A Strategy for Losing Money

A Strategy for Losing Money
Thursday, July 14, 2016


I can give you a name of a fund trading with the equivalent of a 23% sales charge. It’s actively managed by a company that’s incurred large outflows from its signature mutual fund following the departure of its star chief investment officer. Interested in owning it?

You probably aren’t, but some investors were. PIMCO’s Municipal Income Fund (PMF) , a closed-end fund, traded at a 23.4% premium to the underlying value of its net assets last Friday. Put another way, some investors were paying $1.23 for $1.00 worth of net assets. One doesn’t have to know much about investing to realize this isn’t smart.

PIMCO Municipal Income Fund wasn’t the only offender. Eight other closed-end muni bonds funds ended last week with premiums of 10% or more. In comparison, the average closed-end bond fund traded at a 2.32% discount (meaning investors paid just under $0.98 for every dollar of assets), according to the Closed-End Fund Association (CEFA). The average stock closed-end fund traded at a 7.49% discount.

For those of you who are curious, here are the highly priced bond funds, sorted in descending order by their premium based on data for last Friday (July 8) from the CEFA:

PIMCO Muni Income (PMF), 23.40% premium
PIMCO NY Muni Income II (PNI), 21.62% premium
PIMCO CA Muni Income III (PZC), 16.78% premium
BlackRock VA Muni Bd Tr (BHV), 15.27% premium
Pimco CA Muni Income II (PCK), 15.27% premium
BlackRock MuniYld AZ (MZA), 14.71% premium
PIMCO CA Muni Income (PCQ), 12.52% premium
BlackRock MuniVest II (MVT), 11.97% premium
PIMCO NY Muni Income (PNF), 10.59% premium

The premiums on several of the funds have come down since last Friday, but still remain high. As of yesterday, PIMCO Muni Income trades at an 18.89% premium.

Closed-end funds differ from mutual funds and exchange-traded funds (ETFs) by having a fixed number of shares. As money flows into and out of mutual funds and exchange-traded funds, the number of outstanding shares is adjusted. Mutual funds directly issue shares to and redeem shares from shareholders. ETFs adjust their share counts through creation units, which are large blocks of shares issued to and redeemed from institutional investors and large traders. If there are more investment dollars flowing into a closed-end fund than the net value of its assets, shares of the fund will trade at a premium to their net asset value (NAV). It’s the law of supply and demand. More dollars will drive up the share price because transaction proceeds go into the pockets of selling shareholders, but never into the closed-end fund. (New investor dollars only flow into a closed-end fund when an offering occurs, which is not very often.)

This fact invokes the greater fool theory. When a premium, particularly a high premium, is paid, the investor is hoping there is someone willing to pay an even higher price for the same shares. Two events could cause this investor to incur a loss. The first is the fund’s net asset value declining, which should cause the share price to decline and is an inherent risk with any type of fund. The second is a decrease in the premium. Should the premium decline faster than the fund appreciates in value, the investor could lose even though the underlying net asset value of the shares increased in price. The worse-case scenario, of course, is for the fund’s NAV to decline and its premium to shrink—a double whammy.

How do you avoid such a scenario? Check the Closed-End Fund Association’s website. They list a closed-end fund's premium or discount right on the quote page. I also find their screener to be very helpful. (Click on "fund selector" near the top of any page.) You can screen by type of fund as well as by other characteristics, such as premium and discount.

http://www.aaii.com/files/investorupdate/20160714.html?a=updatenm071416

Warren Buffett lives in a modest house — here's what it looks like

NOW WATCH: Warren Buffett lives in a modest house that's worth .001% of his total wealth — here's what it looks like

The 'Warren Buffett of Sweden' gives his best advice on building wealth

The 'Warren Buffett of Sweden' gives his best advice on building wealth
Tom Turula, Business Insider

Roughly one in ten Swedes are millionaires in Swedish crowns, according to data from SBAB, a Swedish bank. (A million Swedish crowns, when converted to US dollars, is worth about $125,000.)

Per H. Börjesson, the founder and CEO of Swedish investment company Spiltan, thinks there could, and should, be many more.

Börjesson's bestselling book "Here's how all Swedes can become millionaires" draws from his experience running his company, an investment firm with $3.4 billion (27 billion Swedish crowns) under management.

The book has a simple message: The key to becoming financially independent is to follow a number of simple savings advice, and stick with them through thick and thin.

Börjesson is a big fan of investor legend Warren Buffett. His strong track record with Spiltan, one of Sweden's foremost investment companies, combined with his affinity for the Sage of Omaha has earned Börjesson the informal nickname "Warren Buffet of Sweden."

He has even made Spiltan's annual shareholder meetings into spectacles modeled on Berkshire Hathway's.

Moreover, Börjesson is often seen quoting Buffett's advice in the media, such as: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes."

Here are Per H. Börjesson's 5 key pieces of advice to young people starting out today, and to anyone else for that matter, according to Veckans Affärer (VA).

1. Start each month by saving 10 percent of your income.
"Absorb the oldest and best investment advice there is: save 10 percent of your salary each month, before you do anything else. Don't wait," Börjesson told Dagens Industri.

2. Live within your means, i.e. don't let your costs surpass incomes.
Börjesson said: "I notice all the time how people spend money on things that are not necessary, such as eating lunch in a restaurant instead of preparing your own, buying coffee on your way to work, or lottery tickets, cigarettes, etc."

3. Buy shares or equity funds.
"If you buy equities, then investment companies are a good alternative. When it comes to funds, choose index funds with low fees, or active funds. You can also buy individual quality stocks."

4. Hold on to your assets.
"The best thing is to never sell all of your shares. But you can use some of your assets for an apartment or for that dream holiday."

5. Be very careful when listening to investment advisors.
Börjesson said that you shouldn't rely too much on "experts", but instead make independent decisions when it comes to your money. When buying your index funds, make sure that fees are low. That way, you will be able to keep most of the fund's returns.

"The most tragic thing is that even people who do a good job of saving each month, cannot possibly become millionaires if they accept bad advice from advisors who are really just salesmen," Börjesson said.


http://uk.businessinsider.com/warren-buffett-of-sweden-gives-advice-on-building-wealth-2017-9/?IR=T

Pentamaster’s PIL valued at RM321mil

Proposed IPO in Hong Kong involves sale of 23% stake in the unit

• StarBiz
• 12 Sep 2017

PETALING JAYA: Pentamaster Corp Bhd is planning to list its most profitable subsidiary, valued at RM321mil, on the main board of the Hong Kong Stock Exchange to raise funds for the expansion of its smart home applications and Internet of things (IoT) business.

The proposed initial public offering (IPO) involves the sale of a 23% stake in Pentamaster International Ltd (PIL) to investors at a price to be determined at a later date, the company said in a filing with Bursa Malaysia. Pentamaster owns 92.6% of PIL.

The share sale will reduce its stake in the unit, which generated all its profits in the financial year ended Dec 31, 2016, to 63%.

Pentamaster will be required to seek its shareholders’ approval in a general meeting for the proposed dilution.

The IPO exercise is expected to be completed in the first quarter of next year.

“The proposed listing will provide the company and its automated solutions business with a diverse fund-raising platform in the future, which, in turn, will increase its financing flexibility to fund its future growth,” Pentamaster said in the statement yesterday.

The company said the offer price for PIL would be determined at a later date.

Pentamaster had announced the plan to spin off its unit in June this year. The planned fund-raising scheme had helped propel the stock 250% higher this year at yesterday’s close of RM4.73.

At this level, the company has a market capitalisation of RM693mil.

The valuation for PIL was ascribed by McMillan Woods Partners in Singapore.

McMillan Woods was appointed as the independent valuer to provide its valuation on the fair market value of the PIL Group to the board.

Pentamaster said it intended to use the proceeds from the share sale exercise to pay for future expansion of the group’s smart building solutions or building management system, and/or property development projects applying such solutions and system, as well as the IoT solutions with applications covering digital mobile software, payment gateway, secured software and/or building construction applications and solutions.

In addition, the fund will be utilised for technology-related investments in business applications covering healthcare, bioscience, aviation, information and communications technology, finance, social environment, energy and infrastructure.

The proceeds will also be allocated for working capital to carry out the new initiatives, including research and development, the hiring of employees, marketing and administrative expenses.

Meanwhile, the net proceeds to be raised by PIL from the public issue of new shares are proposed to be utilised for capital investment and costs in relation to the construction of a new production plant in Batu Kawan Industrial Park, Penang, and the expansion of its existing production plant in Bayan Lepas, Penang.

The net proceeds will also be used for working capital, business expansion into the Greater China region (comprising China, Hong Kong, Macau and Taiwan), the establishment of an office in California in the United States, as well as for marketing, branding and promotional activities.

The details of the proposed listing, including the size and structure of the proposed share offer, the offer price and the amount of proceeds to be raised, will be determined at a later date upon approval being obtained from the Hong Kong Stock Exchange, closer to the launch of the prospectus of PIL and after taking into account the prevailing equity market and industry conditions in which the PIL Group is operating.

Pentamaster, which closed 0.4% higher at RM4.73, traded on a volume of 405,000 shares.

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Pentamaster to list automated solution arm on HK exchange

Posted on 11 September 2017 - 08:45pm

sunbiz@thesundaily.com

Print

PETALING JAYA: Pentamaster Corp Bhd (PCB) proposes to list its automated solution business, Pentamaster International Limited (PIL), on the main board of The Stock Exchange of Hong Kong Ltd (HKEX).

While the exact details of the proposed listing, including size and structure of the proposed share offer, the offer price and amount of proceeds to be raised, are yet to be determined, PBC did say that its equity interest in PIL is expected to reduce from 92.60% as at Aug 30, 2017 to 63.10% upon completion of the exercise.

The entire exercise comprises of a share award scheme for eligible employees of PIL and its subsidiaries; proposed listing of the PIL and proposed dilution of PCB’s equity interest in PIL.

Profit after tax attributable to owners of PIL amounted to RM17.77 million for the financial period ended June 30, 2017.

The proposals are subjected to approvals being obtained from the shareholders of PCB at an EGM to be convened.

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Pentamaster to inject 3 units into Hong Kong-bound arm

Author: moneyKing   |   Publish Date: 18 Jul 2017, 10:07 AM

Wong Ee Lin/theedgemarkets.com
July 17, 2017 21:43 pm MYT

KUALA LUMPUR (July 17): Pentamaster Corp Bhd plans to inject three of its automated solution subsidiaries into Pentamaster International Ltd (PIL), which it intends to list on the Hong Kong Stock Exchange.

The three wholly-owned subsidiaries are Pentamaster Technology (M) Sdn Bhd, Pentamaster Equipment Manufacturing Sdn Bhd and Pentamaster Instrumentation Sdn Bhd.

The three units will be injected into PIL for a collective RM86.78 million, which will be satisfied via the issuance of 999 PIL shares to Pentamaster.

"The internal reorganisation will facilitate a more efficient group structure by way of promoting a better segregation of business responsibilities and operations for Pentamaster’s existing automated solution business and its other smart control solution system business," said Pentamaster in a filing with Bursa Malaysia today.

"This will in turn enable the management of the automated solution business and smart control solution system business to efficiently allocate resources and focus on their respective businesses.
"In addition, the internal reorganisation will also facilitate PIL to act as the listing entity for the proposed listing," it added.

Following the internal reorganisation, Pentamaster will proceed to dispose of a 7.4% stake in PIL to Singapore-based private equity fund GEMS Opportunities Limited Partnership RM25.5 million.
The proposed disposal is expected to result in a gain on disposal of RM19.08 million.

Pentamaster said it intends to use the proceeds from the proposed disposal for expenses in relation to the proposed listing, to repay borrowings, for staff and other general administrative and operating related expenses and sales and marketing expenses.

The disposal consideration of RM25.5 million in PIL represents a price to earnings (PE) multiple of 10.4 times to the audited combined net profit of Pentamaster Technology, Pentamaster Equipment and Pentamaster Instrumentation of RM33.14 million for the financial year ended Dec 31, 2016.
The PE multiple falls within the range of the high (17.96 times) and low (6.45 times) of Pentamaster’s traded PE multiple for the past 12 months up to the date of this announcement.
Barring any unforeseen circumstances, the proposals are expected to be completed by the third quarter of 2017.

In June, Pentamaster announced that it is pursuing a separate listing for its automated solution business in Hong Kong.

Pentamaster shares closed down eight sen or 2.13% to RM3.68 today for a market capitalisation of RM539.37 million.


http://www.theedgemarkets.com/article/pentamaster-inject-3-units-hong-kongbound-arm


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Pentamaster to gain RM19mil from sale of 7.4% in PIL
CORPORATE NEWS
Monday, 17 Jul 2017

KUALA LUMPUR: Pentamaster Corp Bhd


, which seeks to list its automated solution business in Hong Kong held under holding company Pentamaster International Ltd (PIL), is selling a 7.4% stake in PIL to GEMS Opportunities Ltd Partnership for RM25.5mil.

In a filing with Bursa Malaysia, Pentamaster said it stood to gain RM19.08mil from selling the equity interest in newly-incorporated PIL to GEMS, a Singapore-based private equity fund.

Pentamaster had on Monday signed agreements to transfer its entire equity interest in three wholly-owned subsidiaries involved in the automated solution business to PIL and, afterwards, to sell 7.4% equity interest in PIL to GEMS for RM25.5mil in cash.

It said the internal reorganisation would lead to a more efficient group structure separating PCB’s existing automated solution business and its other smart control solution system business.

Besides for raising funds, Pentamaster said its proposed disposal of PIL shares to GEMS would broaden PIL’s shareholder base by exposing it to international institutional investors.

It added that GEMS’ positioning as strategic investor of PIL, coupled with fund manager GEMS Capital Pte Ltd’s extensive investment experience and network, would add value to the proposed listing.

On the use of the RM25.5mil proceeds, Pentamaster said the bulk - RM15mil - would go towards paying the listing expenses while RM7.5mil would be for repaying bank borrowings.

Read more at http://www.thestar.com.my/business/business-news/2017/07/17/pentamaster-to-gain-rm19mil-from-sale-of-7pt4pc-in-pil/#HcHdSuczADQuAwPX.99


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Pentamaster eyes HK listing of automated solution business
CORPORATE NEWS
Tuesday, 13 Jun 2017


KUALA LUMPUR: Pentamaster Corp Bhd is pursuing a separate listing for its automated solution business in Hong Kong.

In a filing with Bursa Malaysia, the company said it had appointed advisers for the purpose of listing the business on the main board of the Stock Exchange of Hong Kong Ltd, including financial advisory firm Altus Capital Ltd as the sponsor.

It said the automated solution business would gain recognition and corporate stature through having its own listing status, hence allowing it to expand of its customer base.

The proposed listing is also expected to enhance efficiency by way of promoting a clearer segregation of business responsibilities and operations for Pentamaster’s existing automated solution business, thereby enabling the respective management teams to focus on opportunities specific to each of the automated solution business.

Pentamaster said the proposed exercise would also unlock shareholders’ value and provide the company and its automated solution business with a diverse fund-raising platform in the future.

The group has three operating segments: automated equipment (its biggest revenue and profit contributor), automated manufacturing solution, and smart control solution system.

“Prior to the completion of the proposed listing, Pentamaster will undertake a reorganisation of its subsidiaries involved in the automated solution business and these subsidiaries will continue to remain as its subsidiaries on completion of the proposed listing,” the company said.

It said a detailed announcement would be made in due course after it had finalised and approved the structure of the proposed listing.

To facilitate the proposed listing, Pentamaster has applied to incorporate a wholly-owned subsidiary in the Cayman Islands, namely Pentamaster International Ltd (PIL), on Monday. PIL’s principal activity is that of investment holding.

Pentamaster said the board wished to highlight to its shareholders that the proposed listing was at a preliminary stage and fairly extensive preparatory work was required and that such preparatory work might involve an uncertain time frame.

“Shareholders should note that the proposed listing may or may not materialise,” it said.

The company noted that the exercise was subject to, among others, satisfactory due diligence and assessment of suitability for listing by the Hong Kong sponsor and other professional advisers, approvals being obtained from the relevant authorities in Hong Kong and Malaysia (where required), as well as the shareholders at an EGM to be convened.

In addition, the proposed listing depends on assessment of other factors such as general economic and capital market conditions.

Read more at http://www.thestar.com.my/business/business-news/2017/06/13/pentamaster-eyes-hk-listing-of-automated-solution-business/#mSKS5z4zH64Mv8QA.99

Stock Valuation Manifesto Checklist

September 11, 2017 | Vishal Khandelwal  

https://www.safalniveshak.com/stock-valuation-manifesto/

I had released my Investor’s Manifesto couple of years back. Now, here is my fifteen-point stock valuation manifesto that I penned down a few months back though I have been using it as part of my investment process for a few years now.

It is evolving but is something I reflect back on if I ever feel stuck in my stock valuation process. You may modify it to suit your own process and requirements. But this in itself should keep you safe.

Read it. Print it. Face it. Remember it. Practice it.

[Your Name]’s Stock Valuation Manifesto

1. I must remember that all valuation is biased. I will reach the valuation stage after analyzing a company for a few days or weeks, and by that time I’ll already be in love with my idea. Plus, I wouldn’t want my research effort go waste (commitment and consistency). So, I will start justifying valuation numbers.
2. I must remember that no valuation is dependable because all valuation is wrong, especially when it is precise (like target price of Rs 1001 or Rs 857). In fact, precision is the last thing I must look at in valuation. It must be an approximate number, though based on facts and analysis.
3. I must know that any valuation method that goes beyond simple arithmetic can be safely avoided. If I need more than four or five variables or calculations, I must avoid that valuation method.
4. I must use multiple valuation methods (like DCF, Dhandho IV, exit multiples) and then arrive at a broad range of values. Using just a single number or method to identify whether a stock is cheap or expensive is too much oversimplification. So, while simplicity is a good habit, oversimplifying everything may not be so.
5. If I am trying to seek help from spreadsheet based valuation models to tell me whether I should buy, hold, sell, or avoid stocks, I am doing it wrong. Valuation is important, but more important is my understanding of the business and the quality of management. Also, valuation – high or low – should scream at me. So, I may use spreadsheets but keep the process and my underlying thoughts simple.
6. I must remember that value is different from price. And the price can remain above or below value for a long time. In fact, an overvalued (expensive) stock can become more overvalued, and an undervalued (cheap) stock can become more undervalued over time. It seems harsh, but I cannot expect to fight that.
7. I must not take someone else’s valuation number at face value. Instead, I must make my own judgment. After all, two equally well-informed evaluators might make judgments that are wide apart.
8. I must know that methods like P/E (price to earnings) or P/B (price to book value) cannot be used to calculate a business’ intrinsic value. These can only tell me how much a business’ earnings or book value are priced at vis-à-vis another related business. These also show me a static picture or temperature of the stock at a point in time, not how the business’ value has emerged over time and where it might go in the future.
9. I must know that how much ever I understand a business and its future, I will be wrong in my valuation – business, after all, is a motion picture with a lot of thrill and suspense and characters I may not know much about. Only in accepting that I’ll be wrong, I’ll be at peace and more sensible while valuing stuff.
10. I must remember that good quality businesses often don’t stay at good value for a long time, especially when I don’t already own them. I must prepare in advance to identify such businesses (by maintaining a watchlist) and buy them when I see them priced at or near fair values without bothering whether the value will become fairer (often, they do).
11. I must remember that good quality businesses sometimes stay priced at or near fair value after I’ve already bought them, and sometimes for an extended period of time. In such times, it’s important for me to remain focused on the underlying business value than the stock price. If the value keeps rising, I must be patient with the price even if I need to wait for a few years (yes, years!).
12. Knowing that my valuation will be biased and wrong should not lead me to a refusal to value a business at all. Instead, here’s what I may do to increase the probability of getting my valuation reasonably (not perfectly) right –
    
    
    
    • I must stay within my circle of competence and study businesses I understand. I must simply exclude everything that I cannot understand in 30 minutes.
    • I must write down my initial view on the business – what I like and not like about it – even before I start my analysis. This should help me in dealing with the “I love this company” bias.
    • I must run my analysis through my investment checklist. I have seen that a checklist saves life…during surgery and in investing.
    • I must, at all cost, avoid analysis paralysis. If I am looking for a lot of reasons to support my argument for the company, I am anyways suffering from the bias mentioned above.
    • I must use the most important concept in value investing – margin of safety, the concept of buying something worth Rs 100 for much less than Rs 100. Without this, any valuation calculation I perform will be useless. In fact, the most important way to accept that I will be wrong in my valuation is by applying a margin of safety.
13. Ultimately, it’s not how sophisticated I am in my valuation model, but how well I know the business and how well I can assess its competitive advantage. If I wish to be sensible in my investing, I must know that most things cannot be modeled mathematically but has more to do with my own experience in understating businesses.
14. When it comes to bad businesses, I must know that it is a bad investment however attractive the valuation may seem. I love how Charlie Munger explains that – “a piece of turd in a bowl of raisins is still a piece of turd”…and…“there is no greater fool than yourself, and you are the easiest person to fool.”
15. I must get going on valuing good businesses…but when I find that the business is bad, I must exercise my options. Not a call or a put option, but a “No” option. 

https://www.safalniveshak.com/stock-valuation-manifesto/

Loss arising from demerger drags UMW Holdings deeper into the red in 2Q

 

Tan Xue Ying/theedgemarkets.com
August 28, 2017 21:24 pm MYT

KUALA LUMPUR (Aug 28): UMW Holdings Bhd's quarterly net loss widened to RM209.3 million from RM12.13 million, dragged down by one-off losses arising from its demerger exercise of associate UMW Oil & Gas Corp Bhd (UMW-OG).

For the second quarter ended June 30, 2017 (2QFY17), the Group posted 2.54% growth in revenue, from RM2.72 billion to RM2.79 billion, mainly attributed to higher top line contribution from its automotive business segment.

Losses per share expanded to 17.92 sen from 1.04 sen in 2QFY16, according to the filing with Bursa Malaysia this evening.

UMW Holdings noted that for the first six-month period ended June 30 (1HFY17), UMW Holdings posted net loss of RM189.14 million, compared with a net profit of RM4.45 million in the previous corresponding period.

This is despite a 14.2% year-on-year revenue growth for the cumulative period, from RM4.83 billion to RM5.51 billion.

For the quarter under review, the group said in its bourse filing that while its automotive business segment enjoyed higher revenue due to the surge in demand for Toyota Innova and Fortuner models, margins were crimped by the higher cost of imports with the strengthening of the US dollar.

Its equipment segment delivered consistent revenue in the quarter, however with lower earnings seen amid squeezed margins.

The group's manufacturing and engineering segment was loss-making in 2QFY17, due to pre-operating expenses incurred for its aerospace business.

Losses at its unlisted oil & gas segment widened in 2QFY17 due to the lower revenue and redundancy expenses incurred on the cessation of drilling operations in Oman.

“As per our strategy, we have successfully completed the demerger within the said timeframe and the exit will provide the platform for the group to emerge as a stronger, more competitive industrial conglomerate with increased capacity for expansion.

“The demerger has resulted in reduced exposure to debt and a strengthened balance sheet, thus improving our financial position to enable new and accretive investments which will spur the growth of our core business segments moving forward”, said UMW Holdings' president and group chief executive officer, Badrul Feisal Abdul Rahim, in a statement.

He added that UMW Holdings’ overall performance will continue to be impacted by headwinds in the oil & gas sector until full completion of the exit plan, and gave assurance that there may be considerable milestones achieved by the end of the year.

On a more positive note, it said that UMW Toyota Motor is on track to achieve its full-year sales target of 70,000 units for 2017, and that its fan case project is progressing as per schedule and delivery is expected to commence in the final quarter of this year.

UMW Holdings’ share price has climbed 36% year to date, rising from the low of RM4.22 end-2016 to RM5.75 today with market capitalisation of RM6.65 billion.


http://www.theedgemarkets.com/article/loss-arising-demerger-drags-umw-holdings-deeper-red-2q

Aeon Credit ICULS

Some notes extracted from a blog.

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my understanding of iculs is a kind of loan. after the expired, it will automatically convert to common share, by the fixed convertion rate. 
1st time subcrip of right 2000LA with cost RM2000, it is equal to 181.98 shares 3yrs later. 
After 3yrs, 181.98shares will credit to your account. No need to pay rm10.99 for convertion

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you can buy the ICULS because it is 2 for 1 share, mean if you have 100 units share you can buy 200 units ICULS, and it is round number lot. After that you have 3 years time to sell the ICULS at anytime if you don't convert them to share. If you convert to share, you may have odd lot.

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For those who dont understand why share price drop from 12.80 to 12.52, I will show you the calculation 

for example if you have 
109900 units of AEONCR you will be entitled 219800 units of AEONCR-LR,219800 units of AEONCR-LR can be converted to 20000 units of AEONCR 

so today open price=(109900*12.8+109900*2)/(109900+20000)=12.52


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To subscribe the Iculs is a form of hedging on future price increase; much the same as airline's forward purchase of their fuel requirement. Of course the outcome can go either way. One pays RM 10.99 + RM 1.00 to lock in the mother share's price 3 years down the road. In view of the potential of Aeoncr, it is a portfolio worth locking in.

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We get LR (right) now. We can then buy LA (ICULS) with RM1 each. After we have LA, we have option to convert this LA to mother share (no cash involved) anytime from day 1 to 3 years time. After 3 years, all remaining LA will auto convert to mother share. 

LR or later LA most probably will have premium (over price) because these financial derivatives have gearing ratio to their mother share. For instance you can now see the Aeoncr rose from RM12.44 to RM12.60 (+1.2%), but the Aeoncr-LR has risen from RM0.13 to RM0.20 (+53.8%). So over price is acceptable in this case.

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You don't pay rm10.99+rm1 for the share. You subscribe to the ICULS at rm1 and you can convert 10.99 of your ICULS to the mother share when you like from issued date to 3 years time.


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Aeoncr-LR is not the same as aeoncr-LA(loan stock) , a lot of ppl kind of confused here. The aeoncr-LR is a right for you to exercise to buy aeoncr-LA and will expiring on 28-8-17, the Aeoncr-LR of what existing aeoncr shareholder received will become worthless after 28-8-17. For those who exercise their right and pay to buy Aeoncr-LA. You will receive Aeoncr-La after ceasation of the right and you have another right to convert your loan stock to the mother shares at 10.99 anytime within 3 years (or mandatory conversion on the end of 3rd year) with no conversion fee as you already pay to exercise your right before.




https://klse.i3investor.com/servlets/stk/5139.jsp

Learning from Philip Fisher and Walter Schloss

A Dozen Things I’ve Learned from Philip Fisher and Walter Schloss About Investing By Tren Griffin

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1. “I had made what I believe was one of the more valuable decisions of my business life. This was to confine all efforts solely to making major gains in the long-run…. There are two fundamental approaches to  investment.  There’s the approach Ben Graham pioneered, which is to find  something intrinsically so cheap that there is little chance of it having a big  decline. He’s got financial safeguards to that. It isn’t going to go down much,  and sooner or later value will come into it.  Then there is my approach, which is to find  something so good–if you don’t pay too much for it–that it will have very,  very large growth. The advantage is that a bigger percentage of my stocks is apt  to perform in a smaller period of time–although it has taken several years for  some of these to even start, and you’re bound to make some mistakes at it. [But]  when a stock is really unusual, it makes the bulk of its moves in a relatively  short period of time.”  Phil Fisher understood (1) trying to predict the direction  of a market or stock in the short-term is not a game where one can have an advantage versus the house (especially after fees); and (2) his approach was different from Ben Graham.

2. “I don’t want a lot of good investments; I want a few outstanding ones…. I believe that the greatest long-range investment profits are never obtained by investing in marginal companies.”  Warren Buffett once said: “I’m 15%  Fisher and 85% Benjamin Graham.”  Warren Buffett is much more like Fisher in 2013 than the 15% he once specified, but only he knows how much. It was the influence of Charlie Munger which moved Buffet away from a Benjamin Graham approach and their investment in See’s Candy  was an early example in which Berkshire paid up for a “quality” company.  Part of the reason this shift happened is that the sorts of companies that Benjamin Graham liked no longer existed the further way the time period was from the depression.

3. “The wise investor can profit if he can think independently of the crowd and reach the rich answer when the majority of financial opinion is leaning the other way. This matter of training oneself not to go with the crowd but to  be able to zig when the crowd zags, in my opinion, is one of the most important fundamentals of investment success.”The inevitable math is that you can’t beat the crowd if you are the crowd, especially after fees are deducted.

4. “Usually a very long list of securities is not a sign of the brilliant investor, but of one who is unsure of himself. … Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused  them to put far too little into companies they thoroughly know and far too much in others which they know nothing about.” For the “know-something” active investor like Phil Fisher, wide diversification is a form of closet indexing.  A “know-something”  active investor must focus on a relatively small number of stocks if he or she expects to outperform a market.  By contrast, “know-nothing” investors (i.e., muppets) should buy a low fee index fund.

5. “If the job has been correctly done when a common stock is purchased, the time to sell it is almost never.” Phil Fisher preferred a holding period of almost forever (e.g., Fisher bought Motorola in 1955 and held it until 2004). The word “almost” is important since every company is in danger of losing its moat.

6. “Great stocks are extremely hard to find. If they weren’t, then everyone would own them.  The record is crystal clear that fortune – producing growth stocks can be found. However, they cannot be found without hard work and they  cannot be found every day.”  Fisher believed that the “fat pitch” investment opportunity is delivered rarely and only to those investors who are willing to patiently work to find them.

7. “Focus on buying these companies when they are out of favor, that is when, either because of general market conditions or because the financial community at the moment has misconceptions of its true worth, the stock is selling  at prices well under what it will be when it’s true merit is better understood.” Like Howard Marks, Fisher believed that (1) business cycles and (2) changes in Mr. Market’s attitude are inevitable.  By focusing on the value of individual stocks (rather than just price) the  investor can best profit from these inevitable swings.

8. “The successful investor is usually an individual who is inherently interested in business problems.” A stock is a part ownership of a business. If you do not understand the business you do not understand that stock.  If you  do not understand the business you are investing in you are a speculator, not an investor.

9. “The stock market is filled with individuals who know the price of everything, but the value of nothing.” Price is what you pay and value is what you get.  By focusing on value Fisher was able to outperform as an investor even  though he did not look for cigar butts.

10. “It is not the profit margins of the past but those of the future that are basically important to the investor.” Too often people believe that the best prediction about the future is that it is an extension of the recent past.

11. “There is a complicating factor that makes the handling of investment mistakes more difficult. This is the ego in each of us. None of us likes to admit to himself that he has been wrong. If we have made a mistake in buying a stock  but can sell the stock at a small profit, we have somehow lost any sense of having been foolish. On the other hand, if we sell at a small loss we are quite unhappy about the whole matter. This reaction, 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.”  Fisher  was very aware of the problems that loss aversion bias can cause.

12. “Conservative investors sleep well.”  If you are having trouble sleeping due to worrying about your portfolio, reducing risk is wise. Life is too short to not sleep well, but also fear can result in mistakes.

Walter Schloss

1. “I think investing is an art, and we tried to be as logical and unemotional as possible. Because we understood that investors are usually affected by the market, we could take advantage of the market by being rational. As [Benjamin]  Graham said, ‘The market is there to serve you, not to guide you!’.”  Walter Schloss was the closest possible match to the investing style of Benjamin Graham.  No one else more closely followed the “cigar butt” style of investing of Benjamin Graham.  In  other words, if being like Benjamin Graham was a game of golf, Walter Schloss was “closest to the pin.”  He was a man of his times and those times included the depression which had a profound impact on him.  While his exact style of investing is not possible  today, today’s investor’s still can learn from Walter Schloss.  It is by combining the best of investors like Phil Fisher and Walter Schloss and matching it to their unique skills and personality that investors will find the best results.  Warren  Buffet once wrote in a letter:  “Walter outperforms managers who work in temples filled with paintings, staff and computers… by rummaging among the cigar butts on the floor of capitalism.”   When Walter’s son told him no such cigar butt companies existed any  longer Walter told his son it was time to close the firm.  The other focus of Walter Schloos was low fees and costs. When it came to keeping overhead and investing expenses low, Walter Schloss was a zealot.

2. “I try to establish the value of the company.  Remember that a share of stock represents a part of a business and is not just a piece of paper. … Price is the most important factor to use in relation to value…. I believe stocks  should be evaluated based on intrinsic worth, NOT on whether they are under or over priced in relationship with each other…. The key to the purchase of an undervalued stock is its price COMPARED to its intrinsic worth.”

3.”I like Ben’s analogy that one should buy stocks the way you buy groceries not the way you buy perfume… keep it simple and try not to use higher mathematics in you analysis.” Keeping emotion out of the picture was a key part of  the Schloss style. Like Ben Graham he as first and foremost rational.

4. “If a stock is cheap, I start buying. I never put a stop loss on my holdings because if I like a stock in the first place, I like it more if it goes down. Somehow I find it difficult to buy a stock that has gone up.” 

5. “I don’t like stress and prefer to avoid it, I never focus too much on market news and economic data. They always worry investors!” Like all great investors in this series, the focus of Schloss was on individual companies not  the macro economy.  Simpler systems are orders of magnitude easier to understand for an investor.

6. “The key to successful investing is to relate value to price today.” Not only did Schloss not try to forecast the macro market, he did not really focus forecasting the future prospects of the company.  This was very different  than the Phil Fisher approach which was focused on future earnings.

7. “I like the idea of owning a number of stocks. Warren Buffet is happy owning a few stocks, and he is right if he is Warren….” Schloss was a value investor who also practiced diversification.  Because of his focus on obscure  companies and the period in which he was investing, Walter was able to avoid closet indexing.

8. “We don’t own stocks that we’d never sell.  I guess we are a kind of store that buys goods for inventory (stocks) and we’d like to sell them at a profit within 4 years if possible.”  This is very different from a Phil Fisher  approach where his favorite holding period is almost forever. Schloss once said in a Colombia Business school talk that he owned “some 60-75 stocks”.

9.  “Remember the word compounding.  For example, if you can make 12% a year and reinvest the money back, you will double your money in 6 years, taxes excluded.  Remember the rule of 72.  Your rate of return into 72 will tell you  the number of years to double your money.” Schloss felt that “compounding could offset [any advantage created by] the fellow who was running around visiting managements.”

10.  “The ability to think clearly in the investment field without the emotions that are attached to it is not an easy undertaking. Fear and greed tend to affect one’s judgment.” Schloss was very self-aware and matched his investment  style to his personality. He said once” We try to do what is comfortable for us.”

11. “Don’t buy on tips or for a quick move.”

12.  “In thinking about how one should invest, it is important to look at you strengths and weaknesses. …I’m not very good at judging people. So I found that it was much better to look at the figures rather than people.” Schloss knew  that Warren Buffett was a better judge of people than he was so Walter’s approach was almost completely quantitative.  Schloss knew to stay within his “circle of competence”.  Schloss said once: “Ben Graham didn’t visit management because he thought figure told  the story.”

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Oct27

PNB Investments in Bursa Malaysia (10.3% of the market cap of Bursa Malaysia.)

Market cap of Bursa Malaysia is RM 1,814.59 billion.

PNB owns 10.3% or RM 186.2 billion of Bursa Malaysia.


http://www.thestar.com.my/business/business-news/2017/08/26/wahid-gets-moving-to-boost-returns-for-pnb/




Putting the Bursa Malaysia in Perspective

The market cap of Berkshire Hathaway is 1.55x  that of the market cap of Bursa Malaysia.

Berkshire Hathaway is listed in NYSE

1 U.S. = RM 4.26

Its equity is US 286.4 billion or RM 1,220.1 billion.

Its market cap based on its share price of US 267,377 per share on 19.8.2017 is US 659.4 billion or RM 2,809.0 billion.

How Warren Buffett built his fortune

How Warren Buffett built his fortune


The more you learn, the more you earn.
- Warren Buffett

Sometimes success is the product of being in the right place at the right time, being born into the right conditions, getting the right piece of advice, or perhaps even having that one-in-a-million moment of perfect insight. Other times, it is the product of seeming inevitability.

This last one is the case of the man we are looking at today. To be clear, this is not a born into wealth kind of story. Quite the contrary, Warren Buffett was born into a working class family in 1930.

So what is the secret of his success? How did this seemingly ordinary guy accomplish what we are all trying to accomplish? Most importantly, if he really was like any of us, how can we say that his rise was essentially inevitable?

There is almost certainly something that has to be original and unborn when we speak about someone as being inevitable. Case and point, Buffett was 7 years old when he read the book One Thousand Ways to Make $1000.

He made his first transactions at that age, buying and selling Coca-cola (bottles not stock) for extra cash. This is of course deliciously ironic because today Buffett is one of the major stockholders of Coca-cola. At an age when most kids are watching television and spending time in the playground, Buffett was already wheeling and dealing. Ask him about it, "I like numbers," he would reply.

Despite his obvious natural inclination, perhaps what really made Buffett the man he is today were the early defeats and the perseverance he had to cultivate, as well as his pioneering spirit.

As a young man, he loved learning and competition but faltered academically. He ended up at the unimpressive University of Nebraska. After completing his degree he interviewed for Harvard Business School but was turned down. Many would have given up but he tried again.

At Columbia, Buffett found what every success story needs, mentors. Ben Graham and David Dodd would become his guides in his early forays into the investing world. Graham gave him the "two rules of investing":

Rule #1: "Never lose money."
Rule #2: "Never forget Rule #1."

Too often, when one finds a way that works, a path to follow, then that becomes enough. Ben Graham, in particular, provided Buffett with a formula for investing wisely, investing safely and profitably.

Had Buffett taken this formula as his own, and merely followed the path, would he be a household name today? We will never know the answer to that. What we do know however is that Buffett followed his mentor to a point and then blazed his own path according to his own original understanding.

There was a fundamental choice that Buffett had to make in parting ways with his mentor and it is a philosophical divide that made Buffett who he is today.

At the heart of the Buffett philosophy is the idea of compounding wealth. Where some would be content taking $100 and safely making 15%, Buffett was about, eschewing safety, taking that same amount and turning it into $2700. In other words, growing rich was always the end goal.

The Magic of Compounding Interest.
Warren Buffett Net Worth
source: dadaviz.com


What is fascinating about Buffett's approach is that he would often buy the exact same stocks as other investors - as his own mentors - but somehow get better results. How is this possible?! Buffett says about himself, that it is not that he had better ideas than other investors, but that he simply had less bad ones. In other words, where some would diversify for safety, he would "focus" on his best ideas and invest as much money as possible in them.

Despite the clarity of his vision, there were some significant setbacks. Out of Columbia, he wanted to go to work for the investment firm of Benjamin Graham, his mentor.

He offered to work for free and was rejected. He went back to Omaha, bought a gas station and it too faltered. Again, Buffett persevered and while still in his early twenties, in buying up the stock of a then little-known company called Geico, he applied that "no-holds-barred" approach that would become his trademark.

First came trying to figure out if Geico was indeed a good company to invest in. Buffett did his research. How? He got on a train from New York to Washington D.C., to the company's headquarters and literally knocked on Geico’s front door.

The man who answered was Lorimer Davidson the future CEO of Geico. Buffett pelted Davidson with in-depth questions for hours and once he was convinced that the company had a bright future, Buffett got back on the train and headed back to New York where he promptly proceeded to invest two-thirds of his total net worth on the fledgling company. He believed Geico’s stock was bound to double within 5 years.

He believed in The Geico agentless business model, and went where few investors dared to go. He over-committed to a single company. In doing so he was directly contradicting his mentor’s approach. He did so, simply put, because his goal was different.

Buffett did not value safe diversification (where one invests in a great idea but also buys other safe, but mediocre stocks for safety). Buffett wanted to get rich and repeating this approach is how he did it.

After Geico, Buffett didn’t need to put 75% of his net worth on the table again, but he continued to buy the most shares possible in his best ideas.

Warren Buffett’s early career is marked by countless investments, all very different, with varied levels of success. There was Greif Brothers Cooperage, Cleveland Worsted Mills, Western Insurance, and National American Fire Insurance, among many.

What, if anything, linked all of these investments? What is the one thing that we can say Buffett looked for in a company. We know he brought an aggressive commitment to the table, so what is the unifying quality he expected his investment prospects to have? Many of Buffett’s early investments had a strong management team.

This means that Buffett thought capital was going to be used more wisely by the right management team. This idea might seem simple and commonplace at first, but it really isn’t. Too often a good investment is seen as one that goes to some sort of incredible idea, or to a wunderkind CEO, but this was not what drew his attention.

In Buffett's mind "management quality" was not a flashy, elusive concept but rather something synonymous with smart capital allocation. In other words, to this day he is not after the one-of-a-kind genius with the precious but fragile idea that will change the world. He's looking for someone who thinks like he does on issues of compounding wealth and getting that return on capital.

That's what he wants in a CEO; someone who is an investor at heart, someone who has and is aware of their competitive advantage in the marketplace; someone who has their eyes fixed on the plausibility of a substantial return on investment. The numbers, just as he is obsessed with them, he wants to see the obsession mirrored in management.

It is an interesting paradox that plays out in the investment style that made Warren Buffett who he is today. At a glance, he appears to be a risk taker, someone who deliberately avoids safety and puts himself out on a limb for a chance at the big money. Logic, however, tells us this can’t be so. Otherwise, he'd be a gambler and a half century of success would have to be attributed to luck.

That would be the wrong lesson to take away from Mr. Buffett. He is no gambler. The way a gambler rests his faith on luck, he rests his on a method, on thorough and deep research, on scrutiny. The supreme confidence he has in his investments is the product of research not just in the numbers but in the people and philosophies behind them.


https://www.pitly.co/blog/2017/7/17/how-warren-buffett-built-his-fortune