Warren Buffett speaks to UGA students

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Should You Bet Like Buffett?

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WARREN BUFFETT INTERVIEW FROM INDIA (MUST WATCH)

Think and Grow Rich - Napoleon Hill

How to be Rich - Napoleon Hill

Law of Success Definiteness of Purpose EXPLAINED Napoleon Hill (Rare Recording)

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Benjamin Graham Interview

Benjamin Graham Interview

A short transcript of an interview with the father of value investing taken way back in 1960.

Question - Can the average manager of institutional funds obtain better results than the Dow Jones Industrial Average or the S&P Index over the years?

Answer - No. In effect, that would mean that the stock market experts as a whole could beat themselves--a logical contradiction.

Question - Do you think, therefore, that the average institutional client should be content with the DJIA results or the equivalent?

Answer - Yes. Not only that, but I think they should require approximately such results over, say, a moving five-year average period as a condition for paying standard management fees to advisors and the like.

Question - What general rules would you offer the individual investor for his investment policy over the years?

Answer - Let me suggest three such rules:

Rule1: The individual investor should act consistently as an investor and not as a speculator. This means, in sum, that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase--in other words, that he has a margin of safety, in value terms, to protect his commitment.

Rule 2: The investor should have a definite selling policy for all his common stock commitments, corresponding to his buying techniques. Typically, he should set a reasonable profit objective on each purchase--say 50 to 100 per cent--and a maximum holding period for this objective to be realized--say, two to three years. Purchases not realizing the gain objective at the end of the holding period should be sold out at the market.

Rule 3: Finally, the investor should always have a minimum percentage of his total portfolio in common stocks and a minimum percentage in bond equivalents. I recommend at least 25 per cent of the total at all times in each category. A good case can be made for a consistent 50-50 division here, with adjustments for changes in the market level


http://investorzclub.blogspot.in/2011/09/benjamin-graham-interview.html

Security Analysis by Benjamin Graham and David Dodd pdf

Security Analysis, the revolutionary book on fundamental analysis and investing, was first published in 1934, following unprecedented losses on Wall Street.

Benjamin Graham and David Dodd chided Wall Street for its myopic focus on a company's reported earnings per share (eps), and were particularly harsh on the favored "earnings trends." They encouraged investors to take an entirely different approach by estimating the rough value of the operating business that lay behind the security. They have given actual examples of the market's tendency to irrationally under-value certain out-of-favor stocks.

The book is must read for any Stock Market Investor, fundamental analyst or equity research professional.

Investment Policies (Based on Benjamin Graham)

Summary of Investment Policies

A. INVESTMENT FOR FIXED INCOME:
US Savings Bonds (FDs)

B. INVESTMENT FOR INCOME, MODERATE LONG-TERM APPRECIATION AND PROTECTION AGAINST INFLATION:
(1) INVESTMENT FUNDS bought at reasonable price.
(2) Diversified list of primary common stocks (BLUE CHIPS) bought at reasonable price. 

C. INVESTMENT CHIEFLY FOR PROFIT: 4 approaches are open to both the small and the large investors:
(1) Representative common stocks bought when the MARKET level is clearly LOW.
(2) GROWTH STOCKS, when these can be obtained at reasonable prices in relation to actual accomplishment – GROWTH INVESTING.
(3) Purchase of securities selling well BELOW INTRINSIC VALUE – VALUE INVESTING.
(4) Purchase of WELL-SECURED PRIVILEGED SENIOR ISSUES (bonds and preferred shares).
(5) SPECIAL SITUATIONS: Mergers, arbitrages, cash pay-outs.

D. SPECULATION:
(1) Buying stock in new or virtually new ventures (IPOs) .(2) TRADING in the market.
(3) Purchase of "GROWTH STOCKS" at GENEROUS PRICES.


_______________


For DEFENSIVE INVESTORS: Portfolio A & B
(Portfolio A: Cash, FDs, Bonds Portfolio B: Mutual funds, Blue chips)

For ENTERPRISING INVESTORS: Portfolio A & B & C
(Portfolio C: Buy in Low Market, Buy Growth stocks at fair value, Buy value stocks i.e. bargains, High grade bonds and preferred shares, Arbitrages)

For SPECULATORS: Portfolio D
(Should set aside a sum for this separate from their money in investing.)

________________
________________


Types of Investors

Graham felt that individual investors fell into two camps : "defensive" investorsand "aggressive" or "enterprising" investors.

These two groups are distinguished not by the amount of risk they are willing to take, but rather by the amount of "intelligent effort" they are "willing and able to bring to bear on the task."

Thus, for instance, he included in the defensive investor category professionals (his example--a doctor) unable to devote much time to the process and young investors (his example--a sharp young executive interested in finance) who are as-yet unfamiliar and inexperienced with investing.

Graham felt that the defensive investor should confine his holdings to the shares of important companies with a long record of profitable operations and that are in strong financial condition. By "important," he meant one of substantial size and with a leading position in the industry, ranking among the first quarter or first third in size within its industry group.

Aggressive investors, Graham felt, could expand their universe substantially,but purchases should be attractively priced as established by intelligent analysis. He also suggested that aggressive investors avoid new issues.


Click and read also:

****My Investment Philosophy, Strategy and various Valuation Methods

Are You an Intelligent Investor?

Knowing Yourself and Keep Investing Simple and Safe

Sorry, the links below are no longer available.

Use the link to directly download the ebook in PDF format

http://books.expect-us.net/dl/Graham%20&%20Dodd%20-%20Security%20Analysis%20(6th%20ed).pdf

http://myinvestingnotes.blogspot.com/2013/09/security-analysis-benjamin-graham-and.html

One up on Wall Street by Peter Lynch pdf

The New York Times best seller "one up on wall street by Peter Lynch" has more than one million copies sold through out the world. Peter Lynch, the world's greatest and the most successful fund manager, was undoubtedly the best stock picker of his time. Anise C. Wallace of The New York Times says "Mr. Lynch investment record puts him in a league by himself ".

Any investor should pay heed to what Mr. Lynch has to say and this book is full of advises by Mr. Lynch himself. He has shared loads of his own personal experiences of stock picking during his tenure at Fidelity Magellan Fund, which is truly a priceless treasure for any equity investor.

Use the following link to download this fabulous book in pdf format: One up on Wall Street by Peter Lynch

The Magic of Compounding

Warren Buffett Investing Secrets.

Warren Buffett Investing Secrets.pdf

Free e-book

The 7 Habits of Highly Effective People

TSM Global (At a Glance)

17.3.2012
TSM Global
Income Statement	9M	9M
	31.10.2011	31.10.2010	Absolute Chg	Change
Revenue	272.46	288.92	-16.46	-5.70%
Gross Profit			0.00	#DIV/0!
Operating Profit	31.194	45.847	-14.65	-31.96%
Financing costs	-0.273	-0.655	0.38	-58.32%
PBT	34.795	52.596	-17.80	-33.84%
PAT	26.279	41.7	-15.42	-36.98%
EPS (basic) sen	12.73	20.73	-8.00	-38.59%
Balance Sheet	31.10.2011	31.1.2011
NCA	91.007	75.462	15.55	20.60%
CA	250.299	176.154	74.15	42.09%
Total Assets	341.306	251.616	89.69	35.65%
Total Equity	284.042	300.543	-16.50	-5.49%
NCL	3.965	2.319	1.65	70.98%
CL	53.3	48.753	4.55	9.33%
Total Liabilities	57.265	51.072	6.19	12.13%
Total Eq + Liab	341.307	351.615	-10.31	-2.93%
Net assets per share	1.370	1.540	-0.17	-11.04%
Short term Investm	41.089	37.869
Cash & Eq	91.433	96.833	-5.40	-5.58%
LT Borrowings	0.316	0.516	-0.20	-38.76%
ST Borrowings	19.002	9.104	9.90	108.72%
Net Cash	113.204	125.082	-11.88	-9.50%
Inventories	54.093	42.26	11.83	28.00%
Trade receivables	63.685	64.693	-1.01	-1.56%
Trade payables	33.918	25.237	8.68	34.40%
Working capital	196.999	127.401	69.60	54.63%
Quick Ratio	3.68	2.75	0.93	34.04%
Current Ratio	4.70	3.61	1.08	29.97%
Cash flow statement	31.10.2011	31.1.2011
PBT	34.795	52.596	-17.80	-33.84%
OPBCWC	71.386	81.839	-10.45	-12.77%
Cash from Operations	87.630	49.731	37.90	76.21%
Net CFO	70.241	34.237	36.00	105.16%
CFI	-58.578	-11.998	-46.58	388.23%
CFF	-2.893	-36.286	33.39	-92.03%
Capex	-23.846	-16.860	-6.99	41.44%
FCF	46.395	17.377	29.02	166.99%
Dividends paid	-6.370	-3.132	-3.24	103.38%
DPS (sen)	5.01	2.46	2.55	103.38%
No of ord shares (m)	127.213	127.213	0.00	0.00%
Financial Ratios
Gross Profit Margin	0.00%	0.00%	0.00%	#DIV/0!
Net Profit Margin	9.64%	14.43%	-4.79%	-33.17%
Asset Turnover *	1.06	1.53	-0.47	-30.48%
Financial Leverage	1.20	0.84	0.36	43.53%
*annualised
ROA	10.27%	22.10%	-11.83%	-53.54%
ROC	12.40%	19.55%	-7.15%	-36.56%
ROE	12.34%	18.50%	-6.16%	-33.32%
Valuation	6.3.2012	4.3.2011
Price	1.22	1.65	-0.43	-26.06%
Market cap (m)	155.20	209.90	-54.70	-26.06%
P/E**	5.91	5.03	0.87	17.33%
P/BV	0.55	0.70	-0.15	-21.77%
P/FCF	3.35	12.08	-8.73	-72.31%
P/Div	24.36	67.02	-42.65	-63.65%
DPO ratio	0.24	0.08	0.17	222.73%
EY**	16.93%	19.87%	-2.93%	-14.77%
FCF/P	29.89%	8.28%	21.62%	261.09%
DY	4.10%	1.49%	2.61%	175.07%
Cash per share RM	0.89	0.98	-9.34%	-9.50%
**9M Earnings

TOP GLOVE NET PROFIT SURGED BY 109%

Financial results for the second quarter ended February 29, 2012 (“2QFY12”)

Klang, Thursday, March 15, 2012 –Top Glove Corporation Bhd (Top Glove) today announced sales revenue of RM549.0 million and net profit of RM54.2 million in 2QFY12 for the financial year ending 31 August 2012.

Revenue for 2QFY12 recorded a growth of 13% to RM549.0 million from RM485.2 million in the corresponding quarter last financial year, and net profit surged 109% to RM54.2 million from RM25.9 million.

On a six month cumulative (September to February) comparison between 1HFY12 and 1HFY11, revenue rose 13% to RM1,103.8 million from RM976.7 million and net profit improved 39% to RM86.7 million from RM62.3 million. The improved performance was attributed to an increase in glove demand, improved operational efficiency and a downtrend in latex prices which reduced from an average of RM8.14/kg in 1HFY11 to RM7.58/kg in 1HFY12.

Top Glove’s Group Chairman, Tan Sri Lim Wee Chai commented “The stronger US dollar and lower latex prices gave us better net profit for 2QFY12. We have learnt from past experience on excessive increases in latex prices and shall remain cautious to continue with our planned strategy for a more balanced product mix of latex and nitrile gloves to cater to on-going customer preference.”

Rare Earth Issues

Points of Maximum Financial Risk and Financial Opportunity

 

Nestle - Projecting its future

Nestle					CAGR	CAGR
	15.3.12	31.12.10	31.12.06		2006-2010	2006-2011
	2011	2010	2006		4 Years	5 Years
Market Price $	56.3	43.34	24.8		17.82%	14.98%
Turnover $	4,700,994	4,026,319	3,275,541		7.49%	5.29%
Earnings (sen)	194.58	166.91	112.67		11.55%	10.32%
Div (sen)	180	165	100		12.47%	13.34%
P/E	28.9	26.0	22.0
EY	3.46%	3.85%	4.54%
DY	3.20%	3.81%	4.03%

Projections of Nestle using the following assumptions:
- EPS GR of 8% per year, that is, its earnings double in 9 years from 2011.
- At the end of the 9 year period in 2020, its intrinsic value was at PE of 22x.

	Projections			EPS GR 8%		Projections
	PE 22	15.3.12		CAGR		Using Historical Price
Year	2020	2011				2020
Market Price $	85.6152	56.3		4.77%		56.3
Turnover $		4700994
Earnings (sen)	389.16	194.58		8.01%		389.16
Div (sen)	360	180		8.01%		360
P/E	22.0	28.9				14.5
EY	4.55%	3.46%				6.91%
DY	4.20%	3.20%				6.39%

Using the above 2 CONSERVATIVE assumptions, you can expect a total return per year of about 9.6% if you were to invest into Nestle today.  This return is derived thus:  about 4.77% from capital appreciation and about  4.8% from dividends.

The more enterprising investor may wish to look for investments with a higher return of 15% or more.  Nevertheless, a return of 9.6% is good for many.

Please note that the projections are over a long period of 9 years.  Over the short term, the price of Nestle can be volatile too and your return may even be negative depending on the price you paid to own it.

Graham defined investment thus: An INVESTMENT OPERATION is one which, upon THOROUGH ANALYSIS, promises SAFETY OF PRINCIPAL and a SATISFACTORY RETURN. Operations NOT meeting these requirements are speculative. 

Nestle revisited

In the year 2001, the after tax EPS of Nestle was 87 sen. and its share price was trading between $19.30 to $21.20, with a P/E ranging from 22.2 to 24.4.

For someone who bought Nestle in 2001, where was the margin of safety of this company?

Margin of safety in a company comes from various sources.  Among these are the qualitative factors which are difficult to quantify mathematically.  Nestle has durable competitive advantage and economic moat.  The only assessment for the investor is to "guess intelligently" what its earnings growth will be over the next few years.  

Margin of safety concept can be applied in two ways.  One that is obvious is buying a company at a big discount to its intrinsic value.  Of course, intrinsic value is not easy to determine and does vary widely depending on the assumptions one makes in deriving this value.  Another method that is not obvious, is the margin of safety that exists too when the present price that you are paying is at a discount to its intrinsic value based on its growth projections, conservatively estimated.

Let's look at Nestle.  In 2001, you were paying 22.2 times for $1 of its after tax earnings.  Was this underpriced, fair price or overpriced relative to its intrinsic value, conservatively estimated based on its growth potential?  Growth projections are at best intelligent guesstimates.  Nestle was projected to grow its business profit at 8% per year at that time.  Therefore in 9 years from 2001, it was projected then to have an EPS of 2 x 87 sen = 174 sen.  

Assuming that Nestle in 2010 had the same PE of 22.2, its share price in 2010 should be 22.2 x 174 sen = $.38.63, or CAGR of 8%.  The average DY of Nestle was 4%.  Nestle paid out virtually all its earnings as dividends.  Therefore, its DY in 2001 based on historical cost was 4% but in 2010, its DY based on historical cost was 8% (dividend paid had also doubled).  This was an average dividend yield of about 6% per year for that period.  Should you have reinvested all the dividends back into Nestle, you would probably be able to compound your initial investment at more than 14% per year.

So, in 2001, Nestle's PE was 22.2x.  Yet, knowing its earning growth potential, conservatively estimated, there was margin of safety even buying at this price, with a reasonable degree of probability.  Using a conservative growth estimate in earnings of 8% per year, its earnings was projected to double in 2010.  Based on this EPS projection, its (future) intrinsic value would be higher and herein was the margin of safety demanded by the value investor.  

Such way of investing may not appeal to some investors.  It is too difficult for them to realise that growth creates value.  One should be happy to pay a higher PE to own a stock of higher quality, better earnings growth, lesser risk and greater certainty of a positive sustainable return.

Buying a wonderful company at a fair price has made those who know how, very rewarding and rich indeed.  There is no reason to change something that has worked consistently over 2 decades of investing.