What is Value Investing? Part 9

June 12, 2007

There you have it,eight parts on value investing. Part 9 will touch on corporate governance. But this part will be explained by my fellow friend, Ben McClure.Anyway, Who is this guy?

But before we go to that topic,let’s learn about The Basics of Corporate Structure.

In summary,

Step 1: Read ‘Who is this Guy’?

Step 2: Read ‘The Basics of Corporate Structure’

Step 3: Read ‘Corporate Governance’

….continue


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. 

(continue)


What is Value Investing? Part 5

May 8, 2007

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)


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)


What is Value Investing? Part 3

April 24, 2007

Given all the problems in KLSE,how should one invest? Some investors prefer short term investing/speculative investment such as options and warrant. In speculators’ opinion,short term investment is not affected by corruption and political decisions. This is true.But how many of us are professional traders?How many of us have a CFA?

CONSERVATIVE analysis couple with long term investment can also reduce the effect of inappropriate decision by the company.When one has made profit in the stock market,he should ‘lock’ his profit in bond.The proportion of portfolio should be ….(continue)


What Is Value Investing? Part 2

April 1, 2007

How to apply value investing in KLSE? This is a bit more complicated task. Here are some of the reasons. Some of the companies in KLSE are politically driven. These companies might not make a decision which benefits its shareholders. Also. Malaysia ranked badly in corruption list.I will leave that topic to other bloggers.

A company fundamental might look alright but …continue