kcchongnz blog
2016 Christmas Reflection in i3investor.com kcchongnz
Merry Christmas to all readers in i3investor. Thanks for the administrator of i3investor for making this place a fun place for diverse group of people to share knowledge, experience, opinions, or simply rants and rave.
I have dwelled in i3investor for about 5 years now. It is like my third home, a favourite home I visit almost every day, even when I am in my first, or second home. The benefit I have derived from this third home is enormous, to say the least. Firstly, it satisfies my desire to share knowledge and experience in my passion in finance and investing. I have made a lot of e-friends and Bloggers, and some of them have become friends, good friends in many countries; United States, Australia, New Zealand, China and Singapore, and of course, all over Malaysia, East and West, whom I sometimes go for a drink or makan, in KL/PJ, Ipoh, Penang, Kuching and Singapore. I don’t know about you, I highly treasure friendship. In Chinese, we have this saying,
“At home, we depend on our parents/children, outside we depend on friends”
Ben Franklin said, “A True Friend is the Best Possession”
i3investor has been providing me with a great place for me to share my knowledge, experience and opinion about life, personal finance and investing, from about 5 years ago, and at the same time, learnt some valuable lessons too. I have so far written and posted 256 articles in i3investor in a span of 3 years. You are welcomed to go to my blog within i3investor in the link below:
http://klse.i3investor.com/blogs/kcchongnz/
I am a believer of the firm foundation theory in investing, the fundamental value investing (FVI), that investing is akin to investing in a small part of a business, that one must know the language of business. Most of my articles discuss about how to see if a business is doing; what business is it in? How does it make money? Does it provide good return, better than the cost? Is the business sustainable and likely to last for some time? Does it provide the company with real cash that it can grow internally, and at the same time able to distribute dividends to shareholders without issuing more shares, or borrow more? Has the management increasing shareholder values throughout the years? Is the business risky, laden with huge debts etc.?
A good company is not necessary a good investment, and vice versa. It also depends on what is the price one has to pay. In this respect, I have also shared in numerous articles in i3investor on how to value a company, and hence its share. I have shared simple market valuation techniques such as price-to-earnings, price-to-book, price-to-cash flows, price-to-sales, dividend yield etc., using many examples from real Bursa companies. These market valuation techniques provide some good ballpark references on price versus value for us to make a good judgment before investing in a stock.
“If something is easy to compute and understand, it is extremely unlikely that the market will misinterpret it. Therefore, such information will not, by itself, provide evidence of mispricing.”
I went further and have written a few articles emphasising the use of enterprise value in valuation such as that of Ebit multiples, i.e. valuation at the firm level taking into consideration of all capital providers, equity shareholders, debt holders, warrant holders, etc., again using real companies from Bursa as examples.
I have even introduced the discount cash flows analysis for valuing companies, something which one learns in a finance curriculum in university, using various practical ways of estimation of discount rates and future cash flows. Very few people can grasp this concept. However, as I have mention before, it is like an additional loft wedge in your golf bag. A golfer needs not to have that, but if he has and he can use it well, he may improve his golf game.
How would one know what price to pay for an asset without having a grasp of what it is worth?
I have presented a few investing strategies in i3investor in the last 4 years. The most frequent investing strategy I have been harping on is the Joel Greenblatt’s Magic Formula which used just two metrics, i.e. ROIC and Earnings yield, EY.
http://klse.i3investor.com/blogs/kcchongnz/
http://klse.i3investor.com/blogs/kcchongnz/55070.jsp
http://klse.i3investor.com/blogs/kcchongnz/59705.jsp
My next favourite investing strategy is the dividend yield investing strategy, with some checks on what to look out for using this strategy.
http://klse.i3investor.com/blogs/kcchongnz/103906.jsp
I am also proud of the Coldeye 5 yardsticks investing strategies which I devised after listening to Coldeye presentation 4 years ago.
http://klse.i3investor.com/blogs/kcchongnz/75946.jsp
Just goggle “Coldeye investing strategy”, and my name will appear first on the list. I have also introduced the asset-based investing strategies such as the Graham net net, negative enterprise value etc. which did not seem to work well in Bursa.
I have also shared the investing thesis for a number of stocks, more than 20 of them, with detail analysis and comprehensive reports in i3investor. A couple of them tanked such as Plenitude and Coastal Engineering, but they generally are doing okay. That is what long-term investing is.
I have also shared my analysis on some stocks after their quarterly results were announced recently such as Hevea, KESM and Thong Guan.
http://klse.i3investor.com/blogs/kcchongnz/104613.jsp
http://klse.i3investor.com/blogs/kcchongnz/104956.jsp
http://klse.i3investor.com/blogs/kcchongnz/104749.jsp
I have also written a few articles on how to avoid the pitfalls in investing. In fact, that was my very first article in i3investor when I first started my own blog within i3investor, on “A Christmas Reflection of the Pitfalls in Investing in Bursa 2013”.
http://klse.i3investor.com/blogs/kcchongnz/45373.jsp
Subsequently, there are many more articles about it as below:
http://klse.i3investor.com/blogs/kcchongnz/60180.jsp
http://klse.i3investor.com/blogs/kcchongnz/67199.jsp
http://klse.i3investor.com/blogs/kcchongnz/78262.jsp
http://klse.i3investor.com/blogs/kcchongnz/80930.jsp
http://klse.i3investor.com/blogs/kcchongnz/81916.jsp
I felt this is very important as in investing, one should take care of the downside first by avoiding lemons, and let the upside takes care of itself. Winning is just a part of the equation in investing; not losing is an equally important part, if not more important part of it. I advocate a reasonable expectation in investing, for long-term, to build long-term wealth, rather than speculating and hoping for quick gains.
“You can’t produce a baby in nine months by getting 9 women pregnant at the same time” Warren Buffet.
I have shared my opinion on the power of mean reversion in investing, and be wary of it.
http://klse.i3investor.com/blogs/kcchongnz/95848.jsp
While there are many temptations to use borrowed money as constantly encouraged in the internet, in i3investor included, I am proud to propagate, furiously, to the younger generation and newbies to avoid it, at all costs.
http://klse.i3investor.com/blogs/kcchongnz/44344.jsp
http://klse.i3investor.com/blogs/kcchongnz/61822.jsp
http://klse.i3investor.com/blogs/kcchongnz/82699.jsp
http://klse.i3investor.com/blogs/kcchongnz/91556.jsp
The avoidance of gambling mind-set in the stock market is a conventional wisdom. These few years, I am sure many people who used margin finance and heed what I wrote, would have prevented from losing big time in the volatile stock market.
I propagated the awareness of the role of luck in investing, recognize risks, to use a proper process in investing to mitigate them.
http://klse.i3investor.com/blogs/kcchongnz/79050.jsp
I shared my knowledge in how to understand corporate exercises and evaluate whether they are useful and shareholder enhancing exercises, and how to go about evaluating the price adjustments.
http://klse.i3investor.com/blogs/kcchongnz/79280.jsp
http://klse.i3investor.com/blogs/kcchongnz/79724.jsp
http://klse.i3investor.com/blogs/kcchongnz/106438.jsp
I also shared my knowledge about derivatives used by investment bankers and companies such as call warrants, company warrants, ICULs, preference shares, etc., and how to value them. I constantly warn against punting in call warrants, which I have had some bad experience too.
http://klse.i3investor.com/blogs/kcchongnz/71783.jsp
Besides the above, I, as a certified financial planner, have also written a couple of articles for the young people, to make use of the human capital in themselves, to focus on career, utilize the eighth wonder of the world to save and invest wisely in part of a business (stock), for long term to build wealth slowly but surely.
http://klse.i3investor.com/blogs/kcchongnz/77460.jsp
http://klse.i3investor.com/blogs/kcchongnz/91536.jsp
I have also provided my opinion on some cognitive bias, such as over-confidence, over-optimism in investing, and the need for diversification to curb against disastrous outcomes. These cognitive biases can have disastrous result in one’s investing outcome. Guard against them if you wish to build long-term wealth, slowly but surely.
http://klse.i3investor.com/blogs/kcchongnz/78742.jsp
“A pervasive human tendency towards overconfidence causes investors to express overly strong opinions and rush to summary judgements” Robert Shiller
I have also written some articles on qualitative and quantitative aspects of personal finance, retirement planning etc., both for the young and the old.
http://klse.i3investor.com/blogs/kcchongnz/49472.jsp
http://klse.i3investor.com/blogs/kcchongnz/49384.jsp
http://klse.i3investor.com/blogs/kcchongnz/82882.jsp
http://klse.i3investor.com/blogs/kcchongnz/99685.jsp
So, within this three years, I am very happy that I have achieved a readership of close to 3.2 million as on today on the Christmas 2016. Thanks to this great blog network in i3investor that there's a ton of people that I can share to bounce ideas off for just about anything on investing, and learn from each other. Yes, I have learned a lot from them too.
I have even got many forumers to participate in my online fundamental value investing course, and I have learnt heaps from them too. Many have become good investors themselves after learning the basics of FVI from me, by further continuous learning on their own. These people are spread over the whole world including Europe, Australia, New Zealand, China, Singapore, East and West Malaysia. They are of all ages, up to 80+, and down to students of age 20, from different professions. They cover a wide and diverse group of people, many doctors, a few specialists, engineers, computer professionals, investment bankers, corporate executive directors, blue collar people, students, housewives, and retirees. Many of them have become my good friends. This I have fulfilled my great passion in investing and the sharing of it, and it continues to keep me motivated.
Thanks again for all of you, including i3investor who have provided me with this golden opportunity, and all these have enriched my life.
You are welcomed to visit my blog and give comments, whether positive or negative at,
http://klse.i3investor.com/blogs/kcchongnz/
Finally, I would like to say sorry if my articles have directly or indirectly offended anyone. I didn't realize some of my articles could be sensitive but I mean no malice. This is a great season to ask for forgiveness.
Merry Christmas and happy new year.
K C Chong
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Discussions
20 people like this. Showing 40 of 40 comments
12 Christmas carols by Jim Reeves
https://www.youtube.com/watch?v=z7KG5_EUxZg
2016-12-25 19:22
I would say KC is the best writer in I3, and KYY is the moray arrogant cock.
2016-12-25 20:58
You are forgiven, KC. Do not simply attack others. Keep peace in i3, pls. God bless you.
2016-12-25 23:21
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.
2016-12-25 23:43
Very good summary of your articles from the past. Thank you for your generous sharing all this while in i3. Merry Christmas!
2016-12-26 00:37
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.
2016-12-26 00:45
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.
2016-12-26 03:20
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.
2016-12-26 08:06
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!
2016-12-26 11:55
Geary
This strategy is the best I have encountered.
It is strange that not more people are using this.
Cheers.
2016-12-26 12:06
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.
2016-12-26 13:13
kcchong, keep it up....teruskan usaha kamu..your articles help a lot...terima kasih, bro....
2016-12-27 00:37
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
2016-12-27 01:23
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!
2016-12-27 01:59
kc chong, i only invest in dividend stock type since 2016...memang dapat rezeki tahun ini....http://klse.i3investor.com/blogs/kcchongnz/103906.jsp
2016-12-27 02:24
3iii
When is yr Pt 2 "Common sense approach to selecting a business. " ready?
Pls share.
2016-12-27 02:35
yes...aku pun sedang tunggu pt2...3iii, bila lagi nak share dengan kira orang???
2016-12-27 02:43
<<<
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.
2016-12-27 14:01
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.
2016-12-27 17:09
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.
2016-12-27 21:50
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.
2016-12-27 21:53
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.
2016-12-27 21:56
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.
2016-12-27 22:00
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.
2016-12-27 22:03
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.
2016-12-27 22:19
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.
2016-12-28 09:03
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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..:)
2016-12-25 18:54