kcchongnz blog
Furniture design and making companies 040615 kcchongnz
“It is unwise to be too sure of one's own wisdom. It is healthy to be reminded that the strongest might weaken and the wisest might err.” Mahatma Gandhi
I like to write about stocks, not only investable stocks but also give constructive criticisms to other stocks. At times I am very blunt especially those rubbish stocks such as this threads below. Sorry to those who were offended but I meant no malice as they were purely for knowledge sharing as you can see I provided a lot of my justifications.
http://klse.i3investor.com/blogs/kcchongnz/45373.jsp
http://klse.i3investor.com/blogs/kcchongnz/59866.jsp
http://klse.i3investor.com/blogs/kcchongnz/60180.jsp
http://klse.i3investor.com/blogs/kcchongnz/66355.jsp
http://klse.i3investor.com/blogs/kcchongnz/67199.jsp
I also provide what I think are very constructive criticisms, and useful for those who hold the stock with a different point of view, such as the few threads I have for the stock V.S.
http://klse.i3investor.com/blogs/kcchongnz/76875.jsp
http://klse.i3investor.com/blogs/kcchongnz/77138.jsp
http://klse.i3investor.com/blogs/kcchongnz/77274.jsp
http://klse.i3investor.com/blogs/kcchongnz/77720.jsp
http://klse.i3investor.com/blogs/kcchongnz/77884.jsp
http://klse.i3investor.com/blogs/kcchongnz/77938.jsp
In these cases, I also provided my detail analysis on them fully substantiated with my arguments. Why are there a few threads? That was because my response to the comments have to be substantiated, and the explanation were long. The last one “V.S Sayonara” was titled as this was the last post on V.S. No more.
I didn’t know they were offensive to some people because all this while I was hoping for people here to give me opposite views to what I have written in my stocks selections. That would curb my overconfidence and mistakes in buying some call warrants and a couple of company warrants. How I wish someone then had warned me about them and I would thank them profusely.
Ok back to business. Here I was told not to bising bising and examine my own record. Not very sure what it really means; whether if I have made multi-million from the stock market? But that is a little boastful, or 陳腔濫調 isn’t that? And how to prove that I have made multi-million Ringgit from the stock market? Just by telling you I have done that? Where is my proof? To gather and compile all my trading records? So it is not easy. Shih, actually I didn’t make millions.
Let me take an easier way out, how I have shared my investing knowledge publicly in i3investor? This is a little bit nobler, isn’t it as I am sharing knowledge and not boasting about how much I have made? I can’t bluff here as I have to base on some records publicly available, specifically in this website.
Posted by calvintaneng > Jun 4, 2015 12:02 PM | Report Abuse
“As for all furniture stocks it was KcChongNz who first highlighted it. And I told people to buy all furniture stocks in his posting.
KcChongnz is like a weighing machine. He just give the figures as they are. No more. No less. However, over a short period the stock market is a voting machine. But over a longer period the share market turns into a weighing machine”
Posted by kai8994 > Jun 4, 2015 02:25 PM | Report Abuse
“http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/40360.jsp
http://klse.i3investor.com/blogs/kcchongnz/66908.jsp
KC shared the good thing about furniture stocks since Nov 2013. I suggest to understand KC and learn more about his contribution before taking a swipe at him.”
Uum, almost forgot about the above. Thanks Calvin and kai8994. I know Calvin very well. I even criticized his favourite stock (sorry Calvin, no malice intended), but with facts of my own. Actually we won’t know how MPCorp will end up in the long-term. It may probably be like what Calvin have said. But the fact is he never have a bad word on me. Instead he has been talking positive things about me. Thank you Calvin.
I don’t know who this kai8994 is but thanks for bringing that up. You consoled me. Now I can “examine my track record”.
Furniture companies
Yes, I started to talk about furniture design and making companies in i3investor since 5th November 2013, almost two years ago. My posting was put up by the courtesy of another former who have contributed a lot in i3investor. He is Tan KW, the one who also organized “Stock Picks Challenge” way back in early 2013. At that time there were only two of us, me and Ooi Teck Bee and I was in for the first two of the challenges. More about that in my later postings. The link below was my posting.
http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/40360.jsp
Three furniture stocks were discussed in the first posting; Homeritz, Latitude and Lii Hen as that time, I was not familiar with too many furniture stocks yet. A small time retail investor mah. My analysis was based on public available information, mainly the financial reports of their past and recent financial performance. Yeah yeah I know, past records no use, must forecast, and make predictions. But I was poor in making predictions and still am. Sorry ah.
Obviously some accounting terms were used, but they are just the language of business, because I was analysing businesses. The terms profit margin, return of equity (ROE), and return on invested capital (ROIC) are just part of the language of the business, nothing mystical, or accounting jargon. I don’t use accounting jargon to impress anybody. I myself is not an accountant. I am a civil engineer. If you care to read the most popular “Letters to shareholders” by Warren Buffet, these terms appear all the time. If you read any business evaluation and valuation books and reports, they appear everywhere. Isn’t investing in a stock investing in part of a business?
I discussed about their profit margins, what their ROE and ROIC are and compared which appeared to be better company and I listed them down. I talked about how their ROEs were achieved by using DuPont Analysis, the simplest three-step DuPont analysis. By the way, DuPont analysis is so popular that all analysts know them and understand their importance. It is not any accounting jargon to impress anyone. Any analyst who doesn’t agree, your opinion is most welcomed.
You could see that all the furniture companies discussed had double digit ROE and ROIC, and higher than their costs of capitals. This is what Warren Buffett said in his 1992 Letter to shareholders:
“Leaving question of price aside, the best business to own is one that over an extended period can employ large amounts of capital at very high rates of return. The worst company to own is one that must, or will, do the opposite – that is, consistently employ ever-greater amounts of capital at very low rates of return.”
So you could see that those furniture companies were good stocks to invest in then, on 5th November 2013, with their share prices then, not 4th June 2015.
Then I went further to compare the price they were offered, as you all know, it is not how good the company you buy, but the price you pay, as the price you pay eventually determines your return. I tabulated their market valuation as below:
|
Table 1: Market Valuation |
|
|
|||||||
|
|
xxxxxxx |
Homeriz |
Lii Hen |
Latitude |
|||||
|
|
PE |
7.0 |
4.2 |
5.3 |
|||||
|
|
EV/Ebit |
3.9 |
2.9 |
5.1 |
|||||
|
|
EV/FCF |
4.6 |
11.6 |
4.3 |
|||||
Subsequently on the feedback by other forumers, a few other furniture stocks were included in the analysis, including Hevea, and Poh Huat. Besides the commonly used PE ratio, I also used enterprise value. Again enterprise value is nothing mystical about it. It is not an accounting jargon, but a simple business language. Think about it as a businessman, when you acquired say a public listed company, you don’t just pay the money to the common shareholders. You have to settle all the interest bearing debts of the company too, and if the company has minority interest, you also need to settle their claim of the company, don’t you?
If you have looked at the PE ratios, enterprise values and their free cash flows, you would noticed that they are all No-Brainer Investments. Why NBI? Great companies with high return on capitals selling at cheap price and high cash yields.
I was discussing about those furniture stocks, I talked about how to identify good companies and how the performance of good companies looked like; margins, ROE and RIC. Knowing how to identify good companies is not enough, but were their prices selling reasonable; PE ratio, enterprise value over earnings before interest and tax, cash yields, etc. They aren’t jargon but just the language of business.
I talked about the same thing again and again here, like a broken record too, sharing what good companies are, and selling at cheap prices:
http://klse.i3investor.com/blogs/kcchongnz/59705.jsp
http://klse.i3investor.com/blogs/kcchongnz/66908.jsp
http://klse.i3investor.com/blogs/kcchongnz/67260.jsp
But what prices were they selling at that time and what are their returns now? Table 2 below shows the share price then and now, and the comparison with the broad market.
Table 2: Total return of some furniture stocks from 5th November 2013
|
Company |
Homeriz |
Lii Hen |
Latitude |
Hevea |
Poh Huat |
KLCI |
|
Stock code |
5160 |
7089 |
7006 |
5095 |
7088 |
|
|
Price then |
0.500 |
1.39 |
1.26 |
0.820 |
0.690 |
1803 |
|
Price 4/6/15 |
1.43 |
4.79 |
6.22 |
3.37 |
2.19 |
1852 |
|
Gain % |
186 |
245 |
394 |
311 |
217 |
3 |
*Note: Prices were adjusted for all dividends and any corporate exercises.
I favoured two stocks in the list, Homeritz and Latitude Tree. Homeritz has very high return on capitals. Latitude Tree has good opportunity to reinvest its cash flows. Nevertheless, all the furniture stocks returned in triple digits figures with less than 2 years since 5th November 2015, while the broad index went up just by 3%. Also see what those prices in the subsequent threads were, and compare with the return you would have got now.
Did I just shout to you to buy buy buy? Or was I sharing with you what good companies were, and if their prices were reasonable?
Actually I can tell you detail analysis aside, it could be I was lucky, lucky that the demand for furniture overseas increased by leaps and bounds since then and all the furniture companies did well.
Besides the Letters to shareholders by Warren Buffett, I also like to read what Howard Marks writes. One of my favourite saying of his is as below:
“That’s because in the world of investing, being correct about something isn’t at all synonymous with being proved correct right away.” Howard Marks
For those who are interested to learn about how to avoid big losses in the stock market, or to invest in good stocks selling at reasonable or cheap price for a small fee, please contact me at
KC Chong (4th June 2015)
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Discussions
13 people like this. Showing 50 of 111 comments
Terima kasih la OTB for sharing on margin financing
I suppose cut loss is important too betul??
2015-06-06 19:15
Mr. Ooi,
Advising investors not to use margin financing to speculate in the Chinese market "stupid"?
These are some of the share price movement in the Chinese market.
• ChiNext, a Chinese stock exchange frequently compared to America's tech-heavy Nasdaq, is already up 165% just this year.
• The average stock on the ChiNext exchange has a P/E of 140. Even after a six-year rally, the average P/E for American stocks is closer to 20.
• There have been 144 IPOs in China so far this year. On average, they've jumped 539%!
• One Chinese company (China National Nuclear Power) wanted to raise $2 billion in an IPO. Investors tried pouring $273 billion into it!
"The Economist told the story of Chinese company Kemian Wood Industry, a wood flooring company that had seen double-digit growth for "much of the past decade."
Looking to cash in on the mania surrounding tech stocks, it re-branded itself as Zeus Entertainment and changed its focus to online gaming.
It should be noted, making wood flooring and online video games... have very little in common.
Yet, investors doubled its share price after the name change!
Shanghai Duolun Industry specialized in real estate, but rebranded itself a tech company overnight.
How did it become a tech company? Well, it bought a website.
Mind you, it didn't do anything with this website. It simply bought the domain name (www.p2p.com), and put it up for sale for $100 million.
The only thing on the site is a number to call if you're interested in paying $100 million for the domain name.
The day after this tech rebranding, the company's stock soared so high that Chinese rules limiting daily price gains forced trading to stop!
2015-06-06 19:18
I guess your acvice is very inspiring. I better shut up.
Posted by Sunkist118 > Jun 5, 2015 06:50 PM | Report Abuse
Ha lar KC Chong very Cheong hei....Sir OTB alredi said mah how he play margin
Posted by Sunkist118 > Jun 5, 2015 06:57 PM | Report Abuse
Yay Sir OTB logic prevail again
Posted by Sunkist118 > Jun 5, 2015 07:19 PM | Report Abuse
That's why I differentiate Sir and Sifu. One stone throw many sifu but Sir very little hor
Posted by AzmiMerican > Jun 6, 2015 07:13 PM | Report Abuse
Is it all about managing risk la
Kc siang malam do calculations buat apa?? To manage risk la to reduce risk la
Kalau OTB can manage risk reduce risk bila guna margin financing I dont see what is wrong with using margin
Posted by AzmiMerican > Jun 6, 2015 07:15 PM | Report Abuse
Terima kasih la OTB for sharing on margin financing
2015-06-06 19:25
Kc I think you dah confuse market risk and finacing risk in Shanghai case la
2015-06-06 19:29
ks55, I know your philosophy. Just asking for fun. So if you won't encourage your son to use margin finance to speculate in the stock market, similarly you won't tell people to use margin finance, right?
But your son has been a trader for so many years, why can't he use margin finance, sure win one what?
Posted by ks55 > Jun 6, 2015 08:44 PM | Report Abuse
kcchongnz -- OPM or margin finance is definitely out of my dictionary. If you still can remember my posting in your other blog, I will never recommend it. So answer to your quiz is no.
2015-06-06 21:52
Shanghai index plunged from 5023 to the close of 4478 today, or 11% in just two weeks when the statement below was made.
Just wondering those investors in China scold me that I am a stupid fool or not if they asked and I gave my opinion that using margin finance is no good.
Posted by Ooi Teik Bee > Jun 6, 2015 05:42 PM | Report Abuse
Dear KC Chong,
To me, it is a wrong strategy not to use margin financing if the market condition is very bullish. Opportunity hits but once, I will make full use of this good opportunity. In Shanghai stock market now, the rapid rise is because most investors use margin financing. You tell the investors in China now, using margin financing is very bad, I believe many investors will scold you that you are a stupid investor.
2015-06-19 18:12
KCChong invests carefully on fundamental while OTB chases momentum stocks.
One investment approach might appear dull while the other looks exciting.
In both markets people make money.
However, it is better to make money with safety than be caught in the euphoria of recklessness.
All can safely invest on fundamental.
Not all succeed chasing momentum. Only the quick witted succeed. A large group will suffer losses.
.
2015-06-19 19:43
Hei Optimus !!! After attacking OTB, now you attack KC ? You kurang ajar !!! Get lost !!!
2015-06-19 21:48
Those who use margin finance to buy Parkson and Lion Industries may face music in days, if not weeks to come. It will include major shareholders like William Cheng if the price for these counters fall further. Why? All the shares are pledged. To play safe, avoid all WC's counters.
2015-06-19 22:05
Please don't descend so low in attacking characters.
Both KcChongNz and OTB have contributed to i3 forumers.
I am learning from both.
We might differ in ideology and approach. But we should respect each others' position.
Ideas my friends. Let us learn the best method.
Dr Jack Hyles said, "Great minds talk about ideas; good minds talk about things and weak minds talk about people."
OTB taught us to buy momentum stocks. If you can catch momentum stocks early and sell near peak you will earn lots of money.
Those bought momentum stocks with margin at the peak before it crashes is another story all together.
So you should first learn fundamental from KcChongnz. After that try to get in early on OTB momentum stocks. And don't be greedy. Sell into euphoria and take your profit early. Always play it safe.
2015-06-19 22:23
The problem I see is that when people cannot accept other people's views and always insist they are right, that is when the problem starts.
I always believe that there is more than one view in life unless it is so black and white that you cannot argue with that. One must learn to Agree to Disagree. If you strongly believe that leveraging is bad, so be it and present your arguments and that is that and vice versa; no point to continue talking about it.
Thank you for allowing me to share. Have a good weekend
2015-06-20 01:49
Totally agree. Those are such as optimus, fortunebullz, icon 888,optimus, sangharimua, salted fish. They think they r smart.
2015-06-20 02:00
To me, implying that you are learned person and a successful investor, and telling the general public to use margin finance to speculate in the stock market is a terrible thing to do. You can use it if you wish, but not telling people to do it, articulating your success in it when it could be due to luck, and forgot to tell any of your failure in using it. Haven't failed before? That you probably the only exception. But then you shouldn't base on on success and encourage others to do it when 70%, 80% of them failed, and failed miserably.
This is the only topic I kept on harping on, as I think it is terribly wrong, utterly irresponsible, and unethical.
Haven't I presented enough argument about leveraging? Please read these:
http://klse.i3investor.com/blogs/kcchongnz/44344.jsp
http://klse.i3investor.com/blogs/kcchongnz/61822.jsp
http://klse.i3investor.com/blogs/kcchongnz/73675.jsp
And where is your argument that using margin finance is good?
Please write one article and publish your reasons for encouraging the general public to use margin finance. I would love to discuss with you.
Yes, i would not stop talking about it, not just talking about it, but with facts and figures, just like before.
Posted by kiasutrader1 > Jun 20, 2015 01:49 AM | Report Abuse
The problem I see is that when people cannot accept other people's views and always insist they are right, that is when the problem starts.
I always believe that there is more than one view in life unless it is so black and white that you cannot argue with that. One must learn to Agree to Disagree. If you strongly believe that leveraging is bad, so be it and present your arguments and that is that and vice versa; no point to continue talking about it.
Thank you for allowing me to share. Have a good weekend
2015-06-20 04:54
Posted by kiasutrader1 > Jun 5, 2015 05:28 PM | Report Abuse
Hence he must have used his business skills instead of static numbers to consider investing. Mr Koon also encourage others to use leverage as the rate of interest is so low and if one did choose a good fundamental stock with good future prospects, even the dividends are able to repay the loan interest. Remember the interest cover ratio? The EBIT is your earnings before interest and tax.
Did you also in your blog, disseminated his wisdom when he recommended people to use margin finance to buy RSawit, JTiasa, XingQuan and Mudajaya within the last three years?
2015-06-20 10:34
China, HK over heated in short term. Next yr will be worse with more factories moving out. Any company say going expand in China, better be careful Liao.
2015-06-21 01:11
Haha, SMRT ppl in line in their thinking. Kcchong, Calvintan, fortunebullz. Of course me lah, investlah stock king. How to double, triple your money?
2015-06-21 01:14
Using margin will not help you double, triple! Good stock picking skill will!
Look what I did, in 2011, buy MYEG, 2012 nothing much done. 2013 skpres, inari, 2014 hl Ind. 2015???hehe
2015-06-21 01:16
Words of wisdom.
Posted by paperplane2 > Jun 21, 2015 01:16 AM | Report Abuse
Using margin will not help you double, triple! Good stock picking skill will!
2015-06-21 06:55
Both Mr Ooi and Mr Chong are excellent investors,however Mr Ooi definitely can stomach more risk when the opportunity arises.There is more than one right way to invest.
Since both of you have different risk profiles there is no point arguing any further whose method is best.
How do we compare a grade a orange with a grade a apple anyway?
2015-06-21 21:24
Very good,
3 Claps to i3 Forum Team!
To all here!
Both KcChongNz & OTB are sharing differing views.
There is a lot you all can learn here. Please be respectful & keep to the presentation of convictions. Ultimately the best course of action will prevail. What is the ultimate truth? The ultimate good?
That all must decide carefully.
2015-06-21 23:51
Charles Munger on Arrogance
On the morning of the battle of Waterloo, Napoleon Bonaparte smugly assured his generals, “I tell you Wellington is a bad general, the English are bad soldiers; we will settle this matter by lunch time.” Don’t be blinded by arrogance. A little humility can help you steer clear of disaster.
Just before the Titanic was about to embark on its maiden journey in 1912, one passenger asked a ship’s agent for extra insurance on some valuables in her luggage. The agent replied, “Ridiculous. This boat’s unsinkable.”
Captain Smith himself was asked about the safety of the Titanic. He answered – “I cannot imagine any condition which would cause a ship to founder. I cannot conceive of any vital disaster happening to this vessel. Modern shipbuilding has gone beyond that.”
Then, after the ship had struck the iceberg, a passenger asked her employer if they should do something about it. He replied, “Go back to bed. This ship is unsinkable.”
In 1997, the KLSE go go years. The SBI ran up by 156% from 256 points in November 1995 to 656 points at the end of March 1997, in just 16 months.Soon after that, as a result of the Asian Financial Crisis which started in Thailand and spreading to other Asian countries, both the KLCI dropped by close to 60% in about just half a year. The markets did recover substantially by about 35% between one to three months. That was the most dangerous part, as those who thought Jaw 1 had ended without knowing the appearance of Jaw 2. The markets plummeted by another 60% in another half a year later when KLCI and SBI closed at 303 points and 77 points respectively on 28 August 1998.
http://klse.i3investor.com/blogs/kcchongnz/73675.jsp
These events repeated in the Dot Com Bubbles in 2001, and the US sub-prime housing Crisis in 2008.
Will it happen to the Shanghai Market with the euphoria going on? Of course not. This were the statement made 2 weeks ago, and Shanghai Index has dropped by 11% since then.
"You tell the investors in China now, using margin financing is very bad, I believe many investors will scold you that you are a stupid investor."
The same statement was made again yesterday.
"The Chinese investors will scold you stupid fool not to use margin account, otherwise, you will be laughing all the way to the bank."
And more statement
"I am sorry ... I repeat ... I am sorry to say that a small investor like you will not use margin account, it does not mean that big investors will not use margin account to win big. May be I had spoken to all big investors only. "
Sure, i am a small investor,and you are a big timer, no doubt about it. And you win big, congratulations!
But the issue we are debating about is
"Should one encourage the general public in a public forum like this to use margin finance in investing?"
2015-06-22 02:38
HONG KONG (AP) -- Chinese stocks plunged on Friday as panicked investors rushed to sell over fears that an extended bull market was coming to an end. Other world benchmarks fell as a standoff between Greece and its international creditors threatened to drag into the weekend.
SHANGHAI SLUMP: After a sizzling rally that more than doubled Shanghai's benchmark index over the past year, investors are now heading for the exit. One factor appears to be authorities tightening rules on margin financing, which involves using borrowed money to buy stocks. The market's drop may also be exacerbated by the herd mentality of retail investors, who play an outsize role in China's markets, or by margin investors being forced to sell off to meet margin calls.
ANALYST INSIGHT: "Although I continue to be optimistic about the longer-term trend of the China markets, it's clear that we are in a sharp correction phase," said Bernard Aw of IG Markets in Singapore. He said up until Thursday, $1.2 trillion had been wiped off of China's equity markets since they peaked June 14 at $10 trillion.
ASIA SCORECARD: The Shanghai Composite Index in mainland China plunged 7.4 percent to close at 4,192.87, bringing its losses for the week to 12.4 percent. The smaller Shenzhen Composite Index tumbled 7.9 percent to 2,502.96. Hong Kong's Hang Seng dropped 1.8 percent to 26,663.87. Asian benchmarks outside of China were more muted.
2015-06-26 18:21
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Mr Ooi,
Last Friday Shanghai dropped more than 4%, fortunately it was followed by an equally massive 4% increase on Monday. Would you advice those on margin financing to cut loss on Friday? Would your chart be able to predict both swings? Is it ethical to encourage margin financing to the mass audience in a mad market fuelled by liquidity?
2015-06-06 19:15