What is Value Investing? Part 7

Now,you should have calculated annual EPS growth (from Part 4), understood a company’s strength,weakness,opportunity and threats (SWOT) (from Part 5) and analysed financial ratios in financial statements (Part 6). Next is to dig further into the management of the company.

Well, there are cases which companies were investigated by S.C on irregularities in annual report and some CEO are investigated for corruptions.As a value investor, you should put  these companies away from your portfolio. Remember, it is ……(continue)

What is Value Investing? Part 6

The 3rd criteria is to recognize ‘EPS Manipulation’ in financial statement.Before buying a share, read the ’Notes to the financial statement’. Get to know how the company define its sales, expenses, debt and others. Look for irregularities in the financial statements such as extraordinary write off, special expenditure and so on. This means you as an investor must question every ‘weird’ numbers in the financial statement. Each financial statement will go through an artist work (by the accountant) to hide any ugly sides of the company.

For example, a company can declare its sales before the products are sold to the end users. This means the company declares its revenue before it receives the cash or before the cerdit term expires. By doing the ‘art work’, the company can significantly increase revenue, reduce expenses and get a better EPS. 

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What is Value Investing? Part 5

The second criteria is a synergy between the management & political influence. A company with the best management team will fall if the current government policy hinders the core business operation. NEP policy towards certain industries must be given great attention. To stay updated with the economy news, get different views from the local media, which are controlled by the government & oppositions’ sources.Relying on one source is an act of a fool.By analysing different views from both sources,a better investment decision can be made.

A company’s business operation is largely affected by the change in the government policy and law.For example,if the price of a product/service is tagged by the law,then the company can only increase its net profit by reducing the expenses,increase efficiency or ….(continue)