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 7 February 2024

Value traps in real life.

Company X is a private limited company that owns a lot of assets. It owns plantations, factories, shop houses and various businesses. Its net book value is very high. If it can sell off everything at the fair market price, it should be worth a lot of money.

It has many shareholders. Many are from the same related brothers and sisters. There are also many outsiders who own shares in the company.

The company makes good profit every year and is cash rich. It is well managed. It chooses to distribute a small portion of the yearly profits as dividends and retains the major portion as cash which is kept in the bank. Every year its net book value increases due to its retained earnings. The shareholders get their dividends without fail, though these have not increased through the years, despite the company earnings having improved over the period.

The management remains sound and those in control of the management and the directors enjoy their fees for their services, which are fair and reasonable.

The company continues to grow its assets and earnings over the years. Its assets, which are land, properties and businesses have appreciated a lot over the very many years.

Alas, some shareholders wish to cash out. Who are the buyers? Yes, some of the shareholders are still accumulating the shares in the company regularly. There are also many who also are not willing to buy, not because the company is not good and also not because it is overvalued. They do not wish to tie their money up in the company as they cannot see how they will be rewarded in the coming years. Except for the dividends received yearly, which weren't much when you compared with the yields from the risk free fixed deposit rates, they just cannot see how they can cash out of this company at a fair price. The buyers have indicated that they are always available for those who wish to cash out, but the price offered is about half that of the net book value. This state of affair existed for many years and continues till today.

Are there similarities we can observe in some of the listed companies who are deemed value traps too?

Friday 5 January 2024

Monitoring your portfolio using Excel file.

Thursday 4 January 2024

Dutch Lady: Investment returns

Dutch Lady

Year	DPS (sen)	EPS (sen)	MR Pr (RM)	LPr (RM)	HPr (RM)
2002	5.8	23.7	6.10	3.85	8.35
2003	12.8	24.2	4.13	3.76	4.50
2004	56	26.6	4.84	3.98	5.70
2005	63.2	42.4	5.56	4.56	6.55
2006	63.2	67.3	10.05	6.10	14.00
2007	63.2	73.8	11.65	10.00	13.30
2008	42.1	66.6	10.55	8.10	13.00
2009	65.5	94.38	10.93	8.85	13.00
2010	72.5	119.05	15.70	11.30	20.10
2011	72.5	172	23.14	15.28	31.00
2012	260	192.78	37.10	23.40	50.80
2013	260	216.04	45.44	41.40	49.50
2014	220	171.63	44.67	40.36	48.98
2015	220	220.28	45.45	41.80	49.10
2016	220	232.93	56.33	46.68	65.98
2017	280	188.08	58.00	54.00	62.00
2018	200	198.07	67.18	57.38	76.98
2019	100	159.41	55.20	45.62	64.78
2020	80	113.99	41.95	34.00	49.90
2021	50	146.25	34.71	31.92	37.50
2022	50	159.64	32.30	30.00	34.60
2023	50	110	25.26	20.22	30.30


Investing period from starting year to now
(RM)
Year	Total DPS	Pr 4/1/24	MR Pr	Pr change	Total returns
2002	25.07	25.00	6.10	18.90	19.15
2007	23.06	25.00	11.65	13.35	13.58
2012	19.90	25.00	37.10	-12.10	-11.90
2017	8.10	25.00	58.00	-33.00	-32.92
2022	1.00	25.00	32.30	-7.30	-7.29

How to read a balance sheet like a CFO: A risk-based approach

https://www.youtube.com/watch?v=DMv9JC_K37Y

Wednesday 3 January 2024

Returns to shareholders of Petronas Dagangan over the last 10 years and 5 years

Petronas Dagangan

Dividends (sens) per share received each year:

2014 55.50

2015 62.00

2016 62.00

2017 78.00

2018 94.00

2019 70.00

2020 61.00

2021 40.00

2022 40.00

2023 NA

Year end share price of PBB

Year 2013 RM 31.44

Year 2018 RM 26.50

Year 2023 RM 23.00

Returns to shareholders of Petdag

10 year period from end of 2013 to end of 2023

Capital depreciation = RM 23.00 - RM 31.44 = - RM 8.44

Total dividends received = RM 5.625

Total loss = - RM 8.44 + RM 5.625 = - RM 2.815

Loss % = - RM 2.815 / RM 31.44 = - 8.95%

The loss of capital was attenuated by the dividends received over the last 10 years.

5 year period from end of 2018 to end of 2023

Capital loss = RM 23.00 - RM 26.50 = - RM 3.50

Total dividends received = RM 2.11

Total loss = - RM 3.50 + RM 2.11 = - RM 1.39

Gain % = - RM 1.39 / RM 26.50 = - 5.24%

The loss of capital was attenuated by the dividends received over the last 5 years.

Returns to shareholders of Public Bank Berhad over the last 10 years and last 5 years

Public Bank Berhad

Dividends (sens) per share received each year:

2014 10.41

2015 11.00

2016 11.60

2017 11.80

2018 13.20

2019 14.00

2020 8.00

2021 20.50

2022 19.70

2023 14.00

Year end share price of PBB

Year 2013 RM 3.76

Year 2018 RM 4.95

Year 2023 RM 4.25

Returns to shareholders of PBB

10 year period from end of 2013 to end of 2023

Capital appreciation = RM 4.25 - RM 3.76 = RM 0.49

Total dividends received = RM 1.34

Total gains = RM 0.49 + RM 1.34 = RM 1.83

Gain % = RM 1.83 / RM 3.76 = 48.7%

Dividends provided the bulk of the returns to shareholders over the last 10 years.

5 year period from end of 2018 to end of 2023

Capital loss = RM 4.25 - RM 4.95 = - RM 0.70

Total dividends received = RM 0.762

Total gain = - RM 0.70 + RM 0.762 = RM 0.062

Gain % = RM 0.062 / RM 4.95 = 1.25%

The loss of capital was attenuated by the dividends received over the last 5 years.

Friday 24 November 2023

HOW TO VALUE A COMPANY: 6 METHODS

1. Book Value

2. Discounted Cash Flows

3. Market Capitalization

4. Enterprise Value

5. EBITDA

6. Present Value of a Growing Perpetuity Formula

Additional notes:

Value of a Growing Perpetuity = Cash Flow / (Cost of Capital - Growth Rate)

In finance, growth is powerful.

https://online.hbs.edu/blog/post/how-to-value-a-company

Thursday 26 October 2023

Nestle Malaysia

Revenue, PBT, EPS and share price.

Wednesday 25 October 2023

Diageo

https://uk.finance.yahoo.com/news/5-uk-shares-d-happily-021902495.html?guccounter=1

Judges Scientific (UK)

Spirax-Sarco Engineering (UK)

Unilever (UK)

Cranswick (UK)

Monday 23 October 2023

How Warren Buffett Made His First $1,000,000

Timestamps: 00:00 Intro 01:53 Buffett the Grinder (1936-) 03:00 Buffett the Detective (1936-) 03:57 Buffett the Math Wiz (1936-) 04:34 Buffett the Bookworm (1936-) 05:59 Buffett’s First Investment (1942) 08:02 Buffett’s Motivation (1943) 09:09 Buffett the Newspaper Boy (1944-1947) 10:43 Buffett the Bodybuilder? (1944-1945) 11:23 Buffett the Farm(own)er (1945-1950) 12:15 Buffett the Entrepreneur (1946-) 14:04 Buffett’s High School Promise (1947) 14:22 Buffett and College (1947-1950) 16:25 Buffett the Intelligent Investor (1949-) 19:03 Buffett: The A+ Student (1950-1951) 22:15 Buffett the Insurance King (1951) 24:34 Buffett and Susie (1951-2004) 26:50 Buffett the Stockbroker (1951-1954) 27:59 Buffett & Public Speaking (1952-1958) 29:33 Buffett & His Dream Job (1954-1956) 30:16 Buffett’s First Partnerships (1956-1961) 33:31 Buffett and the Cigar Butts (1956-1972) 37:39 Buffett: Completely Focused (1956-) 38:36 Buffett and Charlie Munger (1959-) 39:48 Buffett: Becoming a Millionaire (1961)

https://www.youtube.com/watch?v=M5i_YYAXsAM

The Swedish Investor

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?