myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.

Wednesday 6 August 2014

Keys to Successful Investing

Keys to Successful Investing

Know Yourself
Know your investing objectives
Know your time horizon
Know your risk tolerance
Know your financial capacity and reserves

Know your investing philosophy and strategy
Keep it simple and safe (relevant, powerful and focussed)
Never lose money (Rule No 1 and Rule No 2 of Warren Buffett )
Develop and stay with your investing philosophy and strategy (value investing, long term)
Know the difference between investing and speculation/gambling (avoid speculation and gambling)
Avoid market timing (a most dangerous game to play, best avoided)
Selective stock picking (earning power, economic moat, durable competitive advantage, franchise value)
Know your rules for buying (circle of competence, margin of safety, buy quality, great companies at wonderful price)
Know your rules for selling (sell the losers- fundamentals deteriorated permanently or underperformers)
Know your rules for portfolio management (concentrated, defensive and offensive strategies)
Keep good records to guide your investing (an essential to your success in your investing journey)
Reinvest your dividends and dollar cost averaging (take advantage of compounding)

Ongoing activities to invest for the future
Continue to learn and explore.
Continue to master the understanding of all types of businesses
Continue to master valuation of business Thumbs Up

Continue to master the understanding of market behaviour and Mr. Market
Continue to master behavioural finance to understand herd and individual behaviour.
Continue to learn, develop, refine and explore investing knowledge, concepts and applications.
Continue to research companies and businesses.
Continue to seek opportunities in good and bad markets.

A guide to property valuations

WHETHER you’re a potential homebuyer or a greenhorn property investor, your impending venture into the property market will very much revolve around valuations. You might have heard the term being thrown about by experienced property market players, but how much do you know about valuations and how the process would influence your purchase? Here’s what you need to know.

What is valuation?

Officially, “market value” is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion. Valuation calculations take into account recent transacted prices from the Government’s Valuations and Property Services Department (JPPH). Additionally, launch prices of new and upcoming projects in the area play a factor. Once a valuation is done, a bank would usually extend a loan of 90% based on the figure.

Chart from http://loanstreet.com.my/learning-centre/entry-costs-buying-property

How valuation affects you

Say you’ve got your eye on an apartment unit, and after negotiating with the seller, the two of you agree on a price of RM500,000. A 90% loan means that you would need to fork out a down payment of RM50,000, aside from other entry costs. Now, here’s where the valuation comes into play – for a housing loan, a report by a real estate valuation firm recognised by the bank you’re dealing with is needed. If a valuation firm only prices the said property at RM450,000, you would only be eligible for a loan of 90% from RM450,000. Basically, this means that if you were to go ahead and purchase it, you would need to bear the price difference and come up with RM95,000; and not the RM50,000 you were initially expecting.

Why the disparity?

If you observed the Malaysian property market, you would know that prices in certain areas have surged upwards quite quickly. Herein

lies the issue – as it takes up to six months for JPPH to collect and analyse transaction data, which valuation firms rely on for their calculations. Basically, this means that valuations would be centred on outdated prices from up to six months earlier, and are likely to be lower than current prices.

Although many firms take the trouble to ensure an accurate and fair valuation by taking into account as many relevant factors as possible, many others only do as much as they need to, resulting in common cases of disparities between valuations and negotiated prices.

What can you do?

Here’s the bit where you have control over. It’s a well-known fact among veteran property players that different banks can provide different valuations on a single piece of property. Some bank sales agents may aggressively push up their valuations of your property, just so they can obtain more transactions. You could take advantage of this and go “shopping” for valuation rates. Remember to mention what the other branches are offering as you might just end up with the valuation that you want.

> Loanstreet.com.my is a website where visitors can compare and apply for loans online.

http://www.starproperty.my/index.php/articles/investment/a-guide-to-property-valuations/?utm_source=TSOL&utm_medium=widget&utm_campaign=a-guide-to-property-valuations

Tuesday 5 August 2014

Lessons learned from Sir John Templeton

Lessons from Sir John Templeton

“A MAJOR CAUSE OF HIGHER PRICES is higher prices; but when the trend is reversed, then lower prices lead to still lower prices. To buy when others are despondently selling and to sell when others are avidly buying requires the greatest fortitude and pays the greatest ultimate rewards.”
Sir John Templeton

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.”
Sir John Templeton

15 Personal Attributes
 Self Reliance
 Reasonable Risk Taking
 Sense of Stewardship
 A Drive towards Diversity
 Bargain Hunting Mentality
 Broad Social and Political Awareness
 Flexibility
 Devote Large Amounts of Time to Study

 An Ability to Retreat from Daily Pressures
 Develop an Extensive Friendship Network
 Patience
 Thought Control
 Positive Thinking
 Simplicity

 Great Intuitive Powers

“If you want to have a better performance than the crowd, you must do things differently from the crowd.”
Sir John Templeton

Where were the buyers on March 9, 2009?

The truth is that it is very hard to buy at the point of maximum pessimism.
Humans are not wired to do so.

Stock Prices are 14x More Volatile than Actual Fundamentals – This Creates Opportunities for those who are Prepared

Methods Sir John Used to Take Advantage of these Events
Preparation, Preparation, Preparation
 Always stored some funds in reserves, one basis for his thrift...sought out crises
 Maintained a wish list, had already researched and prepared a list of companies he wanted to own at a bargain price

 Maintained good-to-cancel limit orders in the market 20% below the current price
 An optimist, held a fundamental belief in the continued innovation, ambitions and ingenuity of others

Intelligent Finance

http://www.mgmt.uestc.edu.cn/prc/papers/IWIF-II%20PAN%20Heping-Intelligent%20Finance%20C4%20-%20FSA.ppt

Strategies of the Great Masters (ppt)

http://hum14.files.wordpress.com/2009/01/chapter-22-strategies-of-the-great-masters.ppt

The Value of Cumulative Research
A Competitive Advantage. Lessons of the Masters

http://www.valueinvestorconference.com/ppt/2012/12%20VIC%2012%20Auxier.pptx

My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Wednesday 6 August 2014

Keys to Successful Investing

A guide to property valuations

Tuesday 5 August 2014

Lessons learned from Sir John Templeton

Intelligent Finance

Strategies of the Great Masters (ppt)

Time to Invest? There have always been reasons not to invest.

Invest Yourself! (Ppt)

Common Stocks and the Investment Banking Process (ppt)

Basics of Investing (ppt)

Buffett and Beyond (PDF)

All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

Investment Style

Warren Buffett

Political and Economic News

Interesting Blogs