Stockman blogs
so you also want to become value investor? (6)
stockmanmy
Publish date: Sat, 18 Jun 2016, 03:46 PM
stockmanmy
0 76
Trade at your own risk. I am here only to vomit out my feelings
very good read
Not just about Parkson....but the lessons learnt.
lessons
- Net cash is not a good predictor of future share price.
In 2013, Parkson has $ 1.5 billion net cash or 50% of market cap represented by net cash. Share price crashed from above $ 4 in 2012 to below $ 1 now.
I bring it up because I read so often sifus and bloggers in i3 place way too much attention to net cash position. They call it margin of safety.
Way too much attention to net cash positions and accounting ratios and not enough attention to the actual business.
Articles upon articles, one blogger after another on i3 will discuss the net cash position of the company covered. , as if that is the most important thing in the world.
Because of my stand, I have been called not an accountant. That I lied. The reverse is actually true. Because I am a qualified accountant I know both the importance and the pitfalls of relying too much on accounting ratios and advanced valuation methods based on historical records.
- the best predictor of share price is the business segment it is in.
Value investor Tan Teng Boo of Icap is one of the strongest supporter of Parkson, all the way from above $ 4 to below $1...attracted perhaps by the net cash position and other accounting ratios. Turns out to be a disaster for him. (ps....according to the article, Parkson will go into negative cash position soon , after the share has crashed from above $ 4 to below $1)
A better predictor of share price is the business segment it is in. All over the world, retailers and brick and mortal businesses are facing bankruptcy risks. Parkson is no exception. Parkson is no Uniglo.
Swimming up stream is not an easy task, only the fittest can survive. A better use of time is trend analysis and predicting future trends That a rising tide will lift all boats.
The task for investors is to identify a trend early and go with the flow and profit from it eg exporters in 2015....and packaging companies such as Scientex and Thong Guan due to E commenrce which makes use of vast amounts of packaging materials....and this trend will continue for a long long time.
20 accounting formula, 5 valuation methods will not help you to make to make money. Valuations are too sensitive to the assumptions used.. Its like the tail wagging the dog., the ends justifying the means.
- the best predictor of share price is earnings growth
Put all the time in looking for Companies with great earnings growth, ballistic earnings growth. Hints and indications can be obtained from price movements, industry analysis, company expansions, capital expenditures
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Discussions
1 person likes this. Showing 29 of 29 comments
too much mumbo jumpbo can give people a false sense of security , a false impression.
impressed but dangerous in the case of Parkson.
2016-06-18 16:09
watching net cash is okay. but those who invested should cut loss when they have to.
2016-06-18 18:22
aid
a value trap is called a trap because people think they are buying value and refuse to cut loss.
2016-06-18 19:32
Posted by stockmanmy > Jun 18, 2016 03:47 PM | Report Abuse
KC Chong...you asked what is gut feeling and what besides your trusted formulas?
Your answer? Let’s see.
“I bring it up because I read so often sifus and bloggers in i3 place way too much attention to net cash position. They call it margin of safety.
Way too much attention to net cash positions and accounting ratios and not enough attention to the actual business.”
Do you really know what value investing is, looking at net cash? Which value investor does that? OMG.
“the best predictor of share price is earnings growth”
Talk is no use. Simply shoot something has no value. Show us academic research which shows statistical significance on what you say.
“20 accounting formula, 5 valuation methods will not help you to make to make money. Valuations are too sensitive to the assumptions used.. Its like the tail wagging the dog., the ends justifying the means.”
Have you read any academic research on what is/are the proven predictors of share price movement? Have you read about “What has worked in investing”?
The answer is clear.
“Put all the time in looking for Companies with great earnings growth, ballistic earnings growth. Hints and indications can be obtained from price movements, industry analysis, company expansions, capital expenditures”
Again, talk no use and it has no value. Shows us something solid to prove your points.
Gut feeling? Laugh die me!!!!!!
2016-06-18 23:13
DCF? enterprise value?
I can manipulate the assumptions and discount rates to justify a wide range of values.
the tail wagging the dog?
value investors go buy Icap shares, forever got discounts, forever die there.
value investors also go buy small cap property stocks and cash rich companies, forever got discounts, forever also die there.
2016-06-18 23:52
lyo
there is nothing general about buying growth....and the tips and hints to identify growth companies.
as long as the growth story is genuine, you can even temporarily over pay but soon will be rewarded....and if the growth story turns out to be false, you can readily cut loss and move on.
No hang ups, no reluctance, nothing general and no value traps getting misled by 20 formulas and 5 valuation methods.
2016-06-19 00:07
Raider
Earnings growth beats cash in the hand any time.
Take any two companies
One with lots of potential
One with lots of cash
The first one trades at a high premium
The second one trades at a discount.
Always true.
In Malaysia as well as Wall Street.
2016-06-19 10:13
Posted by stockmanmy > Jun 19, 2016 10:13 AM | Report Abuse
Raider
Earnings growth beats cash in the hand any time.
Take any two companies
One with lots of potential
One with lots of cash
The first one trades at a high premium
The second one trades at a discount.
Always true.
In Malaysia as well as Wall Street.
Earnings growth & Cash In Hand?
Think first. How did you get CASH IN HAND from?
From Assets Disposal? Assets that have appreciated in value over the years.
From PAST EARNINGS SPURT?
IN ANY CASE CASH IN HAND SHOWS FRUIT IN HAND. THIS IS REAL AND TANGIBLE
AS FOR EARNINGS GROWTH?
IT MAY OR MAY NOT CONTINUE AS FUTURE IS YET UNKNOWN.
THOSE WHO THOUGHT OIL PRICE WILL ALWAYS REMAIN STRONG DID NOT FORESEEE SHALE OIL DANGER EMANATING FROM NORTH DAKOTA
1.99 STORE ROARING SUCCESS IN SINGAPORE CAME TO A HALT WITH THE SUDDEN OUTBURST OF SARS IN YEAR 2013
PARKSON DID NOT FORESEE THE HUGE SUCCESS OF E COMMERCE. ALIBABA 49% GROWTH LAST YEAR SHOWS THE DECLINING SHARE OF CONVENTIONAL MARKETING.
SO CASH IN HAND WILL BE FAR BETTER THAN CASH STILL OUT THERE.
MORE SO NOW WHEN THINGS ARE GETTING MORE UNCERTAIN BY CRASHING MARKETS EVERYWHERE. EVEN GEORGE SOROS IS HIDING IN GOLD. AND GOLD IS ANOTHER FORM OF STORED CASH
2016-06-19 11:17
Calvin licking wound on bjcorp, jtiasa, mulpha, pmcorp and other 70 hollands pick?? Low life
2016-06-19 11:24
Nevermind calvin...i still remember u said bjcorp is the most undervalue stock...hold tight tight for 10 years maybe can come rm1...what a low life calvin give tp bjcorp rm10...LOL
2016-06-19 11:26
Eh....i forget u also said mui tp rm20...selling hotel la, selling land la, boss selling his wife and divorce la...what else?? But...what is the mui price now?? Hahahahahaha
2016-06-19 11:28
Calvin Chong, raider and anyone else.....
Cash is only relevant to whether the company has enough liquid ratio and current ratio to survive.
Excessive cash has little effect on share price.
All the share price is about earnings growth.
If cash is so important , nobody will declare dividends anymore.
2016-06-19 11:34
Posted by Koon Bee > Jun 19, 2016 11:24 AM | Report Abuse
Calvin licking wound on bjcorp, jtiasa, mulpha, pmcorp and other 70 hollands pick?? Low life
70 HOLLAND PICKS? SURE OR NOT?
CHECK UP ON THESE
1) PM CORP AT 15 CTS ON SEPT 20TH 2013. 3 TIMES PM CORP CROSSED 30 CTS
2) KHEESAN AT 50 CTS. GONE UP 80% TO 90 CTS
3) KPSCB AT 44 CTS. WENT UP 40% TO OVER 60 CTS
4) NTPM AT 70 CTS. JUMPED TO OVER RM1.00 - UP 45%
5) WANGZNG AT 70 CTS. JUMPED 40% TO OVER 90 CTS
6) SUPER ENTERPRIZE AT RM1.25. TAKEN PRIVATE AT RM3.80 (UP 200%)
7) JAKS AT 39 CTS. JAKS JUMPED TO RM1.20 (UP OVER 200%)
8) MY EG AT RM2.00. MY EG JUMPED OVER RM4.00 & SPLIT UP 100%
9) AJIYA AT RM2.15. AJIYA UP OVER RM4.30 (JUMPED 100%)
10) KULIM AT RM2.50. KULIM TAKEN PRIVATE AT RM4.10 (UP 60%)
11) TMAKMUR AT RM1.38. NOW TAKEN PRIVATE AT RM1.80 (UP 30%)
12) JERASIA AT 45 CTS. IT DOUBLED TO 90 CTS (UP 100%)
13) IPMUDA AT 70 CTS. IPMUDA WENT LIMIT UP AT RM1.60!!
14) SUPERMAX AT RM1.60. SUPERMAN DOUBLED TO RM3.20 (UP 100%)
15) POHUAT AT RM1.25 (POWER HUAT JUMPED TO RM3.80 & SPLIT) UP 200%
MANY MORE LIKE KIMLUN, MAHSING, ILB, ETC, ETC (UP 30% TO 40%)
SEE WHO IS TELLING TRUTH AND WHO IS LYING THEIR THEIR TEETH
2016-06-19 11:49
LOL...how about the other 100 stock that you call buy?? Not dare to post due to all gone holland??
15/115 pick = 10% accurate?? I believe i3 member smart enough to see who is the liar
2016-06-19 11:51
Posted by stockmanmy > Jun 19, 2016 10:13 AM | Report Abuse
Raider
Earnings growth beats cash in the hand any time.
Take any two companies
One with lots of potential
One with lots of cash
The first one trades at a high premium
The second one trades at a discount.
Always true.
In Malaysia as well as Wall Street.
RAIDER THINK NET CASH COMPANY IS STILL BETTER THAN OVER LEVERAGE COMPANY LOH....!!
OF COURSE EARNINGS GROWTH ARE IMPORTANT, SAMETHING POSITIVE CASHFLOW, STRONG BALANCE SHEET ALL THESE SUPPORT A VALUATION OF SHARE PRICE MAH....!!
ALSO CASH IN HAND IS BETTER THAN 2 IN THE BUSH MAH.....!!
A COMPANY THAT SHOW STRONG ACCUMULATION OF CASH IS VERY VALUABLE MAH...!1
ALSO IF USE CASH GENERATION WITH EARNINGS GROWTH, THIS WILL ALLOW A VERY GOOD SELECTION FACTORS OF VERY GOOD COMPANLES LOH...!!
RAIDER LIKE TO EMPHASIS THE COMBINATION OF BOTH FACTORS ARE MORE IMPORTANT LOH....U DON NEED TO XCLUDE ONE FACTOR LIKE GROWTH AGST ANOTHER IMPORTANT FACTOR LIKE CASHFLOW MAH...!!
IF USE THIS 2 METHODS TOGETHER.....YOUR SUCCESS IS VERY MUCH HIGHER LOH....!!
2016-06-19 21:18
base on our gut feel value investing Penta will shoot up like crazy, because it has cash and growth, importantly got some big investors going to invest big big in Penta hehe
2016-06-19 21:59
cash is important because cash is the king and no money no talk in business kiki
2016-06-19 22:26
maybe another view that having cash could be better than great earning growths: having cash works across a wider spectrum of probable future scenarios, whereas having great earning growths target only a few scenarios predicted in advance. Still, like stockraider has pointed out, accepting both and not biased in one is definitely the optimal view.
2016-07-11 02:06
sting...cash rich companies are trading at a discount....
somehow, the market actually treats cash as if it is a liability.....
maybe, value is not what they have
but value is what they do with what they have.
2016-07-11 02:16
Yeah agreed. Having one without the other is like having knowlegde but without the intellect to apply it, leading to stunted growth (value trap). Or the other way, being ambitious but without the knowledge of the pitfalls/shortcomings could lead to downfall (companies too depedent on receivables).
2016-07-11 02:46
Posted by stockmanmy > Jun 19, 2016 11:34 AM | Report Abuse
Calvin Chong, raider and anyone else.....
Cash is only relevant to whether the company has enough liquid ratio and current ratio to survive.
Excessive cash has little effect on share price.
All the share price is about earnings growth.
If cash is so important , nobody will declare dividends anymore.
RAIDER SAYS THIS TYPE OF ARGUEMENT VERY EASY TO COUNTER LOH....!!
IT IS JUST COMMON SENSE MAH....!!
IF UR WALLET HAS RM 1,000 RAIDER OFFER TO BUY AT RM 500 ....WOULD U SELL LEH ??
IT DOES NOT MATTER WHETHER U EARN RM 1 MILLION A YEAR...A BILLIONAIRE..IT IS JUST PLAIN COMMON SENSE...U WOULD NOT SELL YOUR WALLET WITH 1,000 CASH FOR MERE RM 500 CASH MAH !!
BUT SURPRISINGLY IN THIS INVESTMENT WORLD....THERE IS SUCH SUCKER LOH....!!
THEREFORE UNDERVALUE MARGIN OF SAFETY BUY LOH....!!
GIVEN TIME U MAKE ALOT OF MONIES USING THIS INVESTMENT TECH LOH....!!
2016-07-11 10:47
raider
it does not work that way.
the value of a share is not how much cash it has.
the value of a share is not even about part ownership.
the value of a share...how much its PE is about growth and about....equally important......the stability of the share.
it is liquidity looking for a home and is very seldom about looking to be a part owner.
2016-07-11 11:35
raider
It is far better to buy a share because you like how the share behave than to buy a share because it got lots of cash or thinking of part ownership.
certainly more rewarding and higher chances of being rewarded.
2016-07-11 11:55
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stockmanmy
KC Chong...you asked what is gut feeling and what besides your trusted formulas?
Here is the answer above.
2016-06-18 15:47