Value Investing 01 (May 08 - Dec 08)

[fclim]

We don't want to catch the disease called "the man with a hammer syndrome".

Good point on the hammer.... to a man with a hammer (and only a hammer), all problems looks like a nail... (to be hammered, that is!)... heee...

sorry for asking silly question, but i guess that's the only way i can learn... so here it goes...

my impression of TA is all charts.... and i'm quite bias against it... but i am afraid i may be wrong, and missing out some real good stuff...

so, the question to all forummers who know a bit to a lot of TA:
- how does TA help to "look for good companies" huh?

so, please enlighten me! use hokkien / chinese also can...

have fun,
fc

[la papillion]

Let me try

TA is not looking for good companies. It's looking for good trades. For pure technician, the business or even the name of the company plays no part in the chart analysis.

http://bp0.blogger.com/_3qF-4FCPF1I/R1V ... -04_lb.gif


Based on the ascending triangle with price target of 0.510, the trade setup will be to enter upon breakout of resistance line at 0.365, with suitable cut loss set in, in the event of breakout failure. Once target of 0.510 is reached, just sell. Of course, this is hindsight trading. I'm not good enough to do this consistently.

[iam802]

I will just add on to the above...

Chartist can avoid trading counters below certain price (eg. $0.50) and with average volume less than X (eg. 500k)

This reduce possible exposure to dodgy counters.

[millionairemind]

Wah, now TA comes into discussion in a Value thread...

OK, let me try. My TA is very rudimentary. I shall not use a stock owned by active forummers here. I only buy growth stocks and buy them when market is in an uptrend. A rising tide lift all boats, just like now a receding tide tanks all stocks.

Lets use a stock that I (used to own) - Cacola Furniture.

I entered Coke at 0.29 on Market follow thro' day on March 24. I added more positions at 33 after it broke out of a consolidation range between 30-32.

I sold out half my position at 41cts two days before market broke down and I headed for vacation. I sold out totally when market broke down on May 22. So it netted me around 35% profit for my 2 months of holding it, plus another 4% dividend.

Now it is priced at around 22cts!!!

If you do a FA on that stock, I cannot find anything wrong for that stock to be priced at 22cts... but I don't argue with the market.

Doing a buy and hold will net me a loss of close to 25% if I have been stubborn, instead of a gain of around 35%.

We all have to decide which investment style is suitable for us.

[helios]

yo Cheng,

1. don't call me Jie Jie okie? shhh ... (not so óld) ... pappy is old ... look at how he zapped up all the figures?

2. intangible assets can be valuated through financial processes ~ Brand Valuation they called it. Was discussing this with pappy, last night.

Brand => Branded Business => Branded Enterprise

i think, this should be the evolutionary path since we are seeing more chinese brands emerging into the economics equation.

EG: for Brand Enterprise, they will play the same game as in franchising 'the rights', by giving the 'freehold' of Brand [licence] to tile up a quattro-businesses, an empire of all niche products. (endless recombination, yeah?)

So, being a solution/ integrated provider might not be the future era of business-innovations, as the marketplace is flooded with the gates of globalisation ... ???

how do you valuate your intangible assets during the rise of sovereign funds, credit tightening? (isn't this Value? or differentiation?)

i have no answer.

scribbling on,

on Brand Due Dilligence:
- IP Rights, trademark design, colours patterns, symbols, class asssets, global registrations, survival class and obligations - whether the Brand is transferable between generations / innovate without consent or not; trademark validity certificate, neglect classes due to generic terms; infringements;
- intellectual processes, tracking systems;
- intellectual and legal expenses, exclusive know-how skills, creativity skills (people assets? culture?)

there are 3 approaches to do Brand valuation ...
(as defined by the UK guy who did the Brand Finance thingie)

- Cost approach: diligence, factor in re-branding cost, surveys on the economic return of the brand.
- Market approach: P/E, EDITDA, DCA? EPS?
- Income approach: cashflows, premium pricing product, relief-from-royalty, royalty saving rates, avoided cost.

i know, if you can tag a Value to the intangible assets, you will have a winner for long-run [and sustainability] ... we might not see, another Coke or Pepsi business again, as the World now is getting liquidy ... can we find another ápple in the Garden of Eden?

Tangibles + Intangibles = Value? (makes sense?)

Guan Xi 关系 = Value + Network-Value? (makes more sense?)

*the above = textbook answers.

[Cheng]

yo Cheng,

1. don't call me Jie Jie okie? shhh ... (not so óld) ... pappy is old ... look at how he zapped up all the figures?

2. intangible assets can be valuated through financial processes ~ Brand Valuation they called it. Was discussing this with pappy, last night.

Brand => Branded Business => Branded Enterprise

i think, this should be the evolutionary path since we are seeing more chinese brands emerging into the economics equation.

EG: for Brand Enterprise, they will play the same game as in franchising 'the rights', by giving the 'freehold' of Brand [licence] to tile up a quattro-businesses, an empire of all niche products. (endless recombination, yeah?)

So, being a solution/ integrated provider might not be the future era of business-innovations, as the marketplace is flooded with the gates of globalisation ... ???

how do you valuate your intangible assets during the rise of sovereign funds, credit tightening? (isn't this Value? or differentiation?)

i have no answer.

scribbling on,

on Brand Due Dilligence:
- IP Rights, trademark design, colours patterns, symbols, class asssets, global registrations, survival class and obligations - whether the Brand is transferable between generations / innovate without consent or not; trademark validity certificate, neglect classes due to generic terms; infringements;
- intellectual processes, tracking systems;
- intellectual and legal expenses, exclusive know-how skills, creativity skills (people assets? culture?)

there are 3 approaches to do Brand valuation ...
(as defined by the UK guy who did the Brand Finance thingie)

- Cost approach: diligence, factor in re-branding cost, surveys on the economic return of the brand.
- Market approach: P/E, EDITDA, DCA? EPS?
- Income approach: cashflows, premium pricing product, relief-from-royalty, royalty saving rates, avoided cost.

i know, if you can tag a Value to the intangible assets, you will have a winner for long-run [and sustainability] ... we might not see, another Coke or Pepsi business again, as the World now is getting liquidy ... can we find another ápple in the Garden of Eden?

Tangibles + Intangibles = Value? (makes sense?)

Guan Xi 关系 = Value + Network-Value? (makes more sense?)

*the above = textbook answers.

Thanks san jie jie, I understand better now

Ok now I know you are younger than pappy, can guess your age le

[fclim]

Wah, now TA comes into discussion in a Value thread...

OK, let me try. My TA is very rudimentary. I shall not use a stock owned by active forummers here. I only buy growth stocks and buy them when market is in an uptrend. A rising tide lift all boats, just like now a receding tide tanks all stocks.

Lets use a stock that I (used to own) - Cacola Furniture.

I entered Coke at 0.29 on Market follow thro' day on March 24. I added more positions at 33 after it broke out of a consolidation range between 30-32.

I sold out half my position at 41cts two days before market broke down and I headed for vacation. I sold out totally when market broke down on May 22. So it netted me around 35% profit for my 2 months of holding it, plus another 4% dividend.

Now it is priced at around 22cts!!!

If you do a FA on that stock, I cannot find anything wrong for that stock to be priced at 22cts... but I don't argue with the market.

Doing a buy and hold will net me a loss of close to 25% if I have been stubborn, instead of a gain of around 35%.

We all have to decide which investment style is suitable for us.

Hi mm,

Fantastic example to make money.... Does this kind of examples happen all the time? I'm asking abt the consistency / pencentage of getting that hit.... ermm... maybe based on your experience?

if the consistency is there, then it is likely i'll change my mind abt TA, seriously consider to change my full-time job to part-time job (coz my current job also my interest) and unlearn to relearn TA.... (prob I have to look for a sifu in the high mountains?)..

have fun,
fc

[cif5000]

If you do a FA on that stock, I cannot find anything wrong for that stock to be priced at 22cts... but I don't argue with the market.

Hi MM, I am trying to understand...do you actually mean that the stock should trade at 22cts?

[millionairemind]

CIF5000 - Sorry if i was not clear. No I don't mean that. I don't even know Y the stock trades at 22cts... lots of fear. If this is a normal trending market, I would have bought all my way up to 60cts if the stock market uptrend persists, depending on the price volume action of the stock. At 60cts, it is only sporting a PE of 6 with a growth rate of 40%.

With the growth rate, cash level, debt level, PE/growth ratio, I cannot find anything wrong on Y market will sell it down so sharply. But I don't bottom fish. Singapore stocks are tofu stocks. Goes up and down with market trend, with a lack of institutional support.

FCLim - My style is CANSLIM style. I adapted it for Singapore. Here is a thread that we started for CANSLIM.
viewtopic.php?f=16&t=262&st=0&sk=t&sd=a

We all have to figure out what works for us in the market.

Hope this helps. I think I will stop posting on this value thread least it dilutes the intention of this thread.

[Blackjack]

Recently my company invited AllianceBernstein for a talk on their views on equity valuations. Here's the essential points that they covered.
Presenter: Stuart Rae - Chief Investment Officer—Pacific Basin Value Equities

Basically they seem to be fundamentally longists and pride themselves on picking value stocks. On their growth division, I realised that its not all about high growth companies, but rather companies that present a disparity between market view and what has been generated by their house research. I formally thought it only referred to high growth companies (where there might not be a difference in opinion) They also acknowledged their weakness in currency play, which I thought is rather unusual for a company trying to ply business.

Anyway, the gist of their presentation is as such:
1) Forward PE, P/B and momentum are the best ways to generate the highest returns when it comes to value investing. The combination of value and momentum is very powerful.
2) Picks based on plain growth, ROE, ROA, earnings growth usually underperform the former.
3) Most sectors in china stocks are currently trading at levels far below the current world average PE.

Interesting China textiles are chosen as a case study as this is trading at the lowest band of PE.
Main points are:
- Labour costs are not as large an impact as one may expect
- China is encouraging a move by manufacturing industries to move up the value chain (this we can observe currently from some SGX counters as well)
- Expect to see labour-intensive activities increasingly outsourced.
- Value-wise this sector is the most underrated
- Momentum-wise this sector is 'horrible'