Venture Investing

The magic venture investing formula is simple: Invest in young, good, innovative, and growing companies while they are cheap.

But what is "good", and what is "cheap"?

7 Contrarian Principles – Ignoring Convention

Do not follow the crowd. Ignore the market, the crowd, and its fashions... More

Identifying an Outstanding Company: Buffett's Criteria2

Buffett's Three Non-financial Investment Criteria It is simple and understandable. It has a consistent operating history. It has favorable long-term prospects. Buffett's Four Financial Investment Criteria Return of equity (not earning per share) "Owner earning" (the share of profits that belongs to investors). Profit margins (which must be high) Return on reinvested profits (which must create at least $1 of market value for every dollar invested)

Six Questions for Measuring the Potential Investment

How long will it take for profits to pay back the investment? When will the cash stop flowing out and start returning? Do we really have to make this investment? What is the return on investment? Is that return comfortably above the true cost of the capital invested? Looking ahead, and allowing for interest rates, what is the future pay-off worth in today's values?

A to Z of Venture Investing

A-F: Opportunity Introduction Do most inventors approaching you lack business skills? If you don't want to miss a great investment opportunity but have no time to teach them the A,B,C, etc. of venture financing, just advise them to go thoroughly the steps of the Ten3 e-Coach on "Venture Financing". This will make your  communication with first-time entrepreneurs much more enjoyable and effective. Please send us e-mail if you wish to become an associate of the Ten3 e-Coach on Venture Financing and receive well prepared investment proposals from our graduates who will match with your investment selection criteria. G-M: Initial Screening Define criteria and follow procedures for evaluating business plan andmanagement team N-T: Due Diligence Investigate and evaluate the investment opportunity by conducting due diligence research: qualify risks, analyze and verify factors presented in the investment proposal U-Z: Negotiating and Closing the Deal Valuate the venture, structure the deal, draft and sign an investment agreement

http://www.1000ventures.com/venture_financing/venture%20investing_main.html

Growth At Reasonable Price (GARP) at Work

Let's delve into some of the numbers that GARPers look for in potential companies.

The PEG Ratio
The PEG ratio may very well be the most important metric to any GARP investor, as it basically gauges the balance between a stock's growth potential and its value.

GARP investors require a PEG no higher than 1 and, in most cases, closer to 0.5. A PEG less then 1 implies that, at present, the stock's price is lower than it should be given its earnings growth. To the GARP investor, a PEG below 1 indicates that a stock is undervalued and warrants further analysis.

PEG at Work
Say the TSJ Sports Conglomerate, a fictional company, is trading at 19 times earnings (P/E = 19) and has earnings growing at 30%. From this you can calculate that the TSJ has a PEG of 0.63 (19/30=0.63), which is pretty good by GARP standards.

Now let's compare the TSJ to Cory's Tequila Co. (CTC), which is trading at 11 times earnings (P/E = 11) and has earnings growth of 20%. Its PEG equals 0.55. The GARPer's interest would be aroused by the TSJ, but Cory's Tequila Co. would look even more attractive. Although it has slower growth compared to TSJ, CTC currently has a better price given the growth potential it offers. In other words, CTC has slower growth, but TSJ's faster growth is more overpriced. As you can see, the GARP investor seeks solid growth, but also demands that this growth be valued at a reasonable price. Hey, the name does make sense!



GARP at Work
Because a GARP strategy employs principles from both value and growth investing, the returns that GARPers see during certain market phases are often different than the returns strictly value or growth investors would see at those times. For instance, in a raging bull market the returns from a growth strategy are often unbeatable: in the Internet boom of the mid- to late-1990s, for example, neither the value investor nor the GARPer could compete. However, when the market does turn, a GARPer is less likely to suffer than the growth investor.(see charts below)

Therefore, the GARP strategy not only fuses growth and value stock-picking criteria, but also experiences a combination of their types of returns : a value investor will do better in bearish conditions; a growth investor will do exceptionally well in a raging bull market; and a GARPer will be rewarded with more consistent and predictable returns.

Conclusion
GARP might sound like the perfect strategy, but combining growth and value investing isn't as easy as it sounds. If you don't master both strategies, you could find yourself buying mediocre rather than good GARP stocks. But as many great investors such as Peter Lynch himself have proven, the returns are definitely worth the time it takes to learn the GARP techniques.


http://www.disnat.com/en/knowledge/stock_selection/stock_selection5.asp











What Is GARP?
The GARP strategy is a combination of both value and growth investing: it looks for companies that are somewhat undervalued and have solid sustainable growth potential. The criteria which GARPers look for in a company fall right in between those sought by the value and growth investors. Above is a diagram illustrating how the GARP-preferred levels of price and growth compare to the levels sought by value and growth investors:

Profiting from the economic cycle using the Investment Clock

Forecasting future asset class returns are, needless to say, challenging. To do so effectively requires, among other things, a clear picture of your starting point. Where are we in the cycle ? What is the timing for increased inflation? To generate profits for clients one must be able to model in real time when the world economy moves from one phase in the cycle to another.

The Investment Clock approach recognises different points within the economic cycle and differentiates between phases which are likely to generate growth and inflation readings based on past trends and the current momentum of lead indicators. These indicators are updated on a monthly basis to build an expectation of how the global economy may perform over the coming three to six months.

The growth reading sets the relative weighting of cyclical and defensive assets (North-South on the clock diagram). The inflation reading sets the weighting of financial assets versus real assets (East-West).

Time lags in the release of economic data mean it reflects what has already happened in the economy. However, to profit we need to recognise in real time when the world economy moves from one Investment Clock phase to another. Therefore, we need a “now-cast” of each possible economic growth and inflation outcome, growth and inflation being the two key mPublish Posteasures of economic activity. To build this now-cast, we consider an array of trend indicators, leading indicators and price signals from the markets themselves. This now-cast drives fund positioning on a real time basis.

With the benefit of hindsight we can identify the historic phases of the US economic cycle by taking note of the major peaks and troughs in the growth and inflation cycles.

Based on back testing, some asset classes perform better than others in each phase: the Investment Clock links the phases of the economic cycles to the performance of the asset classes:



The Investment Clock below shows the four key stages of an economic cycle:

• Stagflation (like we saw in mid-2008). A difficult time for most markets where growth has moved below trend but inflation concerns are high. As the Clock shows, we believe this is a period where Cash can outperform most other investments.

• Reflation (July 2008-March 2009). Often characterised by a period of interest rate cuts, we believe this is often a period of the cycle when bonds can perform well.

• Recovery (such as that which has been experienced through the summer of 2009). Often follows a period of reflation and can represent the best conditions for stocks to perform well; improving growth with falling inflation.

• Overheat (where we believe we were headed in Q4 2009 and into Q1 2010). Typically when commodities tend to shine through as the prospect of inflation rises are coupled with growth above trend.




http://www.fidelityinstitutional.com/deadly_win/multiasset.html

Safety Net for "Everyone"

http://www.newlaborforum.org/Home/Spring2010/Spring2010Abstracts/tabid/1700/Default.aspx

The current hard times have been harder on some people than on others, harder on the poor-obviously-than on the rich; but harder also on blacks and Hispanics than on whites. As of this writing, the unemployment rate for blacks is at 15.6 percent, and for Hispanics it’s at 12.7 percent. For white people, it’s 9.3 percent. Of course, the vast majority of the unemployed are white.

The Zero-Sum Games of Capitalism

http://neuropolitics.org/defaultapr09.asp





http://www.schoolofthinking.org/what-is-your-dangerous-idea/tit-is-coming-the-shadow-of-the-future/

Strong Performance at DBS, Singapore Bank stocks in focus

July 30: Bank stocks in focus next week

WRITTEN BY GOOLA WARDEN
SATURDAY, 31 JULY 2010 11:21

DBS GROUP HOLDINGSS has been hit by another impairment charge related to its controversial purchase of Hong Kong’s Dao Heng Bank nine years ago. Singapore’s largest bank said today that it made a goodwill impairment charge of $1.02 billion in 2Q10, resulting in a net loss of $300 million for the quarter.

DBS bought Dao Heng in 2001 for more than $10 billion, or three times book value. Under accounting rules at the time, the goodwill of $6.8 billion was to have been amortised over 20 years. The rules changed in 2005, however, and DBS is now required to carry Dao Heng in its books at “fair value”. DBS made an impairment charge of $1.13 billion related to Dao Heng in 4Q05. Dao Heng, which has since been renamed DBS Hong Kong, was carried in the group’s books at $8.43 billion as at June 30. That values Dao Heng at 2.2 times book value. By comparison, shares in Bank of China are trading at about 2.1 times book value, while Hang Seng Bank is trading at about 3.5 times book value.

On the operational front, however, DBS turned in a solid performance in 2Q10. Its loan book expanded 8.9% q-o-q, and 18.1% y-o-y. That drove DBS’ market share of Singapore dollar loans up by almost one percentage point, from 21.5% to 22.4%. Excluding the goodwill impairment charge, DBS chalked up earnings of $718 million. That was a record for the banking group, and some 20% higher than the most bullish analyst estimates. “It was above our expectations and consensus, led by another strong trading quarter,” notes Kenneth Ng, an analyst at CIMB Securities.

Piyush Gupta, CEO of DBS, warns that the group’s operational performance in 2H10 might not be as strong. “We don’t expect double digit [loan growth] for the second half,” he says. Also, net interest margins have been under pressure, declining by nine basis points in 2Q10 to 1.84%. Gupta says that “NIMs could see two to three basis points compression” in the second half.

Looking ahead, Gupta says DBS is trying to rebalance its footprint across the region, aiming for 40% of its earnings to come from Singapore; 30% from Hong Kong and China; and the remaining 30% from South and Southeast Asia. Currently, Singapore contributes 62%, Hong Kong 22%, India 8%-9%, China 2%-3% and the balance spread across other markets.

WATCHING THE BANKS
In the wake of the strong performance at DBS, bank stocks could be in focus in the coming week. “We wonder if UOB and OCBC could surprise with stronger-than-expected trading figures,” Ng says. “Our 2Q10 forecasts for UOB and OCBC stand at $582 million and $607 million respectively.” Oversea-Chinese Banking Corp will be reporting 2Q10 results on Monday, while United Overseas Bank is scheduled to report the week after on Aug 10. CIMB currently has “outperform” ratings for both OCBC and UOB with target prices of $10.79 and $23.32 respectively.

As for DBS, some analysts are turning more positive now. For one thing, it has a decent dividend yield. For 2Q10, the bank declared a dividend of 14 cents per share, bringing its total dividend for 1H10 to 28 cents. That translates to an annualised yield of 3.9% at the last done price of $14.40. Investors who opt for scrip dividend will receive their shares at a 5% discount. Shares in DBS are trading at 1.3 times its book value of $10.88 per share.

Jonathan Koh, an analyst at UOB Kay Hian, says that loan growth at DBS has been strong and broad based. He currently has a “buy” recommendation on the stock. Ng of CIMB, however, still has an “underweight” rating on the counter. Meanwhile, DMG & Partners says that DBS’ 2Q10 results were way above expectations, and that it is reviewing its “neutral” rating.

CHART VIEW
The STI (2,987) fell nine points on Friday, after testing an intra-day high of 3,018. As a result a dark cloud cover formed on the candlestick chart suggesting that the index is likely to continue lower in the coming week. While major support is at 2,900, the near term retreat should find support at 2,957. The trend remains upwards but resistance at 3,000 is formidable.

http://www.theedgesingapore.com/blog-heads/goola-warden/18534-weekends-comment-july-30-bank-stocks-in-focus-next-week.html

Warren Buffett: History of Assets owned by Berkshire Hathaway and its investments

http://blog.moneydesktop.com/warren-buffets-investment-history/

The Top 10 Most Profitable Public Companies in the World

Top 10 Profitable Companies in China

http://www.chinadaily.com.cn/business/2009annualreports/index.html

Profitable Company

Sun Tzu & The Art of War - Applied to Portfolio & Risk Management

It would be helpful for you to have these two texts, especially Clavell's, to reference as you read through these comments.

Once you get past the first section of these comments, Application of Selected Sun Tzu Phrases To Portfolio Management and Risk Management, the following sections are organized to follow the chapter titles in Clavell's book; with Griffith's chapter titles in parentheses, and quotes treated as supplemental information.

Within each chapter section, before each Clavell quote or series of quotes, I have inserted a brief heading label that characterizes the substance of the quote(s) and the companion portfolio management and risk management corollaries.

	• Selected Phrases - Application of Selected Sun Tzu Phrases To                                     Portfolio Management and Risk Management
	• Chapter I - Laying Plans (Estimates)
	• Chapter II - On Waging War (Waging War)
	• Chapter III - The Sheathed Sword (Offensive Strategy)
	• Chapter IV - Tactics (Dispositions)
	• Chapter V - Energy (Energy)
	• Chapter VI - Weak Points & Strong (Weaknesses and Strengths)
	• Chapter VII - Maneuvering (Maneuvre)
	• Chapter VIII - Variation Of Tactics (The Nine Variables)
	• Chapter IX - The Army On The March (Marches)
	• Chapter X - Terrain (Terrain)
	• Chapter XI - The Nine Situations (The Nine Varieties of Ground)
	• Chapter XII - Attack By Fire (Attack by Fire)
	• Chapter XIII - The Use Of Spies (Employment of Secret Agents)
	• Summary - Summary of The Art Of War as applied to Portfolio and Risk Management.

http://www.strategies-tactics.com/suntzu.htm

Business Strategy, Planning and Execution

Dynamic Portfolio Management Process

The goal is Return Optimization.

Investment Success Is Hard

CREATING INVESTMENT SUCCESS STORIES
Our investment philosophy is based on some long-term observations:

1. Most capital markets are highly efficient. Outperforming them is difficult and means increasing risk and costs. Many investors rationally seek these returns, but caution is essential.
2. Risk matters. Risk control can avoid painful surprises and ensure that an investment program is maintained during difficult periods.
3. Costs matter. They matter so much that they can mean the difference between success or failure. In particular, if the portfolio pays taxes, tax efficiency is paramount.

The arithmetic of investing is unforgiving.
Costs are certain, volatility dampens growth, and returns are difficult to predict. This sobering reality means long-term investment success is very often the result of portfolio structure and attention to detail. 


http://www.parametricportfolio.com/

Personalized Wealth Management Solutions

Our approach is best reflected in our portfolio management principles:

• In partnership with our clients
• Big Picture fit
• Wealth preservation first
• Focus on absolute returns

http://www.bfi-wealth.com/index.php?id=24

Portfolio Management and Research

A multi-agent architecture to the problem of financial portfolio management.

The interface agent or portfolio manager interacts primarily with the human user as shown in the uppermost part of the diagram, while the set of analysis or task agents coordinate, decompose, and delegate tasks received from the interface agent or from other task agents. Information agents monitor stock and other financial sources. Data culled from the infosphere and stored locally by information agents are sent to one or more task agents upon request, and, following a process of data analysis and integration at the task agent level, are ultimately displayed to the user via the interface agent.

The user's portfolio manager displays a comprehensive summary of the user's portfolio. The interface also allows the user to buy and sell stocks and to request the preparation of a Financial Data Summary or fundamental analysis of the user's stock holdings. The other display available to the user is a price/news graph that dynamically integrates intra-day trading prices and news stories about a stock.

http://www.cs.cmu.edu/~softagents/warren.html

Options Usage in Equity Portfolio Management

Options are a financial instrument that can be considered whenever equity fund managers seek to:

•  Generate extra returns: by writing options and collecting premium income when your market view is that you are happy to cap upside
• Reduce risk: by buying put options as insurance, or by writing premium income which cushions downside price moves
• Reduce transactions costs: by gaining exposure to stocks or an index using options, rather than paying full stock transactions costs
• Reduce market impact costs of acquiring stock: by accumulating exposure via options, and then selling those options when the required stock weight has been reached. 
• Capital gains implications: because you can effectively sell stock by selling call options, capital gains implications can be managed.

The diagram bellow demonstrates how equity portfolio managers can expand the range of portfolio outcomes by using various options strategies. 

The yellow (centre) choices of neutral, long or short stock can be augmented by a range of strategies that enhance yield (blue circles) and that protect the portfolio (red circles).

http://www.asx.com.au/products/indices/types/buy_write/options_portfolio_mgmt.htm

A sound financial plan must address the insurance coverages you, your spouse and family members may require.

Risk Management
A sound financial plan must address the insurance coverages you, your spouse and family members may require.

• Life insurance is used to pay for funeral expenses, repay outstanding debts, make charitable donations and provide living expenses for surviving family members. It can also be used to cover estate taxes and probate fees to enable your estate to be liquidated in the most appropriate manner.
• Disability income insurance^§ is to help partially replace income of persons who are unable to work because of sickness or accident. In terms of its financial effect on the family, long-term disability can be just as severe as death. Disability income protection can come from several sources: social insurance programs, employer-provided benefits, and individually purchased policies.
• Long Term Care Insurance- Long Term Care Insurance is still a relatively new type of insurance product. Many people do not understand what long-term care insurance policies cover, how and when the policies pay benefits, and who should obtain coverage.

http://www.cspgllc.com/section2.cfm

Typical Portfolio Management Process

Your investment choice should focus on meeting your financial goals. During this process, you should consider current and future growth objectives, income needs, time horizon and risk tolerance. These considerations form the blueprint for developing a portfolio management strategy. The process involves, but is not limited to, the following important stages.

• Set investment objectives
• Develop an asset allocation strategy
• Evaluate/Select investment vehicle
• Portfolio review -- Ongoing portfolio monitoring

http://www.cspgllc.com/section2.cfm