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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.

Sunday, 11 October 2009

A boon for 3A in Wilmar

A boon for 3A in Wilmar

Tags: Fang Chew Ham | Three-A-Resources Bhd (3A) | Wilmar Intenational Ltd

Written by Cindy Yeap
Tuesday, 06 October 2009 10:46

KUALA LUMPUR: In a surprise move seen as further diversifying downstream, global PLANTATION [] player Wilmar International Ltd is set to emerge as the second-largest shareholder in food and beverage ingredients manufacturer THREE-A RESOURCES BHD [] (3A).

The exercise is the first step towards more partnerships ahead, including for potential joint overseas acquisitions, 3A, a nondescript Main Market company said in a statement to Bursa Malaysia yesterday.

Wilmar, a Singapore-listed plantation and palm oil processor, is set to pay RM46.2 million or 75 sen per share for a 16.67% stake in 3A’s enlarged share capital via a proposed private placement of up to 61.6 million shares, or 20% of its existing share base, 3A said.

“Wilmar has given a letter stating that it is interested to subscribe for 61.6 million placement shares at 75 sen per share… The proposed private placement is to enable 3A Resources and Wilmar to collectively venture into any future overseas investment,” 3A said in the statement.

The Malaysian company produces, among others, caramel colour, glucose syrup and soya protein sauce that are used in the processing of food. Its maltodextrin plant is the only one in the country and plans are underway to set up an additional plant by the end of next year, according to a note dated Aug 14 by Asia Analytica Sdn Bhd.

Maltodextrin is a white powder with little sweetness that is widely used as fillers or bulking agent.

After the completion of the placement, Wilmar, which recently delayed the listing of its Hong Kong unit, will end up as the second-largest shareholder in 3A.

The 75-sen indicative issue price represents a 12.63% discount to 3A’s five-day weighted average market price up to Oct 2 of 85.84 sen. The indicative issue price is at a 21.9% discount to 3A’s 96 sen closing price yesterday. The stock, which rose to as high as 97.5 sen intra-day yesterday, ended the day up 13.5 sen, or 16.36%, with 12.7 million shares done.

Standard & Poor’s has a hold recommendation on 3A with a 60 sen price target as at Aug 14, according to Bloomberg data.

The RM46.2 million proceeds from the private placement will be used as working capital as well as for “new overseas investment” after deducting some RM400,000 in estimated expenses, 3A said, without elaborating on the possible acquisitions abroad.

The indicative proceeds are set to boost 3A’s net asset per share to 34 sen from 26 sen as at Dec 31, 2009. The enlarged share base of 369.6 million shares (from 308 million shares currently) will also see its gearing fall to 0.36 times from 0.57 times.

The proposed private placement, which needs the approval of shareholders of the Malaysian company, is expected to be completed in the fourth quarter of 2009 and is not expected to have a material effect on earnings for the current year ending Dec 31, 2009, 3A said.

While 3A’s earnings per share (EPS) may see a corresponding reduction with the 20% larger share base, the company expects proceeds from the private placement to be used for overseas investments which are expected to contribute positively to future earnings.

Fang Chew Ham and family, currently 3A’s single largest shareholder, will see their collective shareholding diluted to 37.2% from 44.6% following the private placement. Lembaga Tabung Haji will become 3A’s third-largest shareholder with a 4.6% stake, down from 5.5% as at Sept 30, 2009.

3A has appointed OSK Investment Bank as adviser for the proposed private placement, and applications for the exercise will be submitted to the authorities within a month.

Wilmar, whose shareholders include the Kuok Group, fell six cents, or 0.98%, to S$6.05 with 6.8 million shares done yesterday. It had not made an announcement to the Singapore exchange at press time.

This article appeared in The Edge Financial Daily, October 6, 2009.

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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)

Sunday, 11 October 2009

A boon for 3A in Wilmar

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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

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