What is Value Investing? Part 7

May 27, 2007

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

May 13, 2007

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. 


What is Value Investing? Part 4

April 29, 2007

What are the criteria in choosing a public listed company to invest in?These criteria is obtained from the book,”The New Buffetology” which is written by Mary Buffet.I will explain how can you apply those criteria in KLSE.Some criteria might not be suitable and need some modifications.

The first criteria is the EPS pattern over a decade.By observing the EPS pattern for the past 8 to 10 years,an investor will be able to get a sense of a company’s sustainability and reliability in its industry. You should chart the EPS in Excel as linear graph, and observe its EPS fluctuation and direction.If the fluctuation of the EPS is little and the trend is upward,then you are looking at a stable company.You can only predict the future of a company which has shown stable growth over the 10 years.Small fluctuation of EPS is acceptable.

Erase all the companies which does not have …(continue)