Bullbear Buffett

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, 10 December 2025

LPI Capital Bhd:

LPI Capital Bhd - Investor Summary

Public Liability & General Insurance, Malaysia

🟢 THE INVESTMENT THESIS: "The Fortress Dividend Stock"

LPI is a high-quality, conservatively managed Malaysian general insurer that combines exceptional profitability with a rock-solid balance sheet, delivering reliable dividends to shareholders. Think of it as a defensive fortress that consistently generates strong returns through underwriting discipline and prudent capital management.

📊 BUSINESS MODEL IN 30 SECONDS

LPI sells insurance policies (collects premiums), invests those premiums while holding reserves for future claims, and profits from the difference between:

Underwriting Profit = (Premiums Earned) - (Claims Paid + Operating Expenses)
Investment Income = Returns on the large investment portfolio

Key Insight: LPI makes money even before investments through superior underwriting discipline.

🎯 KEY INVESTMENT ATTRACTIONS

1. Exceptional Profitability (The "Wow" Factor)

Net Profit Margin: 19.5% (2024) - Extremely high for insurance
Return on Equity (ROE): 16.0% (2024) - Beats most peers
Earnings Growth: Net income grew from MYR 337M (2020) to MYR 377M (2024) despite revenue volatility

2. Fortress Balance Sheet (Sleep-Well-At-Night Safety)

Minimal Debt: Debt is only 0.75% of assets (virtually debt-free)
High Capitalization: Equity represents 51% of total assets (very strong buffer)
Conservative Reserves: Large technical reserves indicate prudent claims management

3. Reliable Dividend Payer

Consistent Payouts: Regular dividends for years
High Yield: Dividend payout ratio of ~74% of earnings
Sustainable: Covered by strong underlying cash generation

4. Quality Management

Demonstrated underwriting discipline (generally low loss ratios)
Cost control expertise (dramatically reduced expenses in 2024)
Conservative investment approach (large, diversified portfolio)

⚠️ KEY RISKS TO UNDERSTAND

1. Inherent Insurance Volatility

Claims can spike (as seen in 2022 when claims jumped 241%)
Revenue growth can be inconsistent (varies year to year)
Cash flow swings dramatically due to insurance reserve timing

2. Industry & Economic Sensitivity

Competitive market in Malaysian general insurance
Investment returns depend on market conditions
Economic cycles affect both premium growth and claim frequency

3. High Expectations Already Priced In?

Premium valuation likely reflects the quality
Limited "surprise upside" given conservative approach

📈 FINANCIAL HEALTH REPORT CARD

Metric	Performance	Grade
Profitability	19.5% Net Margin, 16% ROE	A+
Balance Sheet Strength	51% Equity/Assets, Near Zero Debt	A+
Cash Flow Stability	Volatile but Strong Underlying FFO	B
Dividend Reliability	Consistent, ~74% Payout Ratio	A
Growth Consistency	Inconsistent Top-line, Steady Bottom-line	B
Overall Financial Health	Exceptional	A

🎭 WHAT TYPE OF INVESTOR IS THIS FOR?

✅ YOU'LL LIKE LPI IF YOU:

Seek reliable dividend income with growth potential
Value capital preservation and low-risk businesses
Understand and accept cyclical industry volatility
Prefer conservatively managed companies with strong moats
Want defensive exposure to the Malaysian financial sector

❌ YOU MAY PREFER OTHER OPTIONS IF YOU:

Seek high growth or aggressive expansion stories
Cannot tolerate earnings and cash flow volatility
Prefer high leverage/aggressive capital structures
Want tech disruption or revolutionary business models

🔮 FUTURE OUTLOOK & CATALYSTS

Positive Catalysts:

Continued underwriting discipline maintaining low loss ratios
Investment income growth in rising interest rate environments
Market share gains from conservative competitors during hard markets
Potential special dividends if excess capital builds up

Monitoring Points (What to Watch):

Loss Ratio trend (rising would be negative)
Premium growth (consistency indicates market strength)
Investment portfolio performance (major earnings component)
Dividend coverage ratio (FFO to dividends)

💡 THE BOTTOM LINE

LPI is a "quality compounder" - a financially bulletproof company that consistently earns high returns on equity and pays out most earnings as dividends.

Think of it as: The "Warren Buffett-style" insurance stock of Malaysia - boring but brilliant, conservative but profitable, predictable but rewarding.

Current 2025 quarterly data suggests the positive trend continues: Strong revenue recovery, maintained high margins, and robust bottom-line growth.

🎯 ONE-SENTENCE SUMMARY

*"LPI offers investors a rare combination of Malaysian insurance exposure: exceptional profitability (19.5% margins), fortress-like financial strength (51% equity/assets), and reliable dividends, with the main trade-off being acceptance of normal insurance industry volatility."*

Investment Suitability: Core holding for dividend-focused, risk-averse investors seeking quality Malaysian financial exposure.

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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?