kcchongnz blog
Quality Investing kcchongnz
Why quality companies?
I happened to discover a random portfolio of 8 quality Bursa stocks in an internet forum recently. This portfolio consists of high quality big-caps stocks which are followed closely by fund managers and institutional investors. The stocks are; Petronas Dagangan, Nestle, Public Bank, Dutch Lady, Heineken Malaysia, LPI, Aeon Credit, and Carlsberg.
The portfolio returned an average of 362% over 10 and a half years as on 4th January 2019 as compared to the return of the broad index of 52% during the same period. The compounded annual return, CAR of the portfolio was a whopping 15.7%, close to 4 times the CAR of 4.1% of the broad index.
RM100,000 invested in this portfolio of stocks with equal weighting multiplied to RM462,000 in 10 and a half year, 3 times more than the RM152,000 of a portfolio invested in the 30 component stocks during the same period.
But how do we define a high-quality company?
Ask professional investors what they take value investing to mean, and responses will likely be consistent; buying stocks at low Price/Earnings, Price/Book, Price/Cash flows, high dividend yield etc. But ask the same people what they think of a high-quality company is, and responses will vary widely. Some refer to company having a high growth potential, good management, brand names, market leader of the industry, etc. Beyond these themes, interpretations greatly diverge.
In general, there are three attributes of a high-quality company or business: strong and predictable cash generation; sustainably high returns on capital; and high growth opportunities. Each of these financial traits is attractive at its own right, and when they are combined, they are extremely powerful, enabling a virtuous circle of cash generation, which can be reinvested at high rates of return, begetting more cash, which can be reinvested again.
Some of the business models which have the above characteristics include;
- makers of short-lived products with well-known brand names (Coca-Cola, Carlsberg, Nestle, Gillette)
- providers of service/products that always must be/are purchased (pharma, utilities, toll roads)
- companies whose products are sold at a distinct premium due to brand name, image, technology or quality (iPhone, Tiffany & Co)
- providers of products that are in demand due to external influences and regulations (Rosenbauer International, GEICO)
- businesses that have a high level of scalability, i.e. whose marginal cost is close to zero (Microsoft, Goggle, Facebook, Oracle, Pfizer, Netflix, Alibaba, Tencent)
- providers of the cheapest product in the market (Wal-Mart, Amazon.com).
Short-lived products with well-known brand names
Some well-known brand names in consumer products use these characteristics and achieve high profitability, return on capital and high free cash flows. Beer drinkers go to the pubs or coffee shops to drink beer and socialize a few times in a week through the nights. Everyday jugs, mugs and bottles of beer are consumed, and stocks of beer or stout replenished. In Malaysia, Carlsberg and Heineken, the only two listed beer companies, grow their business every year, albeit slowly, with strong and predictable cash generation and high return on capitals.
When Gillette sells a razor, the customer has to keep buying new, fitting razor blades every month. With the sale of a razor the business secures itself additional, recurring revenues.
Nestlé carries a strong brand name in the food and beverage market. Given the popularity of its products, it is extremely difficult for new market entrants to grab its market share. It has used this brand-name to further its advantage with short-life products with the introduction of its Nespresso division: the coffee machine is sold relatively cheaply, but the matching capsules can only be purchased via Nespresso. Every sold coffee machine guarantees more capsule sales for the business. In the past ten years Nestlé has sold tens of billions of coffee capsules. As a result, manufacturers of short-lived products are an attractive investment.
The counterexample is the market for long-lived products. Consumers of cars, television, refrigerator, dish washer etc. which consumers rarely need more than one unit of these products.
Products that always have to be/are purchased
Gloves are widely used in the developed world as the first line barrier and it is a necessity to ensure the protection of healthcare industry users in carrying out their daily work. The recent Coronavirus issue has shown the high and continued demand of the usage of gloves. With the improvement and stringent healthcare standards around the world, the demand and usage of gloves in protecting humans is a continuous effort.
Top Glove, the largest producer of gloves in the world, produces nearly a quarter (23 percent) of the world’s demand for rubber gloves, including latex gloves used for medical examinations and surgery. It is a healthy business given that the world uses 150 billion gloves per annum primarily in the healthcare and food services industries. Its vision is to strive to be the world’s leading manufacturer with excellent quality glove products and services that enrich and protect human lives”.
Top Glove Group has been pretty recession-proof, because protective latex gloves are necessities, particularly in healthcare and food services. This ensures its high growth potential.
Similarly, the advantage of another leader in this industry, Hartalega, which has had excellent cash flows and return on capitals, should have a great future enhanced by the good growth potential. Hartalega, which is the largest nitrile glove maker in the world, has the lowest cost structure compared with its competitors. In additional to economies of scale, Harta also continuously innovate production technology.
Utilities are another defensive sector in general. However, a distinction has to be drawn between more cyclical and less cyclical utilities. Electricity providers, for example, can turn out to be quite cyclical if large shares of their customer base consist of energy-intensive manufacturing companies, which will decrease their demand during downturns. The case of the bankruptcy of Hyflux in Singapore is a good example. However, the demand of household electricity is resilient, and hence the stability of earnings of household electricity supply by Tenaga.
Companies with premium products due to brand name, image, technology or quality
Buying luxurious and expensive things is a means for people to communicate their social status to others, a mean of “wealth signalling”. Wealthy women especially like purchasing designer jewelleries, quality Hermes Birkin handbags and expensive shoes for them to express their style, boost self-esteem, or even signal status, or giving a signal “Don’t steal my husband”. Some wives of world leaders have millions and even billions worth of these stuffs hidden in their closets. It seems humans will always want something that others don’t have.
Manufacturers of luxury goods such as Swatch Group (Omega, Longines, Rado, etc.) or the American jeweller Tiffany & Co., Ferrari car manufacturer can command higher prices, and hence the return on capitals. Thanks to their image and product quality.
Products that are in demand due to external influences and regulations
Credit rating agency (CRA), Moody derives its revenues from fees on issuing credit ratings mainly on fixed income, or bond issues. In the United States and Europe, together with S&P and Fitch, they issue more than 90% of all ratings outstanding.
A company raising a bond would usually head to a CRA to get its new bond rated. Institutional investors and retail investors alike with strict investment mandates would be prohibited to buy unrated bonds. This dynamic creates a cycle of demand for a rating by a Moody or other CRAs.
CRAs wield enormous power in which a ratings downgrade can sometimes cause market disruption and capital flight. Any downgrading of company or sovereign debts would result in escalation of borrowing costs of the company of the country.
American car insurer GEICO fits into this category as well. According to law, every driver in the US is obliged to take out at least one car insurance. GEICO quickly developed into a highly profitable car insurer by initially concluding contracts by phone and without a salesperson, exclusively with military officers, i.e. customers who have statistically low accident rates. Berkshire Hathaway owns a major stake in GEICO which has produced huge amount of free cash flows for Warren Buffett to invest in other businesses.
Glove companies are also presented with this advantage due to health requirements.
Products with a high scalability, i.e. marginal costs are close to zero
Successful business growth depends on a scalable business model that will increase profits over time, by growing revenue while avoiding cost increases. Scalability is what makes a business, in the simplest terms, big, and which typically means greater revenue streams; combine this with efficiencies created by economies of scale, and therefore lower costs, until the marginal cost of producing one additional unit of that product is equal to the marginal revenue, they will receive from selling that additional unit of its product, and you have a recipe for a profitable business with strong growth potential.
In economic terms, a firm is maximizing its profits when marginal revenue = marginal cost.
For industrial products made in a factory, there are additional costs that are incurred for producing more of your product. If you were to double production, you would need to hire more labour, invest in more machinery, buy a bigger warehouse etc. If the price of the product you sell is not increasing, it won’t be long before the marginal cost catches up to the marginal revenue.
For a digital company like Netflix, the cost of selling one additional membership is close to $0. They don't need a bigger factory or hire additional labour to “produce” one additional membership. Put simply, Netflix has a product that is completely scalable. Scalability allows a company to meet the demand of consumers in almost every situation.
Investors love a business that has scalability because they believe that as a company grows its revenues over time it will also increase its profits, and hence its return on capitals. As a result, Netflix stock price has increased by more than 37,000% since the company went public in 2002.
For many software companies, SAP and Oracle, once developed, the product can be duplicated without additional cost. Similarly, high returns can be found at Microsoft, with its operating systems and office applications. Producers of pharmaceuticals such as Novartis. Pfizer and Merck also fall into this category. There are high initial costs for research and development, but these are recouped in low costs per pill once the product is successfully introduced into the market.
The cheapest product in a market
Besides providing quality products at a premium, being the cheapest product in the market can also constitute a unique selling point. With this strategy, the objective is to become the lowest-cost producer in the industry. This strategy is usually associated with large-scale businesses offering “standard” products with relatively little differentiation that are perfectly acceptable to most customers. Occasionally, a low-cost leader will also discount its product to maximise sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share. In an economic or financial crisis, low cost producers tend to survive better than its high cost peers which could face bankruptcy, and the surviving low-cost producers taking their shares subsequently.
However, often a pure price war results in shrinking margins for low cost producers. It is more important in maintaining an acceptable quality and low prices at the same time. An example of such an exceptional case is Amazon. Through a sophisticated logistics network, comparatively good customer service and sheer size, the online retailer has a cost advantage against its competitors.
Wal-Mart, through its gigantic sales volume of more than $400bn, Wal-Mart achieves the highest purchasing volume worldwide and thus secures itself pricing advantages and bargaining power. It practically doesn’t require any working capitals to run its huge business. This provides the business with high return on capitals and abundant free cash flows to grow its business.
Valuation of quality companies
In quality investing, as in any investment strategy, the risk of overpayment exists, but far less than one might think. At a glance, the price-earnings multiples of a quality business relative to its growth can look exaggerated. However, quality companies often tend to exceed estimates, meeting or beating forecasts far more frequently than poor quality companies.
For most people, it is better to invest in quality companies for long-term. But that doesn’t mean one should pay any price for a quality company. That is suicidal in investing, in fact, in any kind of investing.
But what price should one pay for a quality company? We will discuss about this next.
For those who are interested to learn more about how to identify a quality company and what a fair price, there are resources in the internet including many good books on learning about the fundamentals of investing. Here is one,
This book is on sale in the major bookshops such as MPH and Popular. You may also contact me to purchase a copy if you wish at the following email address.
This may end up as your best investment.
KC Chong
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Discussions
6 people like this. Showing 50 of 95 comments
I hope you know what "Intrinsic Value" is.
Intrinsic value is a number. How much is it worth, and you compare with its price. It may be in a range but it is a number. And how yu estimate that number. It is not just about beautiful stories.
2020-02-24 17:11
Yes it is a number. It has served me well buying QL in 2009, and holding it through 2018,2019 and until currently 2020. I used qualitative models, scuttlebutt, governance, and target market figures to arrive at a figure for QL, which I deem to be currently fairly valued in 2020, and very undervalued in 2018. Obviously this is based on real application of stock purchases, holding and buying more after quarterly reports, market journals, the performance of competitors like layhong, lhi and the target market future vs competitors like CP.Foods.
You who seem to only know quantitative valuation just seek to use past extrapolated data to do your valuation.
https://klse.i3investor.com/blogs/kcchongnz/2019-06-12-story210548-Dayang_and_contrarian_investing_kcchongnz.jsp
what about the future? no conviction here.
You don't see any problem? Nothing at all?
That is why you have lost your underwear punting on Sendai from RM1.40 to 60 sen.
Still in denial? How to become a 200 millionaire?
Can! Go to live in Indonesia.
13/06/2019 6:52 AM
but you find the resolve to comment much about other investors. For someone who talks about understanding intrinsic value so much, you have only to see your own results to see the depth of your understanding.
Ah, it is a waste of time explaining further.
Good day to you, and GOOD DAY.
>>>>>>>>
Intrinsic Value Explained
Intrinsic value is an umbrella term with useful meanings in several areas. Most often the term implies the work of a financial analyst who attempts to estimate an asset's intrinsic value through the use of fundamental and technical analysis.
There is no universal standard for calculating the intrinsic value of a company, but financial analysts build valuation models based on aspects of a business that include qualitative, quantitative and perceptual factors.
Qualitative factors—such as business model, governance, and target markets—are those items specific to the what the business does. Quantitative factors found in fundamental analysis include financial ratios and financial statement analysis. These factors refer to the measures of how well the business performs. Perceptual factors seek to capture investors perceptions of the relative worth of an asset. These factors are largely accounted for by means of technical analysis.
Creating an effective mathematical model for weighing these factors is the bread and butter work of a financial analyst. The analyst must use a variety of assumptions and attempt to reduce subjective measures as much as possible. In the end, however, any such estimation is at least partly subjective. The analyst compares the value derived by this model to the asset's current market price to determine whether the asset is overvalued or undervalued.
Some analysts and investors might place a higher weighting on a corporation's management team while others might view earnings and revenue as the gold standard. For example, a company might have steady profits, but the management has violated the law or government regulations, the stock price would likely decline. By performing an analysis of the company's financials, however, the findings might show that the company is undervalued.
Typically, investors try to use both qualitative and quantitative to measure the intrinsic value of a company, but investors should keep in mind that the result is still only an estimate.
2020-02-24 17:33
Posted by Philip (Can I advise you?) > Feb 24, 2020 5:33 PM | Report Abuse
Yes it is a number. It has served me well buying QL in 2009, and holding it through 2018,2019 and until currently 2020. I used qualitative models, scuttlebutt, governance, and target market figures to arrive at a figure for QL, which I deem to be currently fairly valued in 2020, and very undervalued in 2018. Obviously this is based on real application of stock purchases, holding and buying more after quarterly reports, market journals, the performance of competitors like layhong, lhi and the target market future vs competitors like CP.Foods.
I thought you know what intrinsic value is. Ah just a waste of my time trying to teach you.
2020-02-24 17:41
Posted by Philip (Can I advise you?) > Feb 24, 2020 4:54 PM | Report Abuse
change of governments, Tun has stepped down (due to too many complaints by sslee), and the future of businesses is at hand.
============
one who can write about gratitude and complain so much like sslee..............
goes to show knowledge and habits not the same thing.........value investors write so much about value investing but knowledge and habits not same thing...........
knowledge is the easy part, habits not so easy.
2 years already.............................social media full of complaints and manifesto not met.....................now what manifesto?.......lol.....
anwar has azmin, mahathir has muhidin.....................and that is the end of PH.....................goes to show...the biggest problem comes from people most close................scary.....
while public talking about manifesto, people are planning a new future for malaysia based on race and religion.................................one moment of negligence and it is game over for PH...........
share market same one............character and habit is real..............all the knowledge and sifus are fake................
2020-02-24 17:44
As a matter of fact, you don't even seem to understand what you copy and paste from Investopedia.
And also, what you can get from investopedia is just some simplistic explanation, good as a guide only.
2020-02-24 17:45
kc chong...........results and decisions are a matter of habits and character...............some more stock market is not physics...............why do u waste your life away trying to be stock market sifus to others?
u no stress one meh?
be like KYY and me lah..................free as a bird, do what is u feel like doing, no responsibility, no headaches , happy go cycling..............
2020-02-24 18:18
I thought this was what you have been doing all this while, copy pasting from sooner investment book without any real results of note.
I can show my understanding of intrinsic value by hire I buy stoneco, how I buy topglov, how I buy yinson, how I buy QL, how I buy gkent and how I buy PCHEM.
You only know how to write without any results to guide from.
Wasting time.
Let me know when you do finally start investing in the stock market.
>>>>>>>>>
kcchongnz As a matter of fact, you don't even seem to understand what you copy and paste from Investopedia.
And also, what you can get from investopedia is just some simplistic explanation, good as a guide only.
24/02/2020 5:45 PM
2020-02-24 18:56
Dear Philip,
Quote, “Yes it is a number. It has served me well buying QL in 2009, and holding it through 2018,2019 and until currently 2020. I used qualitative models, scuttlebutt, governance, and target market figures to arrive at a figure for QL, which I deem to be currently fairly valued in 2020, and very undervalued in 2018.” Unquote
2018: QL RM 5 (Very under value)
2020: QL RM 8+ (Fairy Value)
For a different of RM 3+ (60% +) two years money? You ready to make war with Ricky Yeo, Choivo, CharlesT, KCChong and etc no end on valuation when you yourself wrote, “Some analysts and investors might place a higher weighting on a corporation's management team while others might view earnings and revenue as the gold standard”
Please consider yourself lucky that QL Founder and major shareholder Dr. Chia Song Kun have done an amazing job.
You should have given the money to qqq3 to manage, qqq3 wrote, “for genuine investors, 12 months money....there were at least a few dozen shares that gave 100% returns or more in last 12 months................ I am Kpower and scib kind of guy...............life is exciting and fast............”
Thank you
P/S: As of my writing to Tun Mahathir’s blog, I wrote to tell him about my feeling on the many ills befalling our beloved Malaysia with hope upon hope that somehow or somewhat I can make a different to heal the sickness and set our beloved Malaysia toward unity, justices and prosperity. I pray for my beloved Malaysia.
2020-02-24 19:04
Posted by Philip (Can I advise you?) > Feb 24, 2020 6:56 PM | Report Abuse
"I thought this was what you have been doing all this while, copy pasting from sooner investment book without any real results of note."
Where do you find me copy and paste any Investopedia phrases likw you do without even understand it?
"I can show my understanding of intrinsic value by hire I buy stoneco, how I buy topglov, how I buy yinson, how I buy QL, how I buy gkent and how I buy PCHEM."
Those are the stories parts of it, the qualitative part. Yes they are equally important. But what are their intrinsic values that "I can show my understanding of intrinsic value", the quantitative part or the umber part of it?
I have shared scores of intrinsic value estimates for stocks in i3investor. Where and when have you shown any?
Ah, forget it, wasting my time. You don't even know what Intrinsic value means.
2020-02-24 19:17
Phillip ah,
If you think QL can grow earnings per share by around 22% per year for the next 15 years. And lets say you value a company (with similar capital structures) that can grow 10% per year for the next 15 years at say 10 PE.
QL would be worth 50 PE.
Now, extraordinary claims require extraordinary proofs.
Thrill us with your acumen and educate us blind men, by sharing your research on this company, that you feel should be valued higher than Berkshire Hathaway, and even Google, Facebook, Apple etc.
2020-02-24 19:24
Hahahaha.
How i wish i am an retiree, so that i can layan Phillip comments day and night. It sounds so fun.
====
Icon8888 He used to be Philips I Hope You Learn Something From Me Today
23/02/2020 1:32 PM
2020-02-24 19:27
the term intrinsic value does not exist
intrinsic value requires a term called returns
returns like 0.001% pa ia also good
returns like 20% per annum is also bad
the term returns does not exist
is it return on money out/capital invested or inflation adjusted?
or is it unrealised returns locked inside the investee company?
when the share price has dropped 90%?
wat the fakk
2020-02-24 19:30
Malaysia is doomed
coz
people order food coz its cheap, then throw it away
for every calorie of food thrown away,
it costs 10 calories of energy to put it on your table
you will be scolded (even by multi-billionaire) if you do it in Germany
here in Malaysia, when you do it, it means you have money, like carrying a Birkin bag.
Malaysians expect rich people to throw away food,
it is a sign of being cool and rich.
=> sign of a corrupt society....
P/S: As of my writing to Tun Mahathir’s blog, I wrote to tell him about my feeling on the many ills befalling our beloved Malaysia with hope upon hope that somehow or somewhat I can make a different to heal the sickness and set our beloved Malaysia toward unity, justices and prosperity. I pray for my beloved Malaysia.
2020-02-24 19:51
An Iron Man vs Captain America situation here.
Both sifus kcchongnz & Philip (Can I advise you?) are my most respected i3investor forumers here. Both sifus' approach are different yet yield superior quality returns over time. I believe they are sincere & have no malicious intentions.
2020-02-24 21:46
I only know of two kcchongnz's previous portfolios here. 2019 https://klse.i3investor.com/servlets/pfs/116402.jsp and 2013 https://klse.i3investor.com/servlets/pfs/13147.jsp
2020-02-24 21:49
https://klse.i3investor.com/blogs/kcchongnz/2016-12-25-story112453-2016_Christmas_Reflection_in_i3investor_com_kcchongnz.jsp & https://klse.i3investor.com/blogs/kcchongnz/2017-11-14-story-h1451644217.jsp I think these articles best represents kcchongnz.
kcchongnz certainly doesn't share merely for self-interest. He's educating i3investors. https://klse.i3investor.com/blogs/kcchongnz/2015-10-13-story84352-10_Dangerous_Myths_in_Bursa_kcchongnz.jsp
2020-02-24 21:57
All roads lead to Rome. There are certainly many methods of investing.
P.S. - I thought kcchongnz & Philip (Can I advise you?) both came from the university of Ilmu Puncha Kemajuan?
2020-02-24 22:02
It's ok, I would rather be amused by how you say you are a long term investor, but then proceed to buy and sell rcecap at highs and lows, then buy again at highs, oblivious to your original qualitative analysis on the risk profile of rcecap, but again blinded by the quantitative side (the greed part when you saw increased revenues and profits). Or do you have another RM5,000 research article on a stock idea coming up?
But at least, you do try to keep a semi honest portfolio of returns. AS you do know the importance of having a portfolio to match your articles.
https://choivocapital.com/2019/12/29/2019-fund-update/
kcchongz knows this is important, because he keeps repeating lessons from warren buffet instead of some indian guru teaching value investing in delhi.
I struggle to explain this important fact to him, but he doesn't seem to get it.
however, having xx xx as a investment item with percentage does nothing for your reliability. Or your returns. Which I do believe is semi honest.
However, I also once knew a guy named madoff who had 10-12% returns consistently over a 17 year period
https://bespokeinvest.typepad.com/bespoke/2008/12/if-you-ever-see-a-chart-like-this-run-away-fast.html
so, no one really knows your results as well.
Is it one big lie as well? Well,at least we can monitor your long term results from investments in timecom and petronm, which apparently you said is your biggest weightage (but dont really know really).
Still, honesty is far more important character in an investor.
Except for new zealand guy. I think it is high time I stopped replying to academicians with no stock picks.
>>>>>>>
Posted by Choivo Capital > Feb 24, 2020 7:24 PM | Report Abuse
Phillip ah,
If you think QL can grow earnings per share by around 22% per year for the next 15 years. And lets say you value a company (with similar capital structures) that can grow 10% per year for the next 15 years at say 10 PE.
2020-02-24 22:09
Appreciate it very much enigmatic. Finally thanks to the eager efforts of the internet, I have more information on the various gurus on i3.
SSLEE - insas, xinquan, hengyuan, dayang. You can see he is learning his way, slowly improving his investing methods, slowly moving from just low PE high NTA stocks (property counters), going towards businesses that grow profits and earnings yearly. I'm thinking he will soon realize the stocks choices he chose not to make versus his insas holdings will be a drag on the most important commodity: time.
Choivo Capital - hengyuan, timecom, petronm, rcecap, abmb, etc etc. He writes many articles, but buys just as much stocks. You can see he is trying to learn by process of elimination, diversifying to minimize his losses (and also his profits). He is so happy to get his first 100% stock return (but regrets that he puts so little into it).
Icon8888 - ecovest warrants, jaks warrants, bumi armada, lctitan. Contrarian gambler, you can see he likes to be called a contrarian. Whether he makes money or not, he doesn't care.
stockraider - gambler. his gambling push on insas warrants and sapura energy and emotional rants show a interesting form of internet addiction.
Calvintaneng - penny stock pusher. Writes articles on 40+ stocks per year, hides those that didn't work out, promotes the hell out of those that does.
qqq333 - london biscuit, vitrox, serba dinamik, kpower. Speculator buying on attitude. He says he makes money, I like the attitude. I wish I knew his volume, date of purchase and date of selling so I can see if attitude works.
3iii - dlady, nestle. long term holder of wonderful companies (you only need 3 in life). His replies and lack of emotional angry responses, shows someone who doesn't need to gamble or buy a huge bucket of stocks. Either a lucky investor or a good one, it doesn't matter as long as you make money.
kcchongz - luckily thanks to enigmatic (appreciate your effort), i finally have some of his stock picks.
https://klse.i3investor.com/servlets/pfs/13147.jsp, with a good portfolio tracker too.
Why the 10 stocks above? Of course that is because I think they present value. I had others too like SP Setia, Johore Tin, Scientex, Padini, Zhulian, Freight, Coastal Contracts, icap etc but I have sold them just recently, trying to reduce my investment in the market.
he even has a glowing commentary on the stocks that he sold and those that he bought.
Wow, no wonder he was shy to share his portfolio returns. from 2013 onwards, he sold scientex to buy jobstreet, johore tin to buy plenitude.
kcchongnz I have to reiterate that the 6-9 months of the good performance posted is too short a record to boast about. It could very well be due to luck. Really the measurement of successful investing does not just based on a short-term of seven months performance. Investing to me is a long term endeavour. So we have to look at the more important long-term return. So how to measure the long term performance of your portfolio?
Table 1 below shows the performance measurement of my portfolio for one to five years. Again this is just for discussion purpose. I hope others do not construe this as a self bragging exercise. Some of the stocks only have prices of 2-3 years as they are either only listed 2-3 years ago, or data is not available from the Yahoo website.
Table 1: Stock prices 1-5 years
kcchongz used to agree with me, I am sad that he no longer does.
He did get one thing right. His results are the very much due to luck.
2020-02-24 22:22
u don't agree with me meh?
right attitude at right time makes a lot of money..............give u the best idea in the world, buy little bit makes a little bit only..............
2020-02-24 23:10
me? I have decided long ago, this forum is a platform for entertainment for me....and maybe collect some information.
If people want to think about what I write, good for them...If people ignore what I write...also fine for me..........
I am not here to make anyone rich (or poor).
mostly I think all internet sifus are rubbish....and stock market is not about intelligent or smartness.......at the end of the day it is all about attitude.............
ps...I am happy with my attitude that help me to buy a lot of SCIB and Kpower recently.........but I have also seen my paper profits on SCIB and Kpower shrink by a lot also in recent days...................it is the shame attitude.............can never be perfect one..............
2020-02-25 00:51
Philip ( Mutually Assured Destruction)
On this I agree 100%.
Those who have the ability to make stocks in the market don't need to make money ( or time) by selling classes. None of the real investors did. Charlie was a lawyer. Warren was a stock salesman at Falk and then a professional analyst at Graham Newman before starting his partnership.
Obviously to get outside investments he has to show his returns and put money where his mouth.
The question remains the same, if you are so good that you can charge money teaching how to stock pick, why don't I just give you my money to invest and you get a proportion of the profits? Very few actually can make outsized returns and use vague concepts like ( helping you save money and reduce losses), instead of helping you choose winners.
As for stock market, I agree you don't have to be a rocket scientist, but the most important criteria is being RATIONAL. Doing rational things means choosing profitable companies and growing companies, investing more as it grows. Being rational during crisis, not selling just for the sake of selling or buying just for the sake of diversification ( diworsification). A lot of these do not require Monte Carlo simulations or writing complex formulas and branching patterns. Being able to rationally ( not looking for confirmation bias) understand the future prospects of a company, why management does things in a certain way, a rational mind if far more important than smartness or intelligence.
>>>>>>>>>
mostly I think all internet sifus are rubbish....and stock market is not about intelligent or smartness.....
2020-02-25 08:06
hahahaha qqq3,
Very soon your shrinked paper profit will become paper loss. Choivo is still the smart one selling his PPHB for 100% gain.
2020-02-25 09:13
Philip, don’t be too harsh on kc. I still have great respect for him teaching very basic fundamental and spending so much time writing so many useful stuffs for beginners. Yes he may not prove he’s a great investor who make tons of money but he doesn’t need to prove he’s one. It’s his choice. Whether he’s an average or shrewd investor, he don’t deserve be to critised after all.
2020-02-25 11:37
Posted by Sslee > Feb 25, 2020 9:13 AM | Report Abuse
hahahaha qqq3,
Very soon your shrinked paper profit will become paper loss
=========
two years money to double from here....too bad I am not a long termer.........
2020-02-25 11:41
by popo92 > Feb 25, 2020 11:37 AM | Report Abuse
Philip, don’t be too harsh on kc.
====
what u don't realise is the best way to learn some thing is to learn
the exceptions to the rule.....the best way to learn how a machine works is how it breaks down.................and yes, the most assured way to lose money in stock market is to follow some mechanical rules.........
so what is intrinsic value? U buying over the whole business? u doing a take over?
u read enough research reports , u know 90% of the time............the intrinsic value of the analyst is within +- 10% of the share price................meaning, he has no idea, don't know...........hahahahaha............analysts not enough tools and formulas meh?
2020-02-25 11:57
i think discipline is important. I think a suitable position in asset alloacation: i.e/ equity vs bond/finxed income is the key success in portfolio managment. To pick the right stock is not difficult. There are plently of good stocks out there; if not in malaysia, there are million of listed companies in the world. Does anyone think on question that when market crashed, do you still have the cash position to buy more..warrant buffect is doing that now?
2020-02-25 12:26
Sslee > Feb 25, 2020 12:17 PM | Report Abuse
hahaha,
qqq3 just tell me have you ever sell any stocks for 100% gain?
==============
there was once I make 500% in a week .................$50,000 profit many many years ago.............
2020-02-25 13:00
haha
qqq3, Bursa day limit up is 30%. So if 5 trading days limit up equal
1.3 X 1.3 X 1.3 X 1.3 X 1.3= 3.71 or 3.71 times.
Still remember what is the stock name?
Need to check are you telling the true.
2020-02-25 13:37
Philip ( Mutually Assured Destruction)
I totally agree. And I would not have said anything, except that for someone who is supposed to teach fundamental lessons, he finds the gall to comment heavily on i3 forum on dayang, eversendai, ql, kyy and myself for great stories.
But, if his investment methods were really good I would totally follow his analysis.
But I guess it is hard to find a good teacher out there.
>>>>>>>>>
Posted by popo92 > Feb 25, 2020 11:37 AM | Report Abuse
Philip, don’t be too harsh on kc. I still have great respect for him teaching very basic fundamental and spending so much time writing so many useful stuffs for beginners. Yes he may not prove he’s a great investor who make tons of money but he doesn’t need to prove he’s one. It’s his choice. Whether he’s an average or shrewd investor, he don’t deserve be to critised after all.
2020-02-25 13:40
ss....many many years ago the rules allow 2 limit ups in a day..............
2020-02-25 13:46
Dear Philip,
Don't be so petty, I with not result to speak of also comment heavily on KYY, Icon8888, Choivo and in Tun M's blog. After-all this is open public forum, everyone are welcome and the more the comments, the more the merrier.
2020-02-25 13:51
haha qqq3,
If many many years ago, you are able to make 50K profit in one week then you must have also losing back a lot until you only with 200k to invest.
2020-02-25 13:57
me? my story very long and complex..........
every thing also done before......except I am not a long termer..........I am a trader.............
stock market...........all about attitude.
2020-02-25 14:31
people in this forum like to look down on traders..........nothing to look down on...............its all about attitude...............
2020-02-25 14:35
haha qqq3,
No one look down on traders, not me. I actually interest to know what is your strategy in trading?
Once I try to trade with Pchem every 50cents drop I buy a batch and once I have overall profit of 15%+ I sold its for profit. I actually profited a few times.
2020-02-25 14:43
I guess he’s still good at quantitative analysis teaching. But beyond that, I am not sure. Your philosophy on qualitative investing is what I really like about. I have read many comments on you elaborate your thoughts on many companies. Quite through and through to be honest. Kudos to all altruistic sifus sharing.
Posted by Philip ( 屁股翘翘!! ) > Feb 25, 2020 1:40 PM | Report Abuse
I totally agree. And I would not have said anything, except that for someone who is supposed to teach fundamental lessons, he finds the gall to comment heavily on i3 forum on dayang, eversendai, ql, kyy and myself for great stories.
But, if his investment methods were really good I would totally follow his analysis.
But I guess it is hard to find a good teacher out there.
2020-02-25 15:35
qqq33333333 sifu, sorry I couldn’t understand the connection of comments between ours. But I 100% agreed with your comment haha
———————————————————————
by popo92 > Feb 25, 2020 11:37 AM | Report Abuse
Philip, don’t be too harsh on kc.
====
what u don't realise is the best way to learn some thing is to learn
the exceptions to the rule.....the best way to learn how a machine works is how it breaks down.................and yes, the most assured way to lose money in stock market is to follow some mechanical rules.........
so what is intrinsic value? U buying over the whole business? u doing a take over?
u read enough research reports , u know 90% of the time............the intrinsic value of the analyst is within +- 10% of the share price................meaning, he has no idea, don't know...........hahahahaha............analysts not enough tools and formulas meh?
2020-02-25 15:43
sslee...scib up 13 sen..........u either trust the real money , up 13 sen..........or trust some formulas called intrinsic value which has no real money attached.
fengshui can cheat u for 10 years, intrisic peddlars also can cheat u for 10 years ...................
2020-02-25 16:28
haha qqq3,
In the short run, the market is like a voting machine tallying up which firm are popular(K factor)and unpopular. But in the long run, the market is like a weighing machine-assessing the substance of a company.
So no worry the next day SCIB will drop 13 sen.
2020-02-25 16:59
hahaha this is classic fighting between numbers and narratives person
kc 70% number, 30% narrative
icon 50% number, 50% narrative
choivo 35% number, 65% narrative
philip 10% number, 90% narrative
i dont know why so many people have qualms on QL's PE.. (maybe philip face problem ;P)
in fact the last time he bought QL was 6.80, which has rise 20% to today's price 8.40.
6.8 was deemed undervalued, 8.40 is considered fair value, so he bought with about 20% mos in mind. Although i personally hope he can share his latest version of Intrinsic value on QL (last time shared was about 15-25), but when come to think about it, he don't have to, and it make little value add to the discussions, because when the narratives about a company change, its intrinsic value change. See this;
http://people.stern.nyu.edu/adamodar/pdfiles/country/narrative&numbers.pdf
2020-02-25 17:27
For example; Uber;
some view it as car service company, then there is Intrinsic value A
some view it as car ownership company,/ logistic company/ payment apps etc; then there will be Intrinsic value B/C/D/etc
So to me what is valuable opinion about a company is; what is the company look like in his mind, towards the future, not just a set of numbers, PE, growth yoy, ROE, etc
Then only we try to relate to the intrinsic value following these 3 rationality tests;
Possible? Plausible? Probable?
Lets look back at QL;
Possible? Why not, they are in Vietnam, Indonesia, Malaysia, first two market are very populous, with low egg consumption, etc
Plausible? in simple words, is the company doing right things to get there
here comes the iron triangle of value narratives, between growth, risk and reinvestment
1) is the company reinvesting enough given their growth? seems yes
2) is the company taking risks reflective of how much and where they are growing?
i don't know
3） is the risk company taken consistent with their reinvestment strategy? i don't know
Probable?
here is the last part to get to Intrinsic value, the DCF is a better tools here,because_PE_tells_little_about_what_price_is_good_entry_price_as_the_PE_always_change_and_there_is_no_close_comparison_from_the_competitors
2020-02-25 17:34
Haha
I like what qqq3 wrote, "so what is intrinsic value? U buying over the whole business? u doing a take over?”
So if you go to the bank and tell the bank I want 100% loan to buy over QL, do you think the bank will lend you the money?
Or the bank will lend you 100% if you say you want to buy over INSAS?
2020-02-25 18:33
osted by Sslee > Feb 25, 2020 4:59 PM | Report Abuse
haha qqq3,
In the short run, the market is like a voting machine tallying up which firm are popular(K factor)and unpopular. Bu
==========
un-testable hypothesis unless u put a holding period to it...........is that why it is such a popular statement?
no holding period...any statement also can be right..........
2020-02-25 20:16
Sadly, I just cannot tahan when someone professes to know what is intrinsic value, and yet holds this basket of stocks.
And he says I don't know a thing about intrinsic value...
I know that intrinsic value is the price a rational investor is willing to pay for an investment, given its level of risk.
Why does the market value ql at pe60?, Amazon 87? Salesforce 198? Tesla ?
You can say that the market is wrong. That it is overvalued bla bla bla. That is another question for another day.
The qualitative question here is why does the market value these companies at high pe ratios?
The answers are simple.
1. They hold a dominant position in the industry that is hard to break. Many have tried. But these companies keep on taking market share, brand recognition, growth.
2. They have been growing cash flow, revenues, earnings for years and years. Reinvesting back into the business because the total addressable market is huge. They h
3. While others are losing money, losing customers, shrinking profits these companies keep on growing and growing and growing.
4. These companies by its nature is in a very safe and monopolistic industry. It's history of share price growth begets a history of share price safety. Companies with swings in volatility of price action and
profits rarely have a consistent growth in PE.
PRICE IS WHAT YOU PAY. VALUE IS WHAT YOU GET.
Imagine selling Amazon, Tesla just because the share price has gone up and picking say Walmart or Faraday future just because the pe is low. Why? Unlike in accounting land, in the real world, a company with low pe can go even lower ( or lose money), while companies with high pe can normalize ( due to margin expansion) or go even higher ( due to market performance).
Never look at share price as a measure of success. Look at the business itself to drive growth.
>>>>>>>>>>
kcchongz - luckily thanks to enigmatic (appreciate your effort), i finally have some of his stock picks.
https://klse.i3investor.com/servlets/pfs/13147.jsp, with a good portfolio tracker too.
Why the 10 stocks above? Of course that is because I think they present value. I had others too like SP Setia, Johore Tin, Scientex, Padini, Zhulian, Freight, Coastal Contracts, icap etc but I have sold them just recently, trying to reduce my investment in the market.
he even has a glowing commentary on the stocks that he sold and those that he bought.
Wow, no wonder he was shy to share his portfolio returns. from 2013 onwards, he sold scientex to buy jobstreet, johore tin to buy plenitude.
2020-02-25 23:06
Answer short term stock is voting machine, longterm it is a weighing machine....if u over pay...it run the risk of crashing in the long run loh...!!
Posted by Philip ( Icarus) > Feb 25, 2020 11:06 PM | Report Abuse
Sadly, I just cannot tahan when someone professes to know what is intrinsic value, and yet holds this basket of stocks.
And he says I don't know a thing about intrinsic value...
I know that intrinsic value is the price a rational investor is willing to pay for an investment, given its level of risk.
Why does the market value ql at pe60?, Amazon 87? Salesforce 198? Tesla ?
You can say that the market is wrong. That it is overvalued bla bla bla. That is another question for another day.
The qualitative question here is why does the market value these companies at high pe ratios?
2020-02-28 23:09
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Posted by Philip (Can I advise you?) > Feb 24, 2020 4:54 PM | Report Abuse
The vehemence of kcchongz leads me to one conclusion:
You don't have a clue what intrinsic value is.
So what is the intrinsic value of your PE 60 stock? Have you shown that you know?
2020-02-24 17:08