kcchongnz blog
Does fundamental value investing (FA) have any predictive power? kcchongnz
In my last article, “Investing and the eighth wonder of the world” in the link below, I discussed about the power of compounding.
http://klse.i3investor.com/blogs/kcchongnz/92412.jsp
There was a comment below disputing something about using FA in investing in the article:
Posted by murali > Mar 3, 2016 10:39 AM | Report Abuse 
And I dont think U have the predictive power..yr FA is mainly on historical figures
It is a fair comment because even for me, I also have doubt in other investment strategies such as this:
Posted by stockmanmy > Mar 3, 2016 10:48 AM | Report Abuse
What Fa what Ta?
It is instincts ......either you got it or you don't.
Of course the second statement above is re-posted by me is just for us to have some fun here only. Nobody in his right frame of mind will take that joke seriously, except the author.
The first statement above prompts me to write this “Does fundamental value investing have any predictive power?” article in an attempt to provide my point of view.
It is said of value investing that either you get it or you don't. In Bursa, few give a damn to what fundamental value investing is, like the statement below.
Posted by blank > Mar 5, 2016 09:08 AM | Report Abuse
gosh, who cares what you think. : )
What they really care are these:
Posted by blank > Feb 22, 2016 04:20 PM | Report Abuse
oil up 3% Knm gogogooo...
Posted by blank > Mar 5, 2016 09:18 AM | Report Abuse
HSI-HQ up up up
Posted by blank > Mar 5, 2016 07:37 AM | Report Abuse
Going to dive more..ringgit will hit below Rm4 soon
These people mostly do not care anything of what business is the company which their stock they invest in and how the business performs. It doesn’t matter to them because they seem to have the predictive power of future share price movement. Well, everyone is different.
As a firm believer in fundamental value investing (FA), let me try my best to convince you again here, using some vigorous academic research studies.
Before dismissing academic research as pure theory or useless information, please note that unlike most stories telling and sweeping statements, academic studies are the product of months or years of work; they carry out econometric analysis of large sets of data and provide empirical evidence, rather than basing on a few observations to make an inference. It gives answers; not just yes or no, but also why and how and has to be proven with precise weighing of evidence. The essence of the scientific method is to come up with a hypothesis, test it, and then make sure it can be repeated — and not skewed by external factors.
So which evidence do you trust, just base on some results of a year or two or the most a few years and from a few people’s hearsay experience, or a simplistic "Golden Rule", for example for the success of a certain investment strategy, or a vigorous research basing on large sets of data and scores of years of empirical evidence with statistical evidence?
What has worked in investing?
Tweedy, Browne Company LLC (TBC), a well-established investment advisory group in the US managed approximately $21.4 billion for individuals, institutions, partnerships, off-shore funds and four mutual funds as of September 30, 2014, had published a little booklet on “What Has Worked In Investing”, latest edition 2009. It is a collection of about 50 studies of investment approaches used in the US and the world, including Malaysia, for many decades. Each of the studies evaluates the results of following a particular value-oriented strategy in a particular market over a particular period.
The studies evaluate cheapness relative to current assets, to book value, to profits, to cash flow, and to dividends. They also look at other indicators sometimes related to cheapness, such as insider buying and market capitalization.
The studies revealed that when stocks in any exchange are lumped into groups of the lowest vs. highest of the four multiples, P/B, P/E, P/CF, P/D, the groups of lowest multiples consistently outperform the groups of higher multiples, usually in a linear pattern (that is, the lowest outperform the preceding higher group). The degree of consistency is astounding.
A couple of them looked at the performance over 1, 3, and 5 year periods. surprisingly the lower multiple groups outperform about 70% of the time over a 1-year period, expectedly about 85-90% of the time over a 3-year period, and astoundingly 100% of the time over a 5-year period. Over the long term, the lowest multiple groups outperform the highest multiple groups by about 4-6% annually for any of the three multiples of P/B, P/E, or P/CF.
For those who are sceptical of what is the big deal of the excess return of 4%-6% a year for value stocks over the broad market, $100000 invested with a CAR of 15% would have grown by 1637% to $1.64m in 20 years, 2.43 times more compared to $673000 for CAR of 10% for the same investment outlay in the same 20-years’ period. That is why I have been emphasizing on the power of compounding in this link below:
http://klse.i3investor.com/blogs/kcchongnz/92412.jsp
The conclusion of the above studies is buying cheap in any form, be it be low P/B, P/E or P/CF (and also P/D) give better return than the broad markets, and in contrary to theory of investment, the better return doesn’t come with the price of higher risk as value stocks decline less than others in a bear market.
Some of the studies also show that combining small market cap value stocks with one of the low P/B, P/E, P/CF, or P/D leads to the best performing class of stocks. One of the very famous study by Eugene Fama, the Three Factor Model, is shown in this link below:
http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/39934.jsp
This lends additional credence that small-cap, value-based stocks are the best way to go in investing.
A couple of studies surprise the momentum investors with the conclusions that stocks that have underperformed over the previous 5-years period tend to outperform over the succeeding year-long period, by a whopping 18%. For value investors who believe in the power of mean reversion in the capital market, that is no surprise.
Some of the studies also cited that stocks with significant purchases by insiders generally outperformed the rest. That is actually an intuitive conclusion too, as insiders should know the company better than the rest of the investors.
These studies have consistently providing empirical evidence that Benjamin Graham’s principles of fundamental value investing, first described in 1934 in his book, Security Analysis, continue to serve investors well and have provided the best returns over long periods of time.
Up till now I could hear people shouting out there.
“These are all just research, theories. They have no use in the real world of investing.”
Again allow me to show you some fantastic extra-ordinary returns of real life established records in investing basing on this value investing approach.
The super returns of super value investors
I have shown the track records of each of nine disciples of the Master of Fundamental Value Investing, Benjamin Graham, who had generated annual compounded returns (CAR) of between 18% and 29% over track records lasting between 13 to 28 years as shown in the link below, out-performing the broad market by wide margins. All of them using fundamental value investing basing mainly on financial reports, and none using other methods of investing, nor any margin finance for exaggerated return.
http://klse.i3investor.com/blogs/kcchongnz/92412.jsp
Take for example of the investing experience of Walter Schloss who just invested in low price-to-book stocks and just by referring to the balance sheets, yes, historical figures, had made a CAR of 21.3% over a 28 years investing period for himself and his investors. $100k invested in a 28 years’ period becomes $22.3m, or a whopping gain of 2220%!
More recently more investors such as Joel Greenblatt, Seth Klarmen, Howard Marks, Mohnish Pabrai, Peter Lynch and many other fundamental value investing fund managers have all generated high return of over 20% CAR over an extended period of time of 20 years or more, purely using FA.
http://klse.i3investor.com/blogs/kcchongnz/88007.jsp
Many of the investment strategies used are quantitative investing basing on the financial statements, yes, mostly purely basing on value investing using historical figures. Of course some of them have better insights of the industries and future prospects of the companies they invested in too.
Still not convinced? I don’t expect it to be so easy to convince others on value investing, as Seth Klarman said, in value investing, either you get it, or you don’t. I can even hear shouting behind:
Posted by koonthebest > Oct 20, 2015 01:48 PM | Report Abuse
empty tong PONG PONG PONG! where your bursa statement!
please post the bursa statement past 3-5 years.unless proven to be real, his writing and analysis can be justified rubbish.
Well, I really don’t wish to show you my records, because you see I have never want to show off that I am rich from investing. As I have said, making a lot of money is nothing to be proud of, as it doesn’t add any value to the society. Very often, rich people extract value from society from making speculative gains from the market, of course from small retail investors. Who else?
However, I do have some established investment portfolios set up in i3investors more than three years ago, many of the stocks were selected with detail investment thesis for sharing purpose, not for showing off how rich I am, but merely sharing my little knowledge and experience in fundamental value investing.
Sorry, this is a repetition of what I have written before, done to prove the point.
My portfolio returns using fundamental value investing
My most recent link below summarized the return of the two portfolios; namely “GE13 Watch” and “Stock Pick Challenge 2013 Second Half”. Yes, the stocks in the portfolios were also in certain way, were based on historical figures as shown in the audited financial statements. I never have any predictive power of future share price movement and I have zero insider information as you know as I don't have any friends who are directors of the companies I invest in.
The link below shows my portfolio of ten stocks in the “GE13 Watch” return an average of 74.1% compared to the 3.6% of the broad market in a one-year period, over performed the broad market by a whoppping 70.5%!
http://klse.i3investor.com/blogs/kcchongnz/48946.jsp
After three years, the “GE13 Watch” portfolio of 10 stocks returned 134%, beating the total return of the broad market of 5.7% by another whopping 128% for the three year investing period.
http://klse.i3investor.com/blogs/kcchongnz/88504.jsp
All 10 stocks in the portfolio have positive total returns, none has lost money, showing the low risk value investing strategy. Yes, we should also talk about risk, not only return.
The average return of the second portfolio, “Stock Pick Challenge, 2H” of eleven stocks with shorter period of about two and a half years is a whopping triple digit of 120%, beating the flattish broad market by the same magnitude.
There are only two stocks which under-performed the market by just, again signifying that this value investing strategy which not only can yield superb return, but also at very low risk.
For your information, a 120% return over a three years’ period equals to a compounded growth rate (CAR) of 30% a year. If the return of my portfolios can maintain that CAR for 20-30 years, then they would have beaten those records of all the super investors. Of course it is easy said than done, as when the size of the portfolios grow, it is harder to maintain high return.
I have no records established in i3investor to show you longer period of return. Hence I just did a 10-years back-testing by combining the 19 stocks I have in the two portfolios. This is a more representative period covering a boom and bust cycle of 10 years. It yields a cumulative return of 472%, or a CAR of 24.4% for a 10-years period, way out-performed the broad market return of 6% during the same period as shown in the link below:
http://klse.i3investor.com/blogs/kcchongnz/92412.jsp
Conclusion
Many academic research has shown that FA works in the past in the US and all over the world, and it continues to work, and it works on a standalone basis. I have also shown the real life successful investing of many FA super investors who have high CAR for extended period of time. Furthermore, I have also shown with my own experience using FA investing in Bursa also works well in a 1 year, 3 years and back testing to 10 years’ period. These results were obtained by just using FA, and without having to use any leverage.
So does fundamental value investing (FA) have any predictive power? You should make your own educated judgment.
Here is a recommendation from a forumer here:
Posted by murali > Mar 3, 2016 09:19 AM | Report Abuse
Before u started yr venture in stock market, make sure u learn FA first...go buy Cold Eye's books or sign up for KC's online FA courses (thought I admit I dont really understand his contents...)
Thanks for the recommendation, murali. I can tell you it is not easy to get kind words from murali. It is an honour.
Although I have a degree in Master of Finance, I don’t teach you useless modern portfolio theory, the alpha, beta, gamma and all the jest. I teach simple, real life investing knowledge; how to read and interpret financial statements which is the language of the business, and how to value stocks.
If you are investing in a stock, you are investing in a part business of the company which issues the stock and how can you have success in investing if you do not understand the language of the business? And how can you be successful if you don’t have a feel how much the business, or the stock, is worth?
Of course you can’t survive well without some knowledge of behavioral finance which is also emphasized in the course too.
Don’t worry that you can’t understand what I am talking now. Most people “can’t” understand because they have not learned about it, or they just refuse to believe FA is the way to go in investing, and that they are not willing to spend some time and effort for this very important thing in their personal finance.
If you don’t spend any effort, pay a small tuition fee instead of huge cost in losing money in the stock market because you simply punt in the market, of course you will not gain anything, or will even lose big. Isn’t that logical?
If you join my course, you don't have to buy Coldeye's book too as it will be given to you free of charge, plus many other some of the best fundamental value investing books.
Here is my email address if you are interested to learn about FA online at your own time and space
K C Chong
Appended here is a testimony:
Keng Leng Ho 1/3/16 10:16 PM (17 hours ago)
Dear KC,
Thank you so much for your teaching and guidance. I did not submit all my homework due to work and family commitments but I followed intensely and closely the course which I find highly educational, interesting, practical and useful.
I have learned the language of value investing in stock market. I believe this is one of the most valuable knowledge I have ever learned.
Does the course make a difference to me in my investment journey?
I had started investing in Bursa two years ago. I bought the shares of good companies which were strongly recommended by professional analysts. I had no ideas of terms like safety margin, undervalued, ROE/ROIC, free cash flow, 'Good company is not a good investment if the price is not right' etc. So I bought Skpetro, MKH, Trop, KSL, LBS at high prices, and I suffered big losses.
Since I joined the course, I practiced what I learned. I invested in companies with deep values, with consistent growth, dividends and piles of cash. I bought shares of Magni, padini, Elsoft, CScenic, Hexza, Hevea, Willow, Tguan, FLBHD ect. Most importantly, I bought them when they were selling cheap at the time of big market correction a few months ago.
There is significant improvement in my investment returns since then (from net loss of 50 K then to net profit of 60 k now excluding dividends).
I understand share market is volatile, it can turn on me anytime. But as you always say, in value investing, heads I win, tails I don't lose much. I hope this will be the case for my investment by practicing value investing.
I still have a lot to learn. With the foundation that you have laid for me, It is much easier to learn by myself now. I have a dream: to establish a stock portfolio that will generate enough dividends for me for my daily expenses and retirement, in other words, financial free. I believe now I am much more well equipped to go after my dream.
Once again, thank you very much, my dear teacher and mentor.
Regards,
Ho KL
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Discussions
10 people like this. Showing 50 of 108 comments
Another example is mudajaya. Can they really pull off their India IPP this year ? If IPP takes off, Will there be other hidden nasty surprise that will offset whatever gain ?
These are questions nobody has answers. But the growth driver is there
U have to try your luck
2016-03-07 07:17
Another example is BJCorp, can their Vietnam lottery really be launched by June 2016 ? If yes, will it fly ?
Nobody has answers, but growth driver is there
2016-03-07 07:19
Another is EG
New factory by Q3, will business take off as planned ?
Is it as immuned to forex as I think ?
You need to bet
2016-03-07 07:20
There are many many others. If u dig hard enough, u will find them
But they will be your bets, not guaranteed return
No guarantee will work as expected
But at least you are not shooting in the dark
That is how I pick stocks
2016-03-07 07:22
Tekseng is another good example
Capacity will expand by 200% by second half this year, and mostly backed by orders
Wil it fly ?
There are many factors in play : risk of solar slow down? Share cap increase due to fund raising ? Price has gone up from 40 sen to 110 now, still can go ?
Nobody had the full answers. You need to bet
But it is an educated bet, u are not operating in a vacuum . That makes it better than playing in casino
That is what punting is about , for me
2016-03-07 07:46
Purebull, to demonstrate the usefulness of your TA, u need to write before the stocks go up
If u r successful in demonstrating that, people will queue up to see you
I found your concept interesting
However, I would like to complain about lack of predictive stock ideas
Can recommend some stocks, and do so by using your TA techniques to explain why u pick them ?
I am very keen to read
2016-03-07 07:52
TA has better Predictive value while FA gives u a peace of mind when prices fluctuates up and down. : )
2016-03-07 08:37
Value investors, after analysing if a stock is a good stock, only buy them if they are selling at reasonable price, or better still, cheap. Some may look at the momentum of the stocks, but that is after deciding the two earlier two factors. But most don’t have to and yet their records are fantastic as clearly shown in this article. If those stocks eventually become momentum stocks, and prices shoot up, that is actually the result of finally more investors discover that they are good and cheap, and hence start chasing after them. It is then a bonus and reward time for value investors. For those who chase the “momentum” later when the price has exceeded the value, most suffer losses.
So value investors who hold value stocks and you tell them about they are doing momentum investing, then you are the worst joker to make them lol.
Value investing has no boundaries of what industries the stocks are in. They are not necessary must have 20 years’ record and must hold for another twenty years. It is good to have some years of record earnings and cash flows, and value investors will sell them when their prices reach their intrinsic value, and intrinsic value is not a historical value, but an educated estimate of its present value from its future cash flows.
Physics is an exact science. Investing is more of an art. Can use the principle of sciences to do artistic investing?
If you disregard investing in a stock is investing in a business, or value investing; i.e. buying good companies at good prices, and only shout about your momentum investing, the super value investors will lol at you such as one of these:
“In 30 years in this business, I do not know anybody who has done it successfully and consistently, nor anybody who knows anybody who has done it successfully and consistently. Indeed, my impression is that trying to do the market timing is likely, not only not to add value to your investment programme, but to be counterproductive.”
John Bogle on market timing
What is a cynic? A man who knows the price of everything, and the value of nothing. Oscar Wilde, Lady Windermere’s Fan
“Candle sticks, flags, pennants, and tea cups-staples of the chartist’s stock in trade-are for the birds.”
Oh, yeah, I didn’t say the above. They are from the great super value investors of the world with proven records.
Posted by PureBULL . > Mar 7, 2016 07:01 AM | Report Abuse
There r 2 broad classes of investing even learned people r confused of :
i. Value investing
ii. Momentum investing
If u r buying or holding momentum stocks n u tell people about value investing then u r the best joker to make everybody lol.
WB is the best master in value investing.
What is he been buying ?
Stocks with solid track record of growth in a span of 20 yrs. n he shall buy in the believe that these cos. will again mirror the same n better increasing profit performance in the next every 20 yrs n perpetually.
This is called value investing. n u can safely hold long term or for life because the stock price of these solid rock cos. will always rise higher from all mkt crashes to multiple record highs to the new blue skies.
then u shout with WB; price is what u pay, value is what u get.
U don't worry at all about Black Swan economic event causing misery to the stock prices.
WB's pillar of success:
i. World Population will forever increases, so is his biz n cos t/o.
ii. Higher global Inflation every yr with high pricing power.
Stock prices r the result of behavioral finance.
That's clearly shown in chart patterns or TA.
Behavioral finance effects both the above investing classes.
So use Knowledge of good TA for both. it works wonderfully.
What is momentum stocks ?
In physics, Momentum = mass X velocity
At Game Over, void of volume or speed of price increases or even at no price change, these stocks could plunge over nite. After a crash, many might not recover at all. It's a game with expiry date. Never spend too much time to analyze their engineered P&L n Cash-flow statements.
Use a simpler n better way to monitor them, like price action theory or weekly candle sticks to determine its trend.
2016-03-07 08:55
With stock prices down so much, many r easily agitated. there is high chance of picking a 'fight.'
The ladies called us gentlemen. Let's be truly gentle at all times.
The very best in stocks will not waste their precious time in i3, bcos he or she can make so easy money in stocks.
let me think n walk about it for a moment, pls kcchongnz. I know having your last support is like asking you for your life. but i don't need it oso. be Cool...
Dear Icon8888,
Now u really want my formula. I have so many scan formulas on Meta Stock program. 1 press, a list of prospective stocks r out in 10-15 seconds, mostly FA stocks. slow, right?
Becareful, might have to take very long holi days.
2016-03-07 08:57
Posted by PureBULL . > Mar 7, 2016 08:57 AM | Report Abuse
The very best in stocks will not waste their precious time in i3, bcos he or she can make so easy money in stocks.
let me think n walk about it for a moment, pls kcchongnz. I know having your last support is like asking you for your life. but i don't need it oso. be Cool...
There are many people who write here do not necessary want to make "easy money" in stocks.
"Who say investing is easy. Anyone who says making money is so easy in the stock market is stupid" Charles Munger (with a little modification)
Many here are happy, happy is the ultimate aim, to share their knowledge and experience, their life, political and investing experience etc.
I am doing reasonable well in investing without using momentum. But seriously, i will consider momentum later in my investing. it is an added tool.
However, I will never consider it before my value investing analysis of the stock, and i don't need those funny things like shooting stars, dojie, saucers and pans, or candle sticks. Some simple momentum indicators will do. And that is later, for sure.
2016-03-07 09:08
Purebull, it is very simple. You press a button and a whole list will come out. But at the end of the day, you need to pick up a few and buy, right ?
You just write about those that you bought, and then provide brief explanations why you bought them (in your case, it would be TA details)
We will then monitor the stocks to see how they perform.
2016-03-07 09:21
Please don't tell me "why should I teach you suckers how to do it ?"
Well, icon8888 is one that doesn't say that when he gave out ideas. So you won't be the first one to do that.
Having said so, if you will insist on charging a fee, most people probably won't mind paying, if they are convinced that the method works.
So it is up to you to choose : you can share your info free, or u can charge a fee
But of course, people will only agree to pay once they see reasonably consistent positive performance
Am I fair ?
2016-03-07 09:25
Past historical performance is a very good guide or indicator, it cannot be used as the determinant of the future business of the company.
For example:
CFY Rev PBT EPS DPS
31/12/2015 49,741 26,468 14.44 8.01
31/12/2014 45,143 20,789 11.13 7.01
31/12/2013 25,218 11,344 5.97 3.00
31/12/2012 18,758 6,665 3.62 2.01
31/12/2011 12,653 4,868 2.64 2.01
31/12/2010 11,269 4,063 2.18 0.99
31/12/2009 5,880 1,751 0.92 0.99
31/12/2008 16,430 6,785 3.70 2.00
31/12/2007 15,015 6,755 3.70 9.00
2016-03-07 09:37
The company's revenues and earnings dropped in 2009 and 2010. Since 2010, the revenues grew very fast indeed. How can these historical data guide you in your investing? What are the assumptions you use to determine the future prospects of this company?
2016-03-07 09:49
Dear kcchongnz,
I am very glad that u r doing a service to society by imparting your knowledge n experiences for a small fee.
To my knowledge, u r the TA taiko in i3.
I strongly believe many people, more so the newbies must seek knowhow on FA 1st, because FA is your 1st step to the long journey of stock investment. n kcchongnz is available for your advantage anytime now.
I was FA 1st of course. A true FA indeed. Out of BCT University, I was a Corporate Planning Officer with the most aggressive chinaman banking conglo. as my 1st job n last job. I did many projects on M&A, detail financial n biz feasibility studies, operational audits to advise mgmt co. to increase installed plant capacity n to enhance mkt development n penetration. I do know the very importance of FA to biz future prospect.
So kcchongnz, I do give u my full support.
We r trained as engineers not expert in charming people. Good to always say nice things about other people's tools or just nothing to be safe. Making others happy is key # 1.
1 day I might be in Auckland as your visitor, can or not ?
2016-03-07 10:00
Dear Icon8888 ,
Mkt not ter good. i too fearful leh.
Will try to impress SIFU Icon8888 1 day.
2016-03-07 10:04
For all KYY follower, its time for u to utilise ur margin account and buy more VS, Latitude, Liihen, Chinwell and FLBHD.
2016-03-07 10:08
Posted by PureBULL . > Mar 7, 2016 10:00 AM | Report Abuse
Dear kcchongnz,
I am very glad that u r doing a service to society by imparting your knowledge n experiences for a small fee.
To my knowledge, u r the TA taiko in i3.
I strongly believe many people, more so the newbies must seek knowhow on FA 1st, because FA is your 1st step to the long journey of stock investment. n kcchongnz is available for your advantage anytime now.
I was FA 1st of course. A true FA indeed. Out of BCT University, I was a Corporate Planning Officer with the most aggressive chinaman banking conglo. as my 1st job n last job. I did many projects on M&A, detail financial n biz feasibility studies, operational audits to advise mgmt co. to increase installed plant capacity n to enhance mkt development n penetration. I do know the very importance of FA to biz future prospect.
So kcchongnz, I do give u my full support.
We r trained as engineers not expert in charming people. Good to always say nice things about other people's tools or just nothing to be safe. Making others happy is key # 1.
1 day I might be in Auckland as your visitor, can or not ?
PureBull,
Thanks for your kind words. I do have some good golf kakis in Auckland, but not that many friends I used to have in Malaysia. So I always welcomed anyone visiting me in Auckland. Friends are forever.
I know next to nothing about TA, so your statement “To my knowledge, u r the TA taiko in i3.” Is incorrect.
Okay, now I know your education background and experience. So you must be an experienced financial professional and a knowledgeable investor. I respect you for that.
But bear in mind that your experience may be unique of your own, and not necessary others must also follow suit; like following momentum investing because your experience is that it is better than value investing.
I seldom comment of others method of investing, because I don’t know much about them. In here, I just cited what other super investors have said, which to a certain extend, I agree with them. But in my opinion, it is okay to give one’s critical opinion, be it positive or negative, as long as one doesn’t go into personal attack, just like what you started your comment here.
Saying good things on something you do not believe in, sounds like hypocrisy to me.
2016-03-07 10:41
Hi kcchongnz, Icon8888 n all,
Together we can create synergy.
JUST DO IT.
2016-03-07 11:07
Posted by PureBULL . > Mar 7, 2016 11:07 AM | Report Abuse
Hi kcchongnz, Icon8888 n all,
Together we can create synergy.
JUST DO IT.
PureBull,
I am in. Your call.
2016-03-07 11:14
I am one of his student in his value investment course. What you will learn from his course is more than theory in value investing (which what books usually teach). You will also learn practically how to value a company. After I am equipped with this knowledge taught by him, I became fearless even if the price drop a lot as I know what I am doing given the knowledge of margin of safety.
Investing is about long term and not short term.
"If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes" - Warren Buffett
I need to give credit to Mr.KC Chong for equipping me with value investment knowledge.
2016-03-07 12:56
The objective of fundamental analysis is to determine a company's intrinsic value or its growth prospects.
2016-03-07 13:12
Can I make a small request?
Can Guru kcchongnz n Sifu Icon8888 create 1 or 2 treads as the i3 launching base for VALUE n/or MOMENTUM Stocks to invest or trade at right timing, hopefully ?
I am very excited to share my shoutings at real time.
U 2 have critical mass support n followers.
IT's going to be exciting with all inputs coming in, sirs.
2016-03-07 13:46
Sorry for asking a noobish question. FA basically tries to forward price assets based on the historical or published knowledge about a counter, and projects it into a future where the price will rise to match upon the realisation of that potential. Yet for that to happen, the market have to be kind of "efficient" for that to happen (without some efficiency, undervalued stocks can stay undervalued.. forever). And yet the consensus outside academia (where EMH still prints tonnes of PhDs annually) is that EMH is kind of like a dead parrot...
2016-03-07 17:28
Without a PHD, my view is that Bursa is very efficient. This conclusion based on my day to day experience. Whenever there is money making opportunities, capital (many are retail,) will flow in to exploit. When something bad, they will dump. The era whereby fund managers tarik harga and only buy liquid stocks is gone. The market has been democratized, and as a result, becomes very efficient.
This is my view.
KC and everybody, if you think differently, please share your view. I am very keen to know how you feel. Thank you
2016-03-07 17:36
sometime I think the stock market is even more efficient than the exchange market....as if like you see price changes in the export counters much earlier than on the currency...when the cause & effects should actually be the other way round.
2016-03-07 17:40
It is not surprising , actually. If u look at i3, people are constantly brainstorming about each stocks, When so much efforts and thoughts are given to digest new info, how can market not be efficient ?
2016-03-07 17:42
Most time, a particular stock price is fairly priced, that is the market is efficient.
However, there are times when a stock price is not priced fairly, i.e. overpriced or underpriced.
Also beware of manipulators in a particular stock too.
You need to know the games you wish to play in, so that you don't end up the "patsy".
2016-03-07 17:52
icon. pity u la. your knowledge of stock mkt mechanism is so terrible.
wakakaka. cannot blame u la, you follow 1 holland sifu, 1 coma sifu.
the combination of which. means if u make money, is luck, if u dont make money and make holland stocks, its Normal.
2016-03-07 17:53
Posted by Icon8888 > Mar 7, 2016 05:36 PM | Report Abuse
Without a PHD, my view is that Bursa is very efficient. This conclusion based on my day to day experience. Whenever there is money making opportunities, capital (many are retail,) will flow in to exploit. When something bad, they will dump. The era whereby fund managers tarik harga and only buy liquid stocks is gone. The market has been democratized, and as a result, becomes very efficient.
This is my view.
KC and everybody, if you think differently, please share your view. I am very keen to know how you feel. Thank you
Icon, read this article of mine where you make your comments again and again.
Does it appear to you that the market is efficient?
2016-03-07 19:22
Posted by Icon8888 > Mar 7, 2016 07:35 PM | Report Abuse
Errrr.... Which article .... ? "Does FA have any predictive power " ?
Efficient market hypothesis states that stock price reflects all available information, and hence nobody can earn extra-ordinary return from the market. If there is, it is purely due to chance.
Price then is close to its value. But how can the value of a company can change by 5% a day, 30% in a month?
This articles has shown that using the various value investing strategies have consistently beating the market.
If the market is efficient, then those strategies can't beat the market. And how can they beat the market due to chance since they consistently have done that?
If market is efficient, how can the return of my portfolios shown here can beat the market by such a wide margin, every year for the last year.
And how can you yourself make extra-ordinary return from the market the last few years.
Warren Buffett used to say; if the market is efficient, I would be carrying a tin can in my hands on the streets.
2016-03-07 19:43
Say if we define 'efficient' as latest price instantly reflects the potential return from the investment based on all the latest available information correctly interpreted by the market.
If that's the case, in an efficient market one can only make a consistent better return than the average by (1) having an information accessibility advantage or (2) the speed of his response to the latest available information.
We can then further deduce that if people are able to make consistent better than avg return like what KC has shown earlier by the gurus...the efficient market assumption would then be incorrect.
So..if its true that such returns really can be made consistently (even now)...it really proves that the market is inefficient. (guess that's why the majority retailers always lose money in market ha?)
2016-03-07 19:46
LOL u r right, u r right... Your way of interpreting EMH is correct (now I remember my textbook).
I have interpreting it as "market is so dumb it is indifferent to news and development, thereby resulting in good stocks not re rated, and bad stocks not sold down"
Which of course is not EMH, LOL
Thank you for refreshing my memory
2016-03-07 19:49
Collecting, measuring and crunching past historical data helps. However, do not spend too much time or effort on these in your investing. These have values, but the benefit is probably marginal. The marginal return on investment may not be worthwhile if this incurs too much cost or uses too much of your time. Remember they are rear-view metrics. They might distract you from the things that are really more important.
You will be better off spending your time to discover if the company is gaining market share or not. This can be done through the "scuttlebutt" method or various readings (annual reports, news, industry newsletters etc.)
2016-03-08 06:32
All momentum FA stocks r dropping.
The pure speculative losing money co. r so strong.
mkt is so ironic.
The fun managers r more panic than retailers. It looks like it.
2016-03-08 11:22
Everyday's down kau kau.
Stock journey on the way down is the toughest job to handle.
all bcos of Uncle k proudly proclaimed that he had margin call.
smart funds on hearing it will clap hands n dump like crazy. it always end ugly.
It's dejavu all over again like in the late 90s, the young ceo of renung announcing that he will buy everything. the amore began popping Champagne n they 'belanja' all their stock holding to him enbloc.
Smart money or mkt movers need to be mindful of practicing CSR to safeguard an orderly mkt. I sympathize with the small players, though i hold non.
2016-03-08 11:37
Every trade you do is a battle between you and someone. Don't forget that you are putting yourself against some of the best brains in the world.
2016-03-08 11:41
if nobody wants a particular share then maybe all risks might have been driven all the way out of it.
perhaps its time to relook at it and buy. time to be greedy when others are fearful.
2016-03-08 12:17
Icon8888, many examples that you drawn, come out 1 conclusion. Using alibaba as example, beside determining a company potential, another essential factor you need to take into account is: whether the potential already price into the share price. If everyone knew the same things as you do, and media trumpet on it, then is really something need to be caution on.
2016-03-08 19:42
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Icon8888
Another example is adventa. They launched their dylasis business in January 2016, will their profit grow ? By how much ? When ?
Nobody had full answers for above, but the potential is there
Another educated bet
Posted by Ahbeng Beng > Mar 7, 2016 04:25 AM | Report Abuse
"Always stick to uncle Koon formula - buy something that you think next year can make more profit than this year"
Problem: If you know next year will be more profit than this year, others also knew it, and share price normally will not be cheap. Eg: alibaba, overly hyped, fulfilled criteria as they every year make more profit and is still growing, to date they are now down more than 30% from their previous peak.
2016-03-07 07:15