the daily price when your intention is not to sell ? Only when you wish to sell does price become important". I'm a little apprehensive of your above statement because in my opinion, to most of us, the current price of the stock which we had bought is very important, even for non day traders. Who would want to see the stocks they had bought to be at under-water? Why? Because if you only see the price "when you wish to sell", then it may be too late. For example: you are met with sudden (or emergency) cash requirement and found that your stock had dropped 25%. Then you will be in a dilemma. To sell the stock and suffer a 25% depreciation or to borrow from the banks (subject to approval)? Yes, everybody always say you should invest only with your spare cash. But even spare cash needs to be utilized 1 day, otherwise, why invest it for growth? |
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musicwhiz5
Senior |
02-Mar-2007 00:41
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Dear all, Thanks so much for replying and making comments ! This network of knowledge sharing can only be beneficial in the long run. To answer some of the queries posed, let me first examine a few issues with respect to value investing:- 1) If one buys part of a company based on value investing principles, one would expect a certain growth for the company which outpaces inflation. Inflation eats into our profits like an unseen shadow, and only companies which have earnings growth greater than inflation can stay ahead. Thus, when one reviews a company, one should see if the growth potential of the company outweighs inflation. This is how I judge when I should sell a company. Another criterion is whether growth is sustained through strategies implemented by the company, and to review if these strategies pan out as planned. A lot of companies make bold promises but in the end fail to deliver. Thus, a value investor should always evaluate information objectively and rationally. 2) As for good management, one of the ways I find out about management are i) Investor Relations (how much they bother to entertain minority shareholders, or if they even HAVE an IR department), ii) Press Releases in which the CEO or MD makes comments, iii) press releases about details of projects and/or contracts secured and iv) attending AGMs/EGMs and actually TALKING to Management. To elaborate, some companies have poor investor relations and shareholders don't know half the time what the heck the company is doing. I have called a listed company before (I will not mention names) and tried several numbers on the website before I finally got through. A tired voice asked what I wanted and when I asked for the IR, she said "huh, what's that ?". Needless to say, I did not bother to find out more about the company. Examples of press releases which are full of gloss but lack substance are those that conveniently focus on the "good" parts and leave out the "bad" or unsavoury parts. Lots of announcements focus on revenue growth and increase in contracts but most of the time, either margins are shrinking, they may not have high recurring revenues or net profits are down due to increasing costs. These are what an investor should look out for, so generally, I take press releases with a dose of skepticism and try to verify the information objectively. As for "knowing" the people behind the company, what better way than to attend the AGM in person ? Suffice to say I have attended EGM where I was so pissed off with the Management that I immediately sold the next day; while I have had very pleasant experiences with Management who was most willing to share about the company, strategies, industry and other salient details. The attitude of Management will reflect on the company because they are the ones up there giving instructions on how to steer the company. If Management is not honest, open and transparent, you bet there will be accounting irregularities, dubious practices and even outright frauds or scandals. This is one thing I leave to you, the reader, to judge for yourself. Body language is also key: the CEO who deflects important questions and tries his best to leave is sending only one message: I have something to hide. In future postings, I will detail the important features to look out for in a good company, and how to select good companies. The next step is to ascertain if the price is worth paying for. |
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iPunter
Supreme |
01-Mar-2007 23:30
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beidou... A very valid point there! It would be nice to be able to do a 'TA' on that.. :) |
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beidou
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01-Mar-2007 23:21
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I have another question. One of the principles under value investing is that the company you picked must be run by a good mgt team (capable, honest etc). I think all of us will definitely agree with this but my question is : how do we find out that the mgt team (the chairman, ceos etc) are really good people up to the mark? |
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beidou
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01-Mar-2007 23:09
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I have read a few books on value investing. I am quite convinced that this is a right approach but have one question: when should we sell our good stocks which we are holding for long term growth? Should we hold on to the good companies which give you good compound interest forever or should we sell them when their reach certain values? If so, at what level and how do we determine it? Can some experts advise? |
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Bandymac
Member |
01-Mar-2007 22:11
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My favourite quote by Warren Buffett; "If you can't hold a stock for 10yrs, don't even think of holding it for 1 day." I am a lousy student of Warren, though I read books by him, I didn't do what he preaches. Maybe because I am too young and impulsive... |
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Livermore
Master |
01-Mar-2007 22:11
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Hi Musicwhiz5, I like your post! |
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iPunter
Supreme |
01-Mar-2007 22:00
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To me the easiest thing for me to do is to sell at a loss!... hehe... :) |
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singaporegal
Supreme |
01-Mar-2007 21:27
Yells: "Female TA nut" |
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Hi musicwhiz5, Althought I'm mainly TA, your posts are interesting to me. To me, when I buy into a counter, its always with the intention of selling it at a profit. |
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ZhouYu
Member |
01-Mar-2007 21:22
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Hi Musicwhiz5 Good thread to start with :) I will post some stocks based on warren buffett theory of investment. Pls help to point out the mistakes I made if any. Currently do you have any stocks holding base on this value investing approach. Thanks and best regards |
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musicwhiz5
Senior |
01-Mar-2007 20:16
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Dear all, Thanks for your responses. I am just a simple guy in his early-thirties trying to make a living. I work full-time and I started investing in Dec 2004 when I purchased my first company, Suntec REIT at its IPO. I do not trade full time or part time (in fact I don't trade at all !). I've had my share of bad mistakes (all of which have been fully documented) in 2005 which has led to some minor losses. Since then, I have started reading up on value investing principles since 2006, and have made far fewer mistakes since then. Value investing has also taught me to "cut losers, and let your winners run". By applying that, one must take note that not all losers should be cut and not all winners should be allowed to run. I will elaborate more in due course using my own real-life examples to illustrate. For confidentiality purposes, I will only disclose my buy/sell prices and not disclose the number of lots that I bought, in all subsequent postings. I think the lessons can as easily be learnt based on just these facts alone. When ascribing a value to a company, one has to take many factors into consideration. These are what makes value investing so challenging; the idea is to "not lose money" (incidentally it is also Warren Buffett's rule no. 1). Rule no. 2 is not to forget rule no. 1 ! There will always be arguments for trading, charting and technical analysis versus fundamental analysis and value investing. I am not here to argue for the good or bad, but merely to present a different method of investing which takes a LOT of effort and research as well as patience. Ultimately, the rewards will slowly accrue to the investor over time. What a value investor needs are:- 1) Effort and time and energy to research companies (not shares or the market). 2) Patience to wait for their investment to realise a decent gain (no 4-D Toto type of one-day big win) 3) Rationality to get you through market turmoils (essentially, you should shut out the market) Another forumer posted on another thread saying that price is ultimately correlated to value as one cannot ignore the price as price is tied to your profit and loss. But my counter-argument is....why bother about the daily price when your intention is not to sell ? Only when you wish to sell does price become important, and even then there must be a compelling reason to sell and this should be objectively determined. For an example of an analysis of a company and its results, please visit the thread on "Global Voice" where I have written a detailed analysis of the company and its merits/demerits. Thanks ! |
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geojam
Member |
01-Mar-2007 19:11
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Hi musicwhiz5 Please give us short intro of urself. I hope to make some kopi $$$. |
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stevenkoh1981
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01-Mar-2007 19:05
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yes that it man Musicwhiz5, come on let all cheer n get together we fly, sail n hold hand together n look to our future with harmony n eye open big enough for the $$$$. I would like to learn from u and everybody in the forum. I am totally new in this thread. |
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rickytan
Veteran |
01-Mar-2007 18:35
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Hi musicwhiz5, thank you for your willingness to share. Would you mind telling us more about yourself, such as how long have you been trading and whether you are a full time trader etc. Xie Xie :) |
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musicwhiz5
Senior |
01-Mar-2007 18:05
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Dear all, This is a new thread started for discussion of Value Investing as practised by Warren Buffett and Benjamin Graham. Over time, I will add little bits of information about value investing, what it's all about, and how to go about achieving long-term returns on your investments. Value investing is NOT about getting rich quick, in fact it's a get-rich-slow method. Thus, it may not be suitable for people who like quick and fast action in the markets. I do, however, attempt to offer a different point of view of investing which is independent of charts, technicals and momentum trading. Please feel free to post your comments and views. All are welcome ! |
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