Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Study the best to become the best. Study Warren Buffett. and learn from him.
1. Warren is the Best
Warren is the best at creating wealth by investing in other people's businesses. No one comes a close second.
Warren studies the best in every field of endeavour. Wise investors study and understand Warren Buffett.
2. Wealth is created through owning a business.
Wealth is created through owning a business. Wealth is also best preserved through owning a business. These concepts are the essence of capitalism.
Warren has become the world's foremost capitalist by deploying earnings from various enterprises into the ownership of more businesses in order to generate more earnings to redeploy - a virtual snowball at the top fo an economic mountain with enough time to create a huge, ever-expanding and momentum-increasing capital avalanche.
3. Stay focus through investing in someone else's businesses
The best athletes become the best at focusing all of their gifts, time and energy on becoming the best in their sport. Likewise, unless one has the benefit of inheritance or marriage, great fortunes have been created by an entrepreneur who focused all of his or her gifts, time, and energy on one business.
Only one person has created billions in wealth by not only investing in someone else's businesses and managers in which to invest. Others can do this - simple in theory and practice, but not easy.
Buffett announced that if he were managing money in the millions instead of billions, he could compound money at an even faster rate - probably twice as fast - which has always been and will always be the average-investor advantage.
Take home messages:
Warren Buffett hasn't invented anything new and doesn't own any patents. He has never started a business an has never taken on the day-to-day management of one. The Oracle of Omaha is so good that he doesn't even need to talk with management, access inside information, or even visit company headquarters of the businesses in which he invests.
Assuming, however, that you study, understand, and employ the same Buffett principles, you too can achieve outstanding market-beating results. Knowledge counts more than experience and business contacts.
Buffett's life is one of extraordinary wealth built on exemplary character traits.
The true measure of a successful investor is not a comparison of performance against a stated index, but rather how well a portfolio performs during down markets.
Warren Buffett is unique in measuring himself annually against changes in book value (the simple calculation of assets minus liabilities). He then compares this annual percentage against the S&P 500 with dividends to determine if he has added value or not.
Buffett has not only added value. He has done the remarkable. Buyiing earnings of companies at attractive prices with outstanding management and with remarkable competitive advantages have all led to mind-blogging increases in book value.
A metric that Warren Buffett never reports or comments on is the actual market price of his stock. He reports the value of his business because he can control purchases, ongoing management, asset purchases and sales, liabilities, and other things that affect changes in book value. Conversely, he ignores the share price because often it has nothing to do with what is going on inside the business.
Individual investors are the primary owners of these funds as opposed to institutions.
Institutions such as mutual funds don't buy shares of closed-end funds or other mutual funds because their customers don't like the idea of paying two sets of fees,.
We can postulate that individual investors would be more flighty than professional investors, such as pension funds and endowments, and thus, they would be subject to shifting moods of optimism or pessimism ("investor sentiment").
When individual investors are feeling perky, discount on closed-end funds shrink and when they get depressed or scared, the discounts get bigger.
Small companies
Individual investors are also more likely than institutional investors to own shares of small companies.
Institutions shy away from the shares of small companies because these shares do not trade enough to provide liquidity a big investor needs.
How to measure individual investor sentiment?
So, if the investor sentiment of individuals varies, it would show up both in the discounts on closed-end funds and on the relative performance of small companies versus big companies.
That is exactly what was found. The average discount on closed-end funds was correlated with the difference in returns between small and large company stocks; the greater the discount, the larger the difference in returns between those two types of stocks.
How to profit from this investor sentiment variability?
The strategy of buying the closed-end funds with the biggest discounts earned superior returns (a strategy also advocated by Benjamin Graham). Burton Malkiel, author of A Random Walk Down Wall Street, has also advocated such a strategy.
Intrinsic value cannot be determined with precision, which makes it hard to prove that stock prices deviate from intrinsic value.
An important principle at the heart of the Efficient Market Hypothesis is the law of one price. The law asserts that in an efficient market, the same asset cannot simultaneously sell for two different prices. If that happened, there would be an immediate arbitrage opportunity, meaning a way to make a series of trades that are guaranteed to generate a profit at no risk.
News and Noises
The only thing that makes an investor change his mind about an investment is genuine news.
But humans might react to something that does not qualify as news, such as seeing an ad for the company behind the investment that makes them laugh. In other words, there are many who make decisions based on noises rather than actual news. These are called "noise traders". They trade on noise as if it were information. "THERE ARE IDIOTS. Look around."
Keynes wrote: "Day to day fluctuations in the profits of existing investments, which are obviously of an ephemeral and non-significant character, tend to have an altogether excessive, and even an absurd, influence on the market."
Keynes was also sceptical that professional money managers would serve the role of the "smart money" that Efficient Market Hypothesis defenders rely upon to keep markets efficient. Rather, he thought that the pros were more likely to ride a wave of irrational exuberance than to fight it. One reason is that it is risky to be a contrarian. "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally."
Keynes's beauty contest analogy
This is still an apt description of what money managers try to do.
Many investors call themselves "value managers," meaning they try to buy stocks that are cheap.
Others call themselves "growth managers," meaning they try to buy stocks that will grow quickly.
But of course no one is seeking to buy stocks that are expensive, or stocks of companies that will shrink.
So what are all these managers really trying to do?
They are trying to buy stocks that will go up in value - or , in other words, stocks that they think OTHER investors will LATER decide should be worth more.
And these other investors, in turn, are making their own bets on others' FUTURE valuations.
Buying a stock that the market does not fully appreciate today is fine, as long as the rest of the market comes around to your point of view sooner than later!
@1.00.30 What will you do with the money recovered from 1MDB?
@1.02.30 Who in Malaysia is chasing this money?
@1.04.00 What has Malaysia done about this? Nothing.
The Attorney General of Malaysia has cleared the Prime Minister of any wrong doing. So this is a perfect crime.
Malaysia is suppose to be the victim. The victim itself seems to be totally unable to do anything ... as long as the Prime Minister and his political appointees represent the people of Malaysia.
But then again remembers, crime pays. Some of it anyway. Lots of it.
Malaysian Finance Minister, Lim Guan Eng, lambasted Arul Kanda as "utterly dishonest and untrustworthy".
"Arul Kanda claimed that all financial matters were handled strictly by the company CFO and he is uncertain what the value of these investments are – or whether they exist in the first place.
"It is completely unbelievable that a highly-paid and experienced investment banker can be so irresponsibly clueless as to not know whether RM9.8bil worth of investments are even real," said Lim.
Lim said he had instructed the ministry's legal advisers to review Arul Kanda's position as president of 1MDB.
The ministry will also appoint PwC to conduct a special position audit and review of 1MDB.
KUALA LUMPUR (May 14): Hartalega Holdings Bhd’s saw its net profit jump 30.7% to RM116.8 million in the fourth quarter ended March 31, 2018 (4QFY18), from RM89.4 million a year earlier.
The world’s largest synthetic glove manufacturer’s quarterly revenue rose by 17% to RM616.84 million, from RM527 million in 4QFY17. Earnings per share was at 3.53 sen in 4QFY18, compared with 2.72 sen the previous year.
For the full year (FY18), Hartalega reported a net profit of RM440.1 million or 13.29 sen per share, up 55.4% from RM283.3 million or 8.62 sen per share in the previous year. Revenue also increased 33.33% to RM2.4 billion, from RM1.82 billion in FY17.
Its group managing director Kuan Mun Leong said in the statement: “This marks another significant milestone for the Group. Our strategic plans continue to bear fruit, enabling us to deliver a strong performance on the back of increased sales volume, in tandem with our continuous expansion in production capacity and robust demand for nitrile gloves.”
On prospects, Hartalega expressed its confidence in propelling the group forward in the coming year, as it is driven by its strategic expansion plans and product innovation,” Kuan said.
“As we move forward, we are well on track to meet growing global demand, driven by our Next Generation Integrated Glove Manufacturing Complex (NGC). To this end, we have successfully commissioned all 12 production lines in Plant 4 of the NGC. We target to commence commissioning of Plant 5 in July 2018 and subsequently, the construction of Plant 6. We are also planning to construct an additional Plant 7, which will focus on small orders and specialty products,” Kuan added.
Additionally, Hartalega is also set to launch its antimicrobial gloves in Europe on May 31, 2018, Kuan said.
“We are also currently in the process of securing approval from the Federal Drug Administration to enter the US market with this latest product,” Kuan added.
Hartalega shares closed unchanged at RM6 today, with 4.9 million shares traded, giving it a market capitalisation of RM20.14 billion.
Hartalega - FY18… a Slight Anti-climax
Author: HLInvest | Publish date: Wed, 16 May 2018, 09:39 AM
Hartalega’s FY18 Core PATAMI of RM399.0m (+23.2% yoy) was below our expectation and consensus. Production capacity rose to 28.5bn with a utilization rate of 91% in FY18. Our forecast is unchanged and we maintain our HOLD rating albeit with a higher TP of RM6.17. We expect the share price will be supported by (i) it’s possible inclusion into the KLCI come June review (ii) sentiment driven weakness in the Ringgit will continue to whet investors’ appetite for export stocks.
Below expectations. FY18 core PATAMI of RM399.0m (+23.2% yoy) came in below at 94% and 92.4% of ours and consensus full year estimates, respectively. The lower than expected results were due to higher (i) energy costs (natural gas) (ii) butadiene prices and (iii) finance costs.
Dividends. Declared a third interim dividend of 2 sen/share (FY17: 8 sen/share).
YTD. Revenue grew 32.1% yoy to RM2.41bn on the back increased sales volume (+33% yoy), greater operational efficiencies and a higher utilization rate (FY18: 91% vs. FY17: 87%). EBITDA margins expanded by 2.8ppts (FY17: 23% vs. FY18: 25.8%). Subsequently, core PATAMI grew 23.2% yoy to RM398.0m on the above mentioned factors.
Yoy. Revenue grew 17.0% to RM616.8m on higher sales volume (+30.1%). EBITDA margin declined marginally by 0.2ppts to 26% as ASP saw downward pressure, offset by 17 extra lines yoy (4Q18:93 lines vs. 4Q17: 76 lines). Consequently core PATAMI grew by 10.3% yoy to RM98.6m.
Qoq. Revenue grew 2.3% qoq on higher sales volume (+5% qoq). Core PATAMI declined by 7.1% to RM98.6m qoq on competitive pricing whilst utilization rate declined to 89% from 91% qoq.
AMG. Production capacity rose to c.28.5bn pcs in FY18 with the current 93 lines having a utilization rate of 91%. Hartalega will launch their anti-microbial gloves (AMG) in Europe later this month, whilst simultaneously being in the midst of securing FDA approval for the US market. We are of the view that it will take some time for Hartalega to secure orders for its AMG given the products infancy in the market.
Outlook. Commissioning of plant 5 (4.7bn pieces) will commence in June CY18 followed by construction of Plant 6. Hartalega also announced its plans for Plant 7 which has been earmarked for specialty products with a capacity of c.2.6bn pieces. Moving forward we expect utilization rate to remain stable at c.89%-91% on the back of robust global demand, however we may see margin deterioration as more gloves capacity come on stream thus putting a downward pressure on ASP.
Forecast. Unchanged as the results were only marginally below expectations.
Maintain HOLD, TP: RM6.17. Despite the marginal results shortfall, we reckon there are short term sentiment driven factors that may warrant share price support (or even possible upside). These include: (i) possible inclusion into the KLCI come June review (ii) sentiment driven weakness in the Ringgit will continue to whet investors’ appetite for export stocks in the near term. Given such, we adjust our TP upwards to RM6.17 based on CY19 EPS pegged to PER of 37x (from 31.8x). Our ascribed PER of 37x represents 1SD above Hartalega’s 3 year historical PER.
Source: Hong Leong Investment Bank Research - 16 May 2018
The majority has voted against Barisan National in this election.
The transition of power to Pakatan Harapan has been smooth and peaceful.
All Malaysians, irrespective of whom they voted for, can now unite to move this nation to greater success, prosperity and happiness.
Many are thankful for those who have provided the leadership in this election.
One lady on the street was so happy with Tun. Quoting her: "I disliked Tun in the past. Today he is 92 and now I wished he will be with us as our PM forever."
History has been rewritten.
Tun Mahathir's achievements and leaderships, over his lifetime have been noted.
He will be remembered as one of the most colourful and greatest among the top world leaders.
Managers should begin by listing the decisions that must be made and deciding which are most important.
For example,
"the top 10 decisions required to execute our strategy: or
"the top 10 decisions that have to go well if we are to meet our financial goals."
Some decisions will be rare and highly strategic.
"What acquisitions will allow us to gain the necessary market share?"
Others will be frequent and on the front lines.
"How should we decide how much to pay on claims?"
Without some prioritization, all decisions will be treated as equal - which probably means that the important ones won't be analyzed with sufficient care.
2. Inventory
In addition to identifying the key decisions in 1 above, you should assess the factors that go into each of them.
Who plays what role in the decision?
How often does it occur?
What information is available to support it?
How well is the decision typically made?
Such an examination helps an organization understand which decisions need improvement and what processes might make them more effective, while establishing a common language for discussing decision making.
3. Intervention
Having narrowed down your list of decisions and examined what's involved in making each, you can design the roles, processes, systems, and behaviours your organization should be using to make them.
The key to effective decision interventions is a broad, inclusive approach that considers all methods of improvement and addresses all aspects of the decision process - including execution of the decision, which is often overlooked.
4. Institutionalization
Organizations need to give managers the tools and assistance to "decide how to decide" on an ongoing basis.
For example, the managers can be trained to determine whether a particular decision should be made
unilaterally by one manager,
unilaterally after consultation with a group,
by a group through a majority vote, or
by group consensus.
In addition, they can also determine
who will be responsible for making the decision,
who will be held accountable for the results and
who needs to be consulted or informed.
Companies that are serious about institutionalizing better decision making can often enlist decision experts to work with executives on improving the process.
For example, the members of a decision analysis group can
facilitate framing workshops;
coordinate data gathering for analysis;
build and refine economic and analytical modes;
help project managers and decision makers interpret analysis;
point out when additional information and analysis would improve a decision;
conduct an assessment of decision quality;
and coach decision makers.
Regularly assess and review to improve the quality of your decision making.
An organization that has adopted these four steps should also assess the quality of decisions after the fact. The assessment should address not only actual business results - which can involve both politics and luck - but also the decision-making process and whatever information the manager relied on.
The organization should regularly performs "look-backs" on major decisions, and assesses not only outcomes but also how the decision might have employed a better process or addressed uncertainty better.
Making decisions is one of the most important things we do in our daily living. It is also the toughest and riskiest in some situations. Bad decisions can damage your career, business and finances, sometimes irreparably.
So where do bad decisions come from?
In many cases, they can be traced back to the way the decisions were made:
the alternatives were not clearly defined,
the right information was not collected,
the costs and benefits were not accurately weighed.
But sometimes the fault lies not in the decision-making process but rather in the mind of the decision maker. The way the human brain works can sabotage our decisions.
Psychological traps
There are a number of well-documented psychological traps that are particularly likely to undermine decision making. These include:
heuristics#,
biases and
other irrational anomalies in our thinking.
Your best defense is AWARENESS
There are specific ways you can guard against them. However, the best defense is always awareness.
By familiarizing yourself with these traps and the diverse forms they take, you will be better able to ensure that the decisions you make are sound and that the recommendations proposed by others (your subordinates or associates) are reliable.
Additional notes:
#heuristics:
These are unconscious routines we use to cope with the complexity inherent in most decisions. These routines serve us well in most situations. These simple mental shortcuts help us to make the continuous stream of judgments required to navigate the world. But, not all heuristics are foolproof. The resulting decisions often pose few dangers for most of us, and can be safely ignore. At times, the decisions arising from these heuristics can be catastrophic. What make all these traps so dangerous is their invisibility. Because they are hardwired into our thinking process, we fail to recognize them - even as we fall right into them.
