Who is Prof Glen Arnold?

• Professor of Investment and Professor of Corporate Finance
• Founder of The Arnold Investment Fund (personal fund)
• Author of few books
  • The Financial Times Guide to Investing
  • The Great Investors
  • Get Started in Shares
  • The Financial Times Handbook of Corporate Finance
  • The Financial Times Guide To Financial Markets
  • The Financial Times Guide To Banking
  • The Financial Times Guide To Bond and Money Markets
  • University Textbooks
    • Corporate Financial Management
    • Modern Financial Markets and Institutions
    • Essential of Corporate Financial Management
• Website: Glen Arnold Investments

TWO THINGS

• Analyze the company thoroughly

• Margin of Safety

NET CURRENT ASSET COMPANY

• Beats the street consistently

KEY FACTORS (On selecting great investment)

• Long term prospect

• Operated by honest and competent people

• A business you understand

• Available at a very attractive price

• Pricing power and low capital needs

  • Example: Sea's Candy Shops

• Return on capital employed

• Valuation using owner earnings (Glen Arnold's definition of intrinsic value)

  • Intrinsic value is the discounted value of the owner earnings that can be taken out of a business during its remaining life.

OWNER EARNINGS ARE DEFINED AS (Glen Arnold's definition of intrinsic value)

• Earning after tax

Plus

• Depreciation, depletion, amortization and certain other non-cash charges

Less

• The amount of expenditures for plant and machinery

Less

• Any extra amount for working capital that is needed to maintain the firm's long term competitive position and unit volume and to make investment

FIVE COMPETITIVE FORCES (What to consider when buying company)

• Rivalry within industry

• Potential Entrants

• Substitutes

• Buyers

• Suppliers

TRRACK SYSTEM (How company performs)

• Tangible

• Relationships

• Reputation

• Attitude

• Capabilities

• Knowledge

WARREN’S INSTRUCTIONS ON WHAT YOU SHOULD AVOID

• Macroeconomic forecasts

• Charts

• Predicting tops and bottoms

• Impatience

• Going along with the crowd

• Gambling and derivatives

• Equations with Greek letters in them

MORE THINGS TO AVOID

• Being too ambitious

• Diversifying to mediocrity

• Being an active trader

• Ignoring errors

• Glamorous companies you don’t understand

• New issue market

• Worrying if prices fall

KC's sharing on Prof Glen Arnold

http://klse.i3investor.com/blogs/kcchongnz/47763.jsp

Comment:

Value investing does not differ much amongst the value investors, except for the valuation approach.