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40 comment(s). Last comment by bracoli at Dec 29, 2016 12:00 AM
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probability
9906 posts

Posted by probability > Dec 25, 2016 6:54 PM | Report Abuse

wonderful write up....thanks for the summary KC. Just wished we have a few more people like KC who talks so much sense with substance (or common sense) in i3... it would really be a wonderful place-rich in information.

Would extent my thanks for 2016 & best wishes on 2017 to itsjustaboutheprofit, WealthWizard, Icon, Jay, OTB, Bone, RicheHo, enning22 , TanKW, CharlesT and all those who maintained a single long term id with logical comments..:)


calvintaneng
26143 posts

Posted by calvintaneng > Dec 25, 2016 7:22 PM | Report Abuse

12 Christmas carols by Jim Reeves

https://www.youtube.com/watch?v=z7KG5_EUxZg


Abismail
646 posts

Posted by Abismail > Dec 25, 2016 7:26 PM | Report Abuse

Tq kcchong...


kkanagasg
547 posts

Posted by kkanagasg > Dec 25, 2016 7:42 PM | Report Abuse

Bellicose beggar


M17
23 posts

Posted by M17 > Dec 25, 2016 8:47 PM | Report Abuse

Merry Christmas, KC!


MoneyFace88
310 posts

Posted by MoneyFace88 > Dec 25, 2016 8:58 PM | Report Abuse

I would say KC is the best writer in I3, and KYY is the moray arrogant cock.


aidwiz
342 posts

Posted by aidwiz > Dec 25, 2016 9:54 PM | Report Abuse

merry xmas kc. have a good holiday.


shortinvestor77
3058 posts

Posted by shortinvestor77 > Dec 25, 2016 11:21 PM | Report Abuse

You are forgiven, KC. Do not simply attack others. Keep peace in i3, pls. God bless you.


einvest88
356 posts

Posted by einvest88 > Dec 25, 2016 11:43 PM | Report Abuse

It is always gd to put up a lot of articles using whatever basis u like...To me most the this book theory and approach just to create more jobs for ppl otherwise many will be jobless and economy will not grow if all choose to make money from stock market. However, to make big money the simplest approach always the best. If anyone had read what KYY put down how he made big in Supermax and the HK real estate company, obviously u can c he dare to hoot big during crisis. So, what it counts here is "Volume" and "Timing". Basically u just have to be patience wait for right timing to come...When it comes...must have confidence to load up even with margin...If u r mentally not prepare, no matter how well u master FA or TA, u r not going to be super investor.


Chi Fei
1 post

Posted by Chi Fei > Dec 26, 2016 12:37 AM | Report Abuse

Very good summary of your articles from the past. Thank you for your generous sharing all this while in i3. Merry Christmas!


supersaiyan3
1913 posts

Posted by supersaiyan3 > Dec 26, 2016 12:45 AM | Report Abuse

Wow, you almost cover everything! Great work!

You don't have to be sorry for doing the right thing, i know why you write those passages, just to tell what is right/wrong.

The stock market is a complex adaptive system, everything changes with information flows and the acts of participants influence each other simultaneously too. Your hard work brings more logic and positive energy to the system.


ccmeow
223 posts

Posted by ccmeow > Dec 26, 2016 3:20 AM | Report Abuse

Thanks kc for your great effort in the compilation of articles related to investment.I came across your blog a month ago,and was very impressed by your articles. I will take my time, slowly, to read through all the articles you have posted in i3 and also your own blog.I wish you a very happy and prosperous , Christmas and 2017 New Year.From:Ir. Chong Chin Meow 26/12/2016 03.19am.


kcchongnz
6341 posts

Posted by kcchongnz > Dec 26, 2016 8:06 AM | Report Abuse

Posted by ccmeow > Dec 26, 2016 03:20 AM | Report Abuse
Thanks kc for your great effort in the compilation of articles related to investment.I came across your blog a month ago,and was very impressed by your articles. I will take my time, slowly, to read through all the articles you have posted in i3 and also your own blog.I wish you a very happy and prosperous , Christmas and 2017 New Year.From:Ir. Chong Chin Meow 26/12/2016 03.19am.


Hi Chin Meow,

What a small world and the power of social media. You are two years my senior in MU Engineering. If I am not mistaken, a senior in Drainage and Irrigation Department too.

Great to hear from you, and merry Christmas.


3iii
5612 posts

Posted by 3iii > Dec 26, 2016 10:46 AM | Report Abuse

It is kind and generous of KCChong to share so many good articles in this forum.

Most have benefited from his generosity.


KC has shared (summarised):

1. A good company is not necessary a good investment, and vice versa.
Understanding the business and its model.

2. How to value a business? How would one know what price to pay for an asset without having a grasp of what it is worth?
Using P/E, P/BV, P/CF, P/Sales, DY etc.
Using EV/Ebit (Ebit multiples)
Using DCF (including how to estimate discount rates and future cash flows)

3. A few investing strategies
Most frequently shared - Joel Greenblatt's Magic Formula using 2 metrics i.e. ROIC and Earnings Yield EY
Dividend yield investing strategy
Coldeye 5 yardstick (http://klse.i3investor.com/blogs/kcchongnz/75946.jsp)
Asset-based investing (Graha's net net, negative enterprise value, etc)

4. How to avoid the pitfalls in investing.
Take care of the downside first, the upside takes care of itself.
The power of mean reversion in investing
The risks of margin financing and the gambling mind-set

5. How to understand corporate exercises
How are they useful?
Are they enhancing shareholder values?
How to go about evaluating the price adjustments?

6. Derivatives used by investment bankers and companies
Call warrants, company warrants, ICULS, preference shares, etc.
How to value them?

7. Personal finance
Maximise self human capital
Career
8th wonder of world (compounding)
Build wealth slowly and surely for the long term.
Qualitative and quantitative aspects of personal finance and retirement planning

8. Behavioural finance
Cognitive bias: over-confidence, , over-optimism
Diversification to reduce risk


I believe the one who teaches learns the most too, from my own experience.

Thanks for sharing your knowledge, KC.


geary
2597 posts

Posted by geary > Dec 26, 2016 11:55 AM | Report Abuse

Merry Xmas!!!.Well said 'einvest88'! Just follow Uncle Munger sitting on your 'ASS' investing. Uncle Buffett was changed by his right-hand man also. Buy a wonderful business at a fair price n Not a fair business at a wonderful price! Buy wz conviction, cause it takes only one opportunity to make u really Rich. D best is just buy 10 wonderful business wz full conviction n let d compounding rate of return do its job. Look for company wz double digits ROIC N ROE, net profit margin above 10% even recession, owner earnings growth n free cash flow growth average 7.2 %, EY more than 2X average AAA bond Yield, Dividend Yield of average AAA bond Yield. Zero debt or little liabilities below 5X owner earnings. Capex below 33% of owner earnings. Insiders are buying, plus company been buying back its shares. Gd luck!


3iii
5612 posts

Posted by 3iii > Dec 26, 2016 12:06 PM | Report Abuse

Geary

This strategy is the best I have encountered.

It is strange that not more people are using this.


Cheers.


3iii
5612 posts

Posted by 3iii > Dec 26, 2016 1:13 PM | Report Abuse

Fast growers, stalwarts, slow growers
Cyclicals
Asset Plays
Turnarounds

These are the 6 types of companies of Peter Lynch.

Are you wired to capture the investing opportunities of all these 6 groups of companies?

Price is what you pay, value is what you get.

Growers

Slow growers: Growth high single digits annually FCF +++ Dividends +++
Stalwarts: Growth 10% - 20% per year FCF +/++ Dividends +/++
Fast Growers: Growth >20% per year FCF -/+ Dividends minimal to nil
Don't we love the growers?
The danger here is the growth did not materialise.
Or the growth was short lived (short-lived growth).
The danger is overpaying for this growth.
Your better bet is to stay with businesses with durable (long term) competitive advantage.


Cyclicals
Do you know the business cycle of these companies?
These companies are to be bought and sold, not held for long term, usually.
Needs to have certain skill.
Not for the not so initiated.


Asset Plays
Can you value the assets?
Can you spot the undervalued assets before the other investors reprice them?


Turnarounds
These companies have fallen on hard time.
Slowly they are crawling out.
Can you spot them before the other investors do?
Many companies do not turnaround.


Unless you are very familiar with the industry, avoid cyclicals.
Investing in asset plays and turnarounds are challenging too.
Those invested in these may find their investments may remain in the rut longer than they can themselves remain solvent.
The reason being the other investors have not re-priced the stock in the manner of your thinking immediately or it maybe years before this repricing occurs.


malaysiaku
580 posts

Posted by malaysiaku > Dec 27, 2016 12:37 AM | Report Abuse

kcchong, keep it up....teruskan usaha kamu..your articles help a lot...terima kasih, bro....


paperplane
18008 posts

Posted by paperplane > Dec 27, 2016 1:23 AM | Report Abuse

Kcchongnz.althought some times I don't agree with you,but I think you make sense mostof the time. Merry Xmas and happy new yr


John Lu
4340 posts

Posted by John Lu > Dec 27, 2016 1:24 AM | Report Abuse

Paper sifu...what is your 2017 pick?


paperplane
18008 posts

Posted by paperplane > Dec 27, 2016 1:30 AM | Report Abuse

You will know yr end mah


John Lu
4340 posts

Posted by John Lu > Dec 27, 2016 1:31 AM | Report Abuse

Very excited to know from a 2016 champion mah


geary
2597 posts

Posted by geary > Dec 27, 2016 1:59 AM | Report Abuse

Uncle Munger quote,' Our methodology is too simple, only arithmetic n lower algebra is enough. No need higher algebra or rocket science! That why it's not famous. Uncle Buffett talk about valuation using DCF method, but his right-hand man, never saw him did it actually. Too many variables involved. The two famous investors have strong understanding of its business, they use business common sense to value a business model. The company product or service must has a durable competitive advantage over its competitors, wide economic MOAT! Gd luck!


malaysiaku
580 posts

Posted by malaysiaku > Dec 27, 2016 2:24 AM | Report Abuse

kc chong, i only invest in dividend stock type since 2016...memang dapat rezeki tahun ini....http://klse.i3investor.com/blogs/kcchongnz/103906.jsp


king36
555 posts

Posted by king36 > Dec 27, 2016 2:35 AM | Report Abuse

3iii 
When is yr Pt 2 "Common sense approach to selecting a business. " ready?
Pls share.


malaysiaku
580 posts

Posted by malaysiaku > Dec 27, 2016 2:43 AM | Report Abuse

yes...aku pun sedang tunggu pt2...3iii, bila lagi nak share dengan kira orang???


3iii
5612 posts

Posted by 3iii > Dec 27, 2016 2:01 PM | Report Abuse

<<<
king36 3iii
When is yr Pt 2 "Common sense approach to selecting a business. " ready?
Pls share.
27/12/2016 02:35

malaysiaku yes...aku pun sedang tunggu pt2...3iii, bila lagi nak share dengan kira orang???
27/12/2016 02:43>>>


Common sense part 2 was published a while back.


king36
555 posts

Posted by king36 > Dec 27, 2016 4:23 PM | Report Abuse

3iii,
can u be specific, I only got Pt 1 in search.
TQ.


3iii
5612 posts

Posted by 3iii > Dec 27, 2016 5:02 PM | Report Abuse

Blog: Business Sense in Fundamental Value Investing (FA) kcchongnz
Dec 12, 2016 05:51 PM | Report Abuse

Common sense approach to selecting a business.

1. It is common sense to look at a business track record over 10 years and not over 10 months.

2. It is common sense to like the business that has grown revenues consistently over than 10 years that those with no or erratic, unpredictable growth.

3. It is common sense to like the business that can maintain its profit margins higher than their peers in the same industry.

4. It is common sense to like the business that can maintain or increase (within certain constrains) this profit margin over the long time.

5. It is common sense to like a business that has grown its EPS consistently (adjusted for capital changes) over the last 10 years than one that has not grown its EPS or has erratic annual EPS, over the same period.

6. It is common sense to like the business with high quality earnings. High quality earnings are those generating a lot of cash from its operations (CFO).

7. It is common sense to like the business with high quality earnings, generating good CFO that are increasing year on year for many years.

8. It is common sense to like the business with capital expenditure (maintainance and growth capex) that are only a fraction of its CFO.

9. It is common sense to like the business with capex that are less than 25% of its CFO, over the long period.

10. It is common sense to like the business with high growing CFO and only spending less than 25% of its CFO on capex, as this means increasing Free Cash Flow (FCF) generated by the company over many years.

11. It is common sense to like the business with increasing FCF, as this is the owner's money which you know will make you very rich.

12. It is common sense to like the business with increasing FCF, as you know that such a company can use its FCF to pay down its debts, pay dividends, buyback company shares and to growth organically or inorganically. These companies as expected often have little debt.

13. It is common sense to recognise that companies with all the above characteristics are good quality companies with economic moats that are both deep and wide (have durable competitive advantage.)



This long list completes the first part of my common sense assessment of the companies I wish to invest in.

The second part follows soon.





Blog: Business Sense in Fundamental Value Investing (FA) kcchongnz
Dec 13, 2016 04:29 PM | Report Abuse

The first part on common sense in investing has dealt with selecting the great businesses with durable competitive advantage. They are the only stocks you need to own.

This is the second part on the topic of common sense to investing.

1, It is common sense that a great business can be often overpriced.

2. It is common sense that a great business can be a bad investment if you overpay to own it. (Don't overpay for growth).

3. It is common sense that to be a good investor you must be able to value the asset.

4. It is common sense that the best way to determine intrinsic value of an asset is to discount all its future cash flows by an appropriate discount rate (as taught by John Burr Williams).

5. It is common sense that the lower the price you pay below intrinsic value of the asset, the larger your margin of safety from potential loss.

6. It is common sense that the lower the price you pay below intrinsic value of the asset, the greater the potential for higher return on your investment.

7. It is common sense to stay with great businesses you understand (stay within your circle of competence).

8. It is common sense to seek out companies with managers of the highest integrity.

9. It is common sense that great businesses are difficult to find, once you own them, stay with them long term.




Summary:

Part 1 focused on common sense approach to selecting the great company.

Part 2 focused on common sense approach to determining intrinsic value of the great company.



To be truly a great investor, you have also to mastered portfolio management.


Happy Investing.


10206809984242765
10 posts

Posted by 10206809984242765 > Dec 27, 2016 5:09 PM | Report Abuse

Merry Xmas KC!!! thanks for your generosity of sharing your knowledge through your articles, it is really benefited me as a TA person that also love to learn about FA.


kcchongnz
6341 posts

Posted by kcchongnz > Dec 27, 2016 9:50 PM | Report Abuse

Posted by einvest88 > Dec 25, 2016 11:43 PM | Report Abuse
It is always gd to put up a lot of articles using whatever basis u like...To me most the this book theory and approach just to create more jobs for ppl otherwise many will be jobless and economy will not grow if all choose to make money from stock market. However, to make big money the simplest approach always the best. If anyone had read what KYY put down how he made big in Supermax and the HK real estate company, obviously u can c he dare to hoot big during crisis. So, what it counts here is "Volume" and "Timing". Basically u just have to be patience wait for right timing to come...When it comes...must have confidence to load up even with margin...If u r mentally not prepare, no matter how well u master FA or TA, u r not going to be super investor.


Good luck to you. anyway, thanks for your comment.


kcchongnz
6341 posts

Posted by kcchongnz > Dec 27, 2016 9:53 PM | Report Abuse

Posted by R3D3 > Dec 26, 2016 12:08 AM | Report Abuse
Chong: i3 is but a mere reflection of the market and the market being a complex voting machine, just consists of far too many complex personality. Which is why you cannot and should not expect others to follow and agree with your investment principals. In fact, there are those who will strongly disagree with you. As you know, you have strong conviction in your believes in stock investment principals, which is good but then, because of your sttong believes, some might find you arrogant and they would certainly be offended with what you write. It's just life. You cannot change this.


You are right that the market is a complex voting machine. I am just trying to tell my story that maybe it is good to treat it as a weighing machine eventually. Strange that people can get offended.

No, I never expect people to agree with me. That is not my problem.

Thanks for your comments.


kcchongnz
6341 posts

Posted by kcchongnz > Dec 27, 2016 9:56 PM | Report Abuse

Posted by supersaiyan3 > Dec 26, 2016 12:45 AM | Report Abuse
Wow, you almost cover everything! Great work!
You don't have to be sorry for doing the right thing, i know why you write those passages, just to tell what is right/wrong.
The stock market is a complex adaptive system, everything changes with information flows and the acts of participants influence each other simultaneously too. Your hard work brings more logic and positive energy to the system.


Thank you very much for your comment. You know as a writer in this kind of forum, I always ponder whether it is worthwhile to spend time here here. But each time I read a comment like yours, it keeps me going again.

Thanks again.


kcchongnz
6341 posts

Posted by kcchongnz > Dec 27, 2016 10:00 PM | Report Abuse

3iii,

Thank you very much for summarizing what I was trying to convey in a long winded article. Very good summary, including that part of "business sense".

Merry Christmas and Happy New year.


kcchongnz
6341 posts

Posted by kcchongnz > Dec 27, 2016 10:03 PM | Report Abuse

Posted by malaysiaku > Dec 27, 2016 12:37 AM | Report Abuse
kcchong, keep it up....teruskan usaha kamu..your articles help a lot...terima kasih, bro....

Terima kasih malaysiaku. Kamu selalu meberi saya semangat yang diperlui untuk berterus manulis.


ttwong
41 posts

Posted by ttwong > Dec 27, 2016 10:06 PM | Report Abuse

keep up the good works KC. Btw, your bahasa sxcks... :)


kcchongnz
6341 posts

Posted by kcchongnz > Dec 27, 2016 10:19 PM | Report Abuse

Posted by Amdi Hamzah > Dec 27, 2016 05:09 PM | Report Abuse
Merry Xmas KC!!! thanks for your generosity of sharing your knowledge through your articles, it is really benefited me as a TA person that also love to learn about FA.


Terima kasih banyak banyak. You have great future.


3iii
5612 posts

Posted by 3iii > Dec 28, 2016 9:03 AM | Report Abuse

You do not have to be super-intelligent to do value investing. You need common sense and good judgement. Also, you require a refined intellectual framework that helps you resist your emotionak twmptation. You should adopt and incorporate the framework to meet your particular invesring needs.


king36
555 posts

Posted by king36 > Dec 28, 2016 2:19 PM | Report Abuse

TQVM 3iii.
Merry Christmas and a Happy New Year to you ALL.


bracoli
2584 posts

Posted by bracoli > Dec 29, 2016 12:00 AM | Report Abuse

Hi kc for new year at least write a theme for 2017?

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