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.

Saturday, 18 December 2010

LOCAL retail investors have been net sellers of stock for all but one month up to November this year

Saturday December 18, 2010

Buying patterns of foreign and local investors

LOCAL retail investors have been net sellers of stock for all but one month up to November this year, but the pace of buying has slowly caught up with selling as the stock market rose towards its record high levels at the end of the year.

According to trade statistics from Bursa Malaysia, retailers bought RM8.93bil worth of stock in November and sold RM8.99bil worth of shares. In terms of purchases, the highest amount of shares bought or sold was in January when retailers bought shares worth RM9bil but sold RM9.1bil.

The pace of transactions declined thereafter but started to pick up in September when purchasers rose to RM5.58bil versus selling RM5.72bil worth of equity.

In October, buying and selling rose to RM7.57bil and RM7.73bil respectively and in November, when the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) hit a record 1,528 points, retailers bought RM8.93bil worth of shares and sold RM8.99bil worth.

The pace of purchasers also reflected the monthly value of trade done on Bursa Malaysia. Data for December has not been released.

In terms of value, the highest month of transactions based on value was November when RM39bil worth of trade was conducted. The month also saw the entry of the largest IPO in the country, Petronas Chemicals Group Bhd, which attracted a great deal of interest among institutional investors.

The value of transactions has also mirrored the FBM KLCI’s ascendency to its new peak.

Total value of trade in October was RM36.5bil and RM31.6bil worth of share transactions were done in September.

Trade value has been consistently rising since July when total transactions were RM26.1bil. The value of transactions has somewhat tracked the rising amount of foreign investor interest in the stock market.

Foreign institutions have been net buyers of Malaysian shares since June but over the last couple of months, the amount of the net purchasers by foreign institutions has been shrinking.

As foreign investors have been net buyers of Malaysian shares over the past 6 months, most of that extra liquidity or shares available for purchase has come from local institutions.

Local institutions have been net sellers of shares on Bursa Malaysia since June and only emerged as net buyers in November.

One of the highest months of purchases by local institutions was in March when local funds bought RM12.8bil worth of stock and sold RM13.1bil in shares.

Total transactions by local institutions dipped thereafter but started to pick up once again in September when such funds bought RM9.7bil worth of shares and sold RM14bil worth.

The net selling gap then dropped as interest in Malaysian shares picked up again and in October, local institutions bought and sold RM12.8bil and RM14.2bil worth of shares.

In November, local funds reversed their selling trend of previous months when it bought RM12bil in stock and sold RM11.5bil in shares.

Foreign investors have also increased their buying of Malaysian shares in recent months and in August bought more shares than local institutions.

Foreign investors continued to buy more shares on Bursa Malaysia compared with local insitutions in September but in October, as the market continued to charged towards its record high, local institutions poured more money into Malaysian shares compared with foreign institutions.

In November, local institutions’ purchase of stocks at RM12bil was higher than foreign institutional funds which snapped up RM11.5bil worth of shares. — By Jagdev Singh Sidhu

http://biz.thestar.com.my/news/story.asp?file=/2010/12/18/business/7640311&sec=business

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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)

Saturday, 18 December 2010

LOCAL retail investors have been net sellers of stock for all but one month up to November this year

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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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