Saturday, 6 April 2013
GOLD is 4 suckers - Warren Buffett, Bill Gates, & CNBC join the war
Why Buffett does not like to invest in gold?
@ 6 min
Warren Buffett How to Turn 40 into 5 Million
Buy an attractive business.
My biggest mistakes are those of omissions.
Better to learn from other people's mistakes.
Disagree but never argue.
Live life forward.
Important and knowable.
Important but not knowable.
Buffett's buying is not affected by macroeconomic factors.
HOW WARREN BUFFETT HEDGES HIMSELF AGAINST INFLATION
Good interview Buffett starts talking about how he hedges himself and what you can use to hedge yourself against inflation starting at 16.42
Friday, 5 April 2013
What is Portfolio Management anyway?
When to Sell: A Workshop with Ellis Traub
Session 1
What is Portfolio Management anyway?
Around the end of last year, a few of us were asked to contribute a list of five stocks we thought would be good investments and to comment on the reasons we thought they would be. I did so but, unfortunately, I got so wrapped up in other things that I forgot all about them. So I’m in the embarrassing position of having to lead this discussion off with the admonition, “Do as I say and not as I do!”
In any event, the best I can hope for is a) you’ll accept this as an example of why you should pay attention to what’s ahead, and b) I’ll be able to demonstrate in the months ahead how you can greet such a challenge and turn things around. That disclaimer out of the way, let’s get at it.
Although most of the fun of investing surrounds the acquisition of your stocks, the fact is that buying them is only a half of what investing’s all about. The other half—for a variety of reasons we’ll discuss in a moment—is considered by most of us as being pretty much of a drag! Yet, there’s as much or more potential benefit is to be derived from managing your portfolio as from buying the right stocks in the first place.
What I intend to do in the next few days is to address all the reasons why we don’t do it very well—if we do it at all—and to expose those reasons for what they are: insufficient excuses. In the next five lessons, I hope to make it clear that we no longer have a leg to stand on for not doing what we need to do; and, with any luck at all, I might even persuade you it can be fully as much fun as the stuff we do to select our companies for investment.
You know, just the term, “Portfolio Management,” is pretentious …almost intimidating. It suggests that we have to put in hours of dedicated and tedious work, and it suggests that it’s much more complicated than it really is. So let’s set the record straight here by first understanding what Portfolio Management really is; and start that process by explaining what it’s not.
Portfolio Management is definitely not Portfolio Tracking. If you think that regularly looking at our portfolios to see how the prices are doing, and whether or not they’re making money, is managing our portfolios, fuggedaboudit! Portfolio tracking, at best, is merely checking to see how good or poor a job of managing our portfolios we’re doing. It has nothing to do with the actual task of managing our holdings. In fact, as you’ll see down the road in this workshop, portfolio tracking can be one of the more insidious things that can work against sound portfolio management.
No, Portfolio Management is a pro-active activity that requires a certain amount of discipline and dedication. Its purpose is simply to catch our losers before they damage our portfolios’ performances, and to maintain our average estimated return at as close to 15 percent as possible so we can meet our objective or doubling our money every five years.
When an issue seems complicated, what’s the easiest way to cut it down to size? It’s to break it down into its smallest parts. In this case, that’s easy! Once we own a stock or stocks, there are only two things we can possibly do with them: either hold onto them or sell them.
Since we already hold them, we are left with only one decision to make; and that is simply when to sell them. So Portfolio Management is nothing more than making that determination: when to sell them. That’s all there is to it!
More than “when,” why we would sell them is the important issue. As long-term investors, the most important thing that distinguishes us from “the herd”—those who trade or try to make money in the market in the short term—is the definition of “long-term.” We buy stocks not to hold until they reach a target price, not for a month, not even for five years. We buy them to hold forever! …unless—and here is where I can go another step further in making it simpler for you—unless one of three, and only three, conditions come to pass:
- We want or need the money,
- The Quality deteriorates (Defensive strategy: SSG Sections 1 &
- The potential Return deteriorates (Offensive strategy: SSG Sections 3 – 5)
Indeed, these are the only three conditions that would warrant your selling a stock.
So, “When to sell” (Portfolio Management) means watching our holdings to see whether any of them meet conditions 2 or 3 in hopes that we can hold onto them until such time as we reach condition 1.
During the next five days, we’re going to discuss 1) all the excuses we have heard for not doing the job; 2) why you can no longer use them for excuses; 3) the basics of defensive portfolio management, 4) the basics of offensive portfolio management, and 5) the tools we have at our disposal to make the task even simpler.
http://www.stockcentral.com/tabid/143/forumid/289/postid/3523/view/topic/Default.aspx
A 5% return may end up being a better deal than a 20% return.
If one is able to get a 5% return in a month, we could argue
that it is a better investment than one that earns us a 20% return over a
two-year period.
The reason for this is that a 5% rate of return in a month
is arguably the equivalent of getting a yearly rate of return of 60% (5% x 12 =
60%).
Likewise, a 20% return at the end of two years is arguably
the same as only getting a 10% yearly rate of return. (20% / 2 years = 10%).
Of course, this argument is premised on being able to
reallocate the capital that we had out at 5% for a month, at attractive rates
in the preceding months.
But in theory, if you could reallocate your capital 5 times
over a two-year period and each time earn 5% a month, it would still produce
better results than getting a 20% return at the end of a two-year period.
The certainty of the deal is important. This allows for a quick and certain return
Buffett: 'Business is coming back' (How to write an Annual Report)
@25 min: How to write an annual report.
Importance of Financial Education and Knowledge in Investing in the Stock Market
The tragedy is that people work so hard to earn money, and then they lose so much of it on the stock market because they haven’t taken the relatively simple steps to educate themselves about it.
First rule of Buffett: Do not lose money.
April 4, 2013
Mom and pop: The world’s worst investors
Commentary: They buy high, sell low, and the ending is predictable
By Brett Arends
Oh, brother.
I don’t know Mark Villa and Lucie White, a pair of doctors in Houston, Texas, who were featured in a big story in our sister publication, The Wall Street Journal, a few days ago.
And I wish them all the best.
But when I read the story about them, and other “mom and pop” investors rushing to jump back into the booming stock market, a few words crossed my mind.
The more printable ones included “Uh-oh” and “Doom.”
You know how, when you get older, the movies just get so predictable you can hardly bear to go any more? Within the first five minutes you can already tell how the whole story is going to end.
So I’m sorry, but when I read “Mom and Pop Run With the Bulls,” all I could think was, here we go again.
My Journal colleague Jonathan Cheng’s story tells you everything you need to know. Villa and White felt “sucker punched” when stocks collapsed in 2008, he reports. The crash “wiped out half their savings.” They sold out of stocks, put their money in the bank, and “swore off stocks,” presumably forever.
Last month, as the Standard & Poor’s 500 index surged to new highs, they hired a new financial adviser and plunged into the stock market again.
The problem with Villa and White isn’t that they are unusual but that they are absolutely the typical American investor. Both of them are doctors, meaning they are presumably intelligent and educated. And yet they insist on investing like absolute fools.
First, their minds have been playing tricks on them all along. The crash of 2008 did not wipe out half their savings, unless they invested all their money right at the peak and sold right at the bottom. The reality is that it wiped out a lot of illusory gains and replaced them with a lot of illusory losses. Stock prices were wrong in 2007 because they were too high, and they were wrong in late 2008 and early 2009 because they were too low.
Second, as they now know, they sold out somewhere near the lows. They were not alone. According to the Investment Company Institute, the trade body of the mutual fund industry, U.S. investors flooded the market with stocks in the fall of 2008 and the winter of 2009. From September, 2008 through March, 2009, ordinary U.S. investors dumped $114 billion worth of stock funds. They sold at absolutely the worst time.
This is not a coincidence. The stock market is “us.” Share prices fall because there are more sellers than buyers. They rise because of the reverse. So mom and pop investors like the Villa-Whites rush to dump their stocks because they see the market plummeting, oblivious to the fact that the only reason it’s falling is because people like them are rushing to dump their stocks.
And here we are in the opposite situation. The Investment Company Institute reports that mutual fund investors have pumped about $20 billion back into stock funds since the start of the year. Mom and pop investors across the country, just like the Villa-Whites, are rushing to buy stocks so they don’t “miss out” on big gains. The reality is that stocks have risen, in part, because people like them have rushed to buy stocks. And the more of them rush to buy stocks, the higher they drive the price.
Study after study has found the grim truth. People like the Villa-Whites end up losing money for years, even when the stock market has gone up, because they have sold at the wrong times and bought at the wrong times. They have consistently bought high and sold low. You could have made astonishing super-normal profits over the past thirty years just by selling stocks when Mom and Pop were buying, and buying stocks when Mom and Pop were selling.
Be like Buffett: Buy low and sell high.
Have you heard of Suicide Chess, a peculiar game where the rules are reversed and you try to lose all your pieces? Mom and pop investors like the Villa-Whites are playing Suicide Roulette.
The tragedy is that people like the Villa-Whites work so hard to earn money, and then they lose so much of it on the stock market because they haven’t taken the relatively simple steps to educate themselves about it.
There is no great mystery to the stock market. The longer I follow it, the less complicated it actually becomes. Buy stocks when they are cheap and everyone is afraid to own them. Don’t buy stocks when they are expensive and everyone is afraid of getting “left behind.” In other words, be fearful when others are greedy, and greedy when others are fearful. This is no great insight — Warren Buffett keeps saying it. The Villa-Whites were selling their stocks around the time Buffett was buying — and telling everyone he was buying too.
But the message just gets lost.
There are reasons for that. They include the Federal Reserve’s policy of Forever Blowing Bubbles, which has played havoc with the idea of the sensible long-term investor. They also include the spreading influence of a cult called the Efficient Market Hypothesis, which downplays the importance of the actual price you pay for stocks. It is horrifying how many financial advisers have bought into the nonsense of the EMH, often without even understanding it.
In late 2008 and early 2009 I was tasked by The Wall Street Journal with finding good value stocks for people to buy. And my job was very easy. There were so many cheap stocks around you could scoop them up with a spoon. Indeed in October 2008 I described it as “shooting fish in a barrel.” I was six months early, but so what?
Today it is very hard to find stocks that look great value, especially here in the U.S. And people like the Villa-Whites are rushing to buy stocks before they go to infinity.
I fear I have seen this movie before.
Brett Arends is a MarketWatch columnist. Follow him on Twitter @BrettArends.
http://www.marketwatch.com/story/mom-and-pop-the-worlds-worst-investors-2013-04-04
First rule of Buffett: Do not lose money.
April 4, 2013
Mom and pop: The world’s worst investors
Commentary: They buy high, sell low, and the ending is predictable
By Brett Arends
Oh, brother.
I don’t know Mark Villa and Lucie White, a pair of doctors in Houston, Texas, who were featured in a big story in our sister publication, The Wall Street Journal, a few days ago.
And I wish them all the best.
But when I read the story about them, and other “mom and pop” investors rushing to jump back into the booming stock market, a few words crossed my mind.
The more printable ones included “Uh-oh” and “Doom.”
You know how, when you get older, the movies just get so predictable you can hardly bear to go any more? Within the first five minutes you can already tell how the whole story is going to end.
So I’m sorry, but when I read “Mom and Pop Run With the Bulls,” all I could think was, here we go again.
My Journal colleague Jonathan Cheng’s story tells you everything you need to know. Villa and White felt “sucker punched” when stocks collapsed in 2008, he reports. The crash “wiped out half their savings.” They sold out of stocks, put their money in the bank, and “swore off stocks,” presumably forever.
Last month, as the Standard & Poor’s 500 index surged to new highs, they hired a new financial adviser and plunged into the stock market again.
The problem with Villa and White isn’t that they are unusual but that they are absolutely the typical American investor. Both of them are doctors, meaning they are presumably intelligent and educated. And yet they insist on investing like absolute fools.
First, their minds have been playing tricks on them all along. The crash of 2008 did not wipe out half their savings, unless they invested all their money right at the peak and sold right at the bottom. The reality is that it wiped out a lot of illusory gains and replaced them with a lot of illusory losses. Stock prices were wrong in 2007 because they were too high, and they were wrong in late 2008 and early 2009 because they were too low.
Second, as they now know, they sold out somewhere near the lows. They were not alone. According to the Investment Company Institute, the trade body of the mutual fund industry, U.S. investors flooded the market with stocks in the fall of 2008 and the winter of 2009. From September, 2008 through March, 2009, ordinary U.S. investors dumped $114 billion worth of stock funds. They sold at absolutely the worst time.
This is not a coincidence. The stock market is “us.” Share prices fall because there are more sellers than buyers. They rise because of the reverse. So mom and pop investors like the Villa-Whites rush to dump their stocks because they see the market plummeting, oblivious to the fact that the only reason it’s falling is because people like them are rushing to dump their stocks.
And here we are in the opposite situation. The Investment Company Institute reports that mutual fund investors have pumped about $20 billion back into stock funds since the start of the year. Mom and pop investors across the country, just like the Villa-Whites, are rushing to buy stocks so they don’t “miss out” on big gains. The reality is that stocks have risen, in part, because people like them have rushed to buy stocks. And the more of them rush to buy stocks, the higher they drive the price.
Study after study has found the grim truth. People like the Villa-Whites end up losing money for years, even when the stock market has gone up, because they have sold at the wrong times and bought at the wrong times. They have consistently bought high and sold low. You could have made astonishing super-normal profits over the past thirty years just by selling stocks when Mom and Pop were buying, and buying stocks when Mom and Pop were selling.
Be like Buffett: Buy low and sell high.
Have you heard of Suicide Chess, a peculiar game where the rules are reversed and you try to lose all your pieces? Mom and pop investors like the Villa-Whites are playing Suicide Roulette.
The tragedy is that people like the Villa-Whites work so hard to earn money, and then they lose so much of it on the stock market because they haven’t taken the relatively simple steps to educate themselves about it.
There is no great mystery to the stock market. The longer I follow it, the less complicated it actually becomes. Buy stocks when they are cheap and everyone is afraid to own them. Don’t buy stocks when they are expensive and everyone is afraid of getting “left behind.” In other words, be fearful when others are greedy, and greedy when others are fearful. This is no great insight — Warren Buffett keeps saying it. The Villa-Whites were selling their stocks around the time Buffett was buying — and telling everyone he was buying too.
But the message just gets lost.
There are reasons for that. They include the Federal Reserve’s policy of Forever Blowing Bubbles, which has played havoc with the idea of the sensible long-term investor. They also include the spreading influence of a cult called the Efficient Market Hypothesis, which downplays the importance of the actual price you pay for stocks. It is horrifying how many financial advisers have bought into the nonsense of the EMH, often without even understanding it.
In late 2008 and early 2009 I was tasked by The Wall Street Journal with finding good value stocks for people to buy. And my job was very easy. There were so many cheap stocks around you could scoop them up with a spoon. Indeed in October 2008 I described it as “shooting fish in a barrel.” I was six months early, but so what?
Today it is very hard to find stocks that look great value, especially here in the U.S. And people like the Villa-Whites are rushing to buy stocks before they go to infinity.
I fear I have seen this movie before.
Brett Arends is a MarketWatch columnist. Follow him on Twitter @BrettArends.
http://www.marketwatch.com/story/mom-and-pop-the-worlds-worst-investors-2013-04-04
BUFFETT’S 'EQUITY BOND' STRATEGY (Video)
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(A) THE THEORY.
Warren Buffett has determined that companies which show great Strength and Predictability in Earnings Growth, especially those with Durable Competitive Advantage (DCA), can be seen as a kind of EQUITY BOND with a COUPON.
The company’s SHARE PRICE equates with the EQUITY BOND, and their PRETAX EARNINGS/SHARE equates with a Bond’s COUPON or INTEREST PAYMENT.
Therefore ....
EQUITY BOND = SHARE PRICE
BOND COUPON = PRETAX EARNINGS/SHARE
Durable Competitive Advantage
Throughout this presentation:
Durable Competitive Advantage is abbreviated to DCA
BUFFETT’S 'EQUITY BOND' STRATEGY.
(A) THE THEORY.
The DIFFERENCE between a normal Bond’s Coupon Rate and an EQUITY BOND’s Coupon Rate is that the former’s rate remains static while the latter’s rate can increase yearly due to the inherent Positive Performance of a DCA company.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(A) THE THEORY.
This is how Buffett buys an Entire Business or a Partial Interest in a company via the Stock Market.
He interrogates its PRETAX EARNINGS and then determines if the purchase is a Good Deal relative to the ECONOMIC STRENGTH of the company’s underlying Economics and its ASKING PRICE.
The strong underlying Economics of DCA companies ensures a CONTINUING INCREASE in the company’s PRETAX EARNINGS which gives an Ongoing Increase in the EQUITY BOND’s COUPON RATE.
This results in the INCREASE in the VALUE of the EQUITY BOND and hence its SHARE PRICE.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(A) THE THEORY.
Here’s how Buffett’s Theory works ....
In the 1980’s Buffett bought Coca Cola shares for $6.50c against PRETAX EARNINGS of $0.70c/share.
Buffett saw this as buying an EQUITY BOND paying an INTEREST RATE of 10.7% (0.70/6.50) on his $6.50 investment.
Historically, Coca Cola’s Earnings had been increasing at an annual rate of about 15%.
Therefore he could argue that his 10.7% Yield would increase at a projected Annual Rate of 15%.
By 2007 Coca Cola’s PRETAX EARNINGS had grown at about 9.35%/annum to $3.96c/share.
Buffett now had an EQUITY BOND with a Pretax Yield of 61% (3.96/6.50) which could really only increase with time due to Coca Cola’s DCA “status”.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(B) DETERMINE SHARE PRICE.
From his own experience Buffett has determined that the Stock Market will price a DCA company’s EQUITY BOND at a level that approximately reflects the VALUE OF ITS EARNINGS RELATIVE TO THE YIELD ON LONG TERM CORPORATE BONDS.
This can be written as the following equation ....
EQUITY BOND = SHARE PRICE = COUPON RATE/LONG TERM CORPORATE BOND RATE (L.T.C.B.R.)
and .... COUPON RATE/(L.T.C.B.R.) = PRETAX EARNINGS/( L.T.C.B.R.)
BUFFETT’S 'EQUITY BOND' STRATEGY.
(B) DETERMINE SHARE PRICE.
Examples :-
(1) In 2007 The Washington Post had Pretax Earnings of $54/share = Coupon Rate.
The L.T.C.B.R. was about 6.5%.
EQUITY BOND = Coupon Rate/L.T.C.B.R. = $54/6.5% = $830/share.
In 2007 The Washington Post shares traded between $726 and $885 a share.
(2) In 2007 Coca Cola had Pretax Earnings of $3.96/share = Coupon Rate.
The L.T.C.B.R. was about 6.5%.
EQUITY BOND = Coupon Rate/L.T.C.B.R. = $3.96/6.5% = $61/share.
In 2007 Coca Cola shares traded between $45 and $64 a share.
(The following web site will give you values for Corporate Bond rates :-
BUFFETT’S 'EQUITY BOND' STRATEGY.
(B) DETERMINE SHARE PRICE.
The stock market, seeing this ongoing return, will eventually revalue these EQUITY BONDS to reflect this increase in Value.
Because the Earnings of these companies are so consistent, they are also open to a LEVERAGED BUYOUT.
If a company carries little debt and has ongoing strong earnings, and its stock price falls low enough, another company will come in and buy it, financing the purchase with the acquired company’s earnings.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(B) DETERMINE SHARE PRICE.
Therefore, WHEN INTEREST RATES FALL, the company’s EARNINGS ARE WORTH MORE because they will SUPPORT MORE DEBT, which makes the company’s shares worth more.
Conversely, WHEN INTEREST RATES RISE, EARNINGS ARE WORTH LESS because they will SUPPORT LESS DEBT, making the company’s shares worth less.
In the end it is LONG-TERM INTEREST RATES that determines the Economic Reality of what Long-Term investments are worth.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(C) WHEN TO BUY.
In Buffett’s world the PRICE you pay directly affects the RETURN on your INVESTMENT.
Therefore the MORE one pays for an EQUITY BOND the LOWER will be the INITIAL Rate of Return and also the LOWER the RATE OF RETURN on the company’s EARNINGS in, say, 10 years time.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(C) WHEN TO BUY.
Example :-
In the late 1980’s Buffett bought Coca Cola for about $6.50c/share.
The company was earning about $0.46c/share after tax.
Initial Rate of Return = 0.46/6.50 = 7%.
By 2007 Coca Cola was earning $2.57c/share, after tax.
Rate of Return = 2.57/6.50 = 40%.
If he had originally paid, say, $21/share back in the 1980’s his Initial Rate of Return would only have been 2.2%, and this would have only grown to about 12% ($2.57/$21) 20 years later in 2007, which is a lot less than 40%!
Therefore the LOWER THE PRICE one pays for a DCA company the BETTER one will do OVER THE LONGER TERM.
SO WHEN DO YOU BUY INTO DCA TYPE COMPANIES ?
BUFFETT’S 'EQUITY BOND' STRATEGY.
(C) WHEN TO BUY.
SO WHEN DO YOU BUY INTO DCA TYPE COMPANIES ?
One of the best times to buy into these companies is during BEAR MARKETS when the price of shares are generally depressed, in some cases due to no fault of a DCA type company but due to adverse Market conditions.
This is in line with Buffett’s creed that one should “Be Greedy When Others Are Fearful”.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(C) WHEN TO BUY.
SO WHEN DO YOU BUY INTO DCA TYPE COMPANIES ?
In addition, one can also buy into a DCA type company when its price is at a discount to the price obtained from the formula in (B) above ....
EQUITY BOND = SHARE PRICE = COUPON RATE/LONG TERM CORPORATE BOND RATE (L.T.C.B.R.)
and .... COUPON RATE/(L.T.C.B.R.) = PRETAX EARNINGS/( L.T.C.B.R.)
Once again, referring to Coca Cola, we see that ...
Pretax Earnings per Shares in the late 1980’s = $0.70c.
At that time the L.T.C.B.R. was about 7%.
That would give a “Market Valuation” = $0.70/7% = $10 per share.
Buffett bought it at $6.50c/share, a “discount” of 35%.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(D) WHEN TO SELL, OR NOT TO BUY.
There are at least THREE occasions ...
(1) One can SELL when one needs the money to invest in an even BETTER company at a BETTER PRICE.
(2) One can SELL when, what was a DCA type company, is now losing its Durable Competitive Advantage.
Examples could be Newspapers and Television Stations which were great businesses until the advent of the Internet and the Durability of their Competitive Advantage could be called into question.
(3) One can SELL, or NOT BUY, during BULL MARKETS when the stock market often sends share prices through the ceiling. At these times the current selling price of a DCA’s stock often far EXCEEDS the long-term ECONOMIC REALITIES of the business.
BUFFETT’S 'EQUITY BOND' STRATEGY.
(D) WHEN TO SELL, OR NOT TO BUY.
Eventually, these Economic Realities will pull the share price back down to earth.
In fact, it may be time to SELL when one sees P/E ratios of 40, or more, in these great companies.
To once again quote Buffett ... at these times, “Be Fearful When Others Are Greedy”.
Reference
Reference
http://www.siliconinvestor.com/readmsgs.aspx?subjectid=56822&msgnum=1131&batchsize=10&batchtype=Previous
Warren Buffett's Interpretation of Financial Statements and Analysis
Warren Buffett's Interpretation of Financial Statements and Analysis
Warren Buffett's Interpretation of the Income Statement and Analysis
Warren Buffett's Interpretation of a Balance Sheet and Analysis
Warren Buffett's Interpretation of Cash Flows and Analysis
Warren Buffett's Interpretation of the Income Statement and Analysis
Warren Buffett's Interpretation of a Balance Sheet and Analysis
Warren Buffett's Interpretation of Cash Flows and Analysis
Thursday, 4 April 2013
Can you feel proud of your representatives after listening to this video?
All these changes occurred over the recent years and only after 308!
It would have been more credible when these were never issues to be resolved.
It would have been more credible when these were never issues to be resolved.
“So what do I do with my money?”
IT'S A NEW WORLD OF INVESTING AND ONE QUESTION IS ON EVERYONE'S MIND:“So what do I do with my money?”
The New World
Today’s markets are as uncertain as ever. But there is one certainty – that the future is coming. It may no longer be enough to simply preserve what you have today; you also have to build what you will need for tomorrow. So don’t put off speaking to your financial adviser. Isn’t it time to be an investor again?
"SO WHAT DO I DO WITH MY MONEY?"
Start taking action. Build a more dynamic, diverse portfolio based on your goals, your investment time horizon and appetite for risk.
"So what do I do with my money?"
It’s no secret that some economies are struggling, but that doesn’t mean all companies are. Consider high-quality companies with strong balance sheets, robust business models, sound company management and attractive growth prospects in fast-growing areas of the world. Many of these companies also pay real and growing dividends, offering investors the flexibility to either draw their income to fund their lifestyle today or reinvest it to grow their total return in the long run.
All financial investments involve an element of risk. The value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. Overseas investments may involve risk of capital loss from unfavourable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
Investments in fixed interest securities such as corporate or government bonds pay a fixed or variable rate of interest and behave similarly to a loan. These securities are therefore exposed to changes in interest rates which will affect the value of any securities held. Companies which issue higher yield bonds typically have an increased risk of defaulting on repayments. In the event of default, the value of your investment may reduce. Economic conditions and interest rate levels may also impact significantly the values of high yield bonds. Under certain market conditions, liquidity in bond markets may fall significantly without warning. Therefore it may not be possible to sell a security at the last quoted price or at a value considered to be fair. In extreme market conditions, it may be difficult to realise your investments.
Exchange Traded Funds (ETFs) and index tracking mutual funds seek to track a benchmark and holdings are not altered during rising or falling markets. Some ETFs are optimised and therefore may not hold all securities within the benchmark index. Performance may differ from the underlying benchmark index. ETFs trade on exchanges intraday at the current market price which may differ from net asset value. Transaction or brokerage fees will apply. Liquidity is not guaranteed. Active and index tracking mutual funds can usually be accessed at a single valuation point each business day at net asset value adjusted for applicable dealing charges and fees.
Wednesday, 3 April 2013
Ranking Stocks using the PEG Ratio
PEG = PE / EPS Growth Rate
PEG Ratio Key Points
1. Less reliable for large low-growth companies.
2. Estimates can differ from future realities.
3. Compare individual PEG Ratio to industry and market averages.
4. Beware of speculative and low-dollar stocks with low PEG Ratios.
Best Stocks to Buy & Picking your stock - Two rules of value Investing
Follow these 2 rules and you will find investing in stocks is very profitable and very enjoyable too.
Rule 1: Find a wonderful business to invest in.
Rule 2: Buy its stock at a discount.
Personal Finance by a leading Financial Planner for the Secondary School Students. Yes, educate them early.
Many intelligent people has no financial education.
This video is an excellent introduction to personal finance.
Well worth spending time to go through the 12 videos in a couple of hours which will benefit you for a lifetime in your financial planning and management.
You will learn the core knowledge of financial planning to accomplish your goals.
Define and set your goals.
Your goals should be SMART
Specific
Measurable
Attainable
Realistic
Time bound
Related:
Compounding
http://myinvestingnotes.blogspot.com/2013/04/compound-interest.html
Human Resources: 'Social Engineering in the 20th Century'
Behaviour modification.
Behaviour is predictable, therefore it is controllable.
This world is driven not by love, but by fear.
Tuesday, 2 April 2013
How Rich Men Think and Act
Wealth Creation Formula:
The broke buy stuff.
The middle class buy liabilities.
The rich buy assets.
The Six Important Financial Parameters
1. EPS
2. Operating Cash Flows
3. Net Sales
4. Book Value per Share (BVPS)
5. Return on Invested Capital (ROIC)
6. Debt to Net Profit Ratio
Gold Standards
1 - 4 : Growing at greater than 12% per year for 10 years
5. >12% every year
6. <3 br="" nbsp="">
Past Performance
Profit Margins (OPM & NPM)
Debt/Equity ratio
ROE
Working Capital Management
Having established the company's solid financial track record, now look at their competitive strength.
PetDag to issue special 35 sen dividend.
For its fourth quarter ending Dec 31, PetDag made RM176.5 million in net profit on RM 7.7 billion in revenue.
PetDag has proposed a special dividend payout of 35 sen per share, to be paid on April 30. The ex-date falls on April 26.
http://www.theedgemalaysia.com/business-news/234653-petdag-to-issue-35-sen-dividend.html
PetDag has proposed a special dividend payout of 35 sen per share, to be paid on April 30. The ex-date falls on April 26.
http://www.theedgemalaysia.com/business-news/234653-petdag-to-issue-35-sen-dividend.html
CBIP subsidiary acquires land in Kapar
CBIP
A subsidiary of CBIP, Advance Boilers Sdn. Bhd, has entered into a sale and purchase agreement with Vickers Hoskins (M) Sdn. Bhd. to acquire a 4.09 ha piece of land in Kapar, Selangor, for RM 35.98 million.
No valuation was done on the land, but we believe the price CBIP is paying - RM82.60 per sq. ft - is reasonable in line with average transaction values of land in the area of RM85 to RM90 psf.
http://www.theedgemalaysia.com/business-news/234670-cbips-boiler-operations-heating-up.html
A subsidiary of CBIP, Advance Boilers Sdn. Bhd, has entered into a sale and purchase agreement with Vickers Hoskins (M) Sdn. Bhd. to acquire a 4.09 ha piece of land in Kapar, Selangor, for RM 35.98 million.
No valuation was done on the land, but we believe the price CBIP is paying - RM82.60 per sq. ft - is reasonable in line with average transaction values of land in the area of RM85 to RM90 psf.
http://www.theedgemalaysia.com/business-news/234670-cbips-boiler-operations-heating-up.html
Hot Stock - Nestle
Nestle's 3 year profit before tax compound annual growth rate to grow by 16.1% in financial year 2013.
Domestic consumption, which makes up an estimated 75% of sales, is expected to remain buoyant driving this growth.
There would be higher capital expenditure to help boost beverage and confectionery segments in 2013.
Sales are estimated to grow by 6% and 15% respectively for both these segments.
Cautious outlook on escalating raw material prices especially for cocoa butter and milk solids.
http://www.theedgemalaysia.com/business-news/234684-hot-stock-nestle-rises-22-sen-despite-ta-report.html
Domestic consumption, which makes up an estimated 75% of sales, is expected to remain buoyant driving this growth.
There would be higher capital expenditure to help boost beverage and confectionery segments in 2013.
Sales are estimated to grow by 6% and 15% respectively for both these segments.
Cautious outlook on escalating raw material prices especially for cocoa butter and milk solids.
http://www.theedgemalaysia.com/business-news/234684-hot-stock-nestle-rises-22-sen-despite-ta-report.html
Secrets to successful investing
Secrets to successful investing.
1. Know the business well. Do you understand the business?
2. Know the intrinsic value of the business. Is it increasing its intrinsic value consistently?
3. Know the management. Are they with integrity?
4. Know the price. Is the company's price attractive, that is, undervalued?
It is just so simple, everyone can adopt these.
1. Know the business well. Do you understand the business?
2. Know the intrinsic value of the business. Is it increasing its intrinsic value consistently?
3. Know the management. Are they with integrity?
4. Know the price. Is the company's price attractive, that is, undervalued?
It is just so simple, everyone can adopt these.
Sunday, 31 March 2013
Anatomy of the Forex Market (Graphic)
Source http://www.pepperstone.com/
By Instruments
Foreign exchange swaps – $1,8 trillion – 45%
Spot – $1,5 trillion – 37,5%
Outright forwards – $475 billions – 11,9%
Currency options – $207 billions – 5,2%
Currency swap – $43 billions – 1%
Foreign exchange swaps – $1,8 trillion – 45%
Spot – $1,5 trillion – 37,5%
Outright forwards – $475 billions – 11,9%
Currency options – $207 billions – 5,2%
Currency swap – $43 billions – 1%
By Counterparties
with other financial institutions (hedge funds, pension funds, central banks) – $1,9 trillion – 47,7%
with bank dealers – $1,5 trillion – 37,5%
with non-financial customers (corporations and governance) – $533 billions – 13,4%
private traders – $60 billions – 1,5%
with other financial institutions (hedge funds, pension funds, central banks) – $1,9 trillion – 47,7%
with bank dealers – $1,5 trillion – 37,5%
with non-financial customers (corporations and governance) – $533 billions – 13,4%
private traders – $60 billions – 1,5%
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