Hi fookchng,

The main difference between ROE and ROCE is ROCE minus out the current liabilities on the denominator.

ROCE will provide a significant difference if a company have huge current liabilities.

And owing to this, I think ROE will sutie my taste better than ROCE. Isn't the current liabilities contribute to the company asset? We need to measure how the management generate value based on all granted asset.

By the way, I try to look for companies with low financial leverage. The companies listed here is a subset from the company list with high ROE and low financial leverage which posted earlier - http://klse.i3investor.com/blogs/intelligent_investor_notes/53177.jsp

hi speakup,

Yes. I would agree that low P/E doesnt mean good.

If you read my post, you will aware that the above companies was selected based on high ROE which achieve by High Profit Margin \ Turn Over and low financial leverage. Do look at company quality first prior to look at P/E.

P/E is not able to provide a whole story.

Do always take note on this.

it is Total Assets / Equity, you can refer to the DuPont analysis posting - http://intelligentinvestor8.blogspot.com/2014/05/dupont-analysis-dissecting-roe.html

Look at Mr. Chong comment and Think about it. Why not put the money to bank FD to get a better return? And it is risk free and you can sleep well.

Hi noby. Yes, this is just a raw number. Don't worry, I won't click my "buy" button before I perform more detail study.

I cross check with i3 - http://klse.i3investor.com/servlets/stk/fin/7231.jsp
and it show that wellcall p/e is 8.21 - still a good number.

Hi ipomember, thanks for your comment.

As per what I stated in my post, this is not the final list yet as a thorough analysis need to be carried out to further examine the companies in the list.

Hi noby , thanks for the recommendation.

I will take a look if time availalble. There is too much to learn.

In the meantime, I have compiled some note on moat and franchise. Feel free to review and it will be appreciated if you can let me know if I make any mistake or missed out any important point.

http://intelligentinvestor8.blogspot.com/2014/05/moat.html

http://intelligentinvestor8.blogspot.com/2014/05/franchise-value.html

Thanks!

Mr Chong, I have summarized the red flag on LONBISC http://intelligentinvestor8.blogspot.com/2014/05/red-flag-on-lonbisc.html

I really appreciate all your post. Thanks for spending time and effort to provide guidance to us.

hi stockoperator, thanks for your comment. I hope that you can share your exercise with us and I can use it as a sample to start mine later.

I think most of the retailer do not have confidence on the red stocks. We can only analysts the financial statement if we know that we can trust the financial statement.

There are around 1000 companies listed in bursa, we can find some companies that is suite our own taste. And, for me I like to pratices "When in doubt, just walk away....."

Let's hear what Mr. Chong comments on the red stocks. I would like to hear his advice too.

Hi stockoperator, thanks for your suggestion. I will try to work on this after I finish my current exercise. In this moment, I will focus on rateing the company based on its pass performance.

Maybe you can share with us how you going to perform the forecast on the business? I would like to hear from you on this and hope that I can improve as well.

Most of the time, I would agree on what Seth Klarman say - "The number of things that can go wrong (in business) greatly exceeds the number that can go right." And, it make the forecast a difficult jobs.

And, John Kenneth Galbraith argue that "We have two classes of forecasters: Those who don't know - and those who don't know they don't know." while Howard Marks did mentioned "In both economic forecasting and investment management, it's worth noting that there's usually someone who gets it exactly right... but it's rarely the same person twice."

Hi stockoperator, I agree that I might lack of business mind and I am not able to predict which company can growth from single digit to double digit.

I will accept the fact and trying to look for good company from the pass performance.

And, I am just aiming a 15% CAGR. I believe a good company with solid track record should able to help me to achieve my goal.

Last but no least, buffett did mentioned that "In the business world, the rearview mirror is always clearer than the windshield."

I start to filter out good company by looking at the ROE and I will further drill down slowly. I remember buffett say "if you want to reduce unforced errors (reduce losing investments), it helps to get familiar with stable, predictable businesses with long histories of producing above average returns on invested capital."

Mr Chong, thanks for your comment.

If the operating cash flow > 5 times interest payment, the financial leverage can be as high as 2?

But, if both ROE is same, do you favor the company with lower financial leverage?

hi johnny cash, i don't know how to derrive the momentum. feel free to add in the ratio on the selected stock.

Thanks noby for your feedback.

hi all! I have further update the list. you are welcome to review and comment. http://intelligentinvestor8.blogspot.com/2014/05/company-listed-in-bursa-with-roe-20-and.html

Mr Chong, I like your blog title.

Please sell sell sell. I want to collect KFIMA too.

hi johnny, i am not sure about UEMS as it is not in my watchlist.

In my opinion, VITROX is business is good. It's ROE is 18% and ROR is 22%. The revenue and net profit is increasing from time to time too. But bear in mind that the price have been increased from RM0.9 to RM2 less than a year. And the P/E is almost 19. I am not sure if the price can continue to move up or not as I don't have a crystall ball with me. And frankly speaking, I am not good at market timing, and I shouldn't in the position to provide any advice on this.

If you read my conversation with other members in http://klse.i3investor.com/blogs/intelligent_investor_notes/52939.jsp, you will found out that I am kinda risk averse and I am not aiming to double up my money within short period. I like to buy when there a high Margin of Safety.

And, I think my style and stock pick is kinda boring and might not suite your taste.

If you want to buy something which is safe, you can consider following post which I think it is suite my taste:-
http://klse.i3investor.com/blogs/kcchongnz/53034.jsp
http://klse.i3investor.com/blogs/stoCKTANgerin/52955.jsp

Hi noby, glad to hear that. If you don't mind, can share it with me?

Hi Noby, thanks for your sharing.

"1) Stock Concentration is more like Great Rotation which is selling the losers and rides on the winners. Basically it is riding on profits and cut the losers short; You may start with 10 but end up with 5 winners; Any criteria for Winner or losers? Well dont mistaken laggards as losers. "

I agree that laggards is not a lossers, and for me laggards should be a better investment candidate as it provide a higher MOS. So, what is your definition for losser?

But, is it contradict with your sentences "riding on profits and cut the losers short;"? I prefer to sell some when the price start to move and sell further when price move near to the intrinsic value (as MOS become lower and lower). And, buy some more on the laggards (if fundamental intact).

What's your view?

hi stockoperator. referring to your post below

Blog: [转帖] 出席 Mr. Koon 股票讲座分享有感 - 夜孩子

May 24, 2014 04:02 PM | Report Abuse

How do i find cash to invest while I am nearly 80% invested?

1.10-20% cash holding
2.Sales of Loser into and Ride on the Winner. Around 10- 20%.
3.Portfolio Switching 10%
4.Use of Margin Accounts 10%.

So Besides learning and graduates from stock Valuation, we have to learn up portfolio management. Why? Again we want our portfolio to survive then we can talk about Long term Compounding.

Do you mean that you will always keep 10%-20% cash holding? But what if you have use the 10%-20% in opportunity A, then you find a good opportunity B?

And, aren't (2) and (3) the same?

hi stockoperator, i just aim for 15% CAGR. I hope I can achieve it. Let me review what is my result after 10 years or 20 years.

and, thanks for your quality reply.

Hi johnny cash,

I will pick some post and repost it to i3. you can visit http://intelligentinvestor8.blogspot.com and I will update this blog when i perform my study.

Noby did provide us a free scanner - http://www.klsescreener.com/v2/ and it can serve as the start point to filter out some stock.

Or alternately, you can use the list in this blog to perform further study.

Hi WLiang777, do you mean FCF instead? It is stand for Free Cash Flow.

Free Cash Flow = Operating Cash Flow - CAPEX and It is left over cash after spending necessary money to keep it growing at its current rate.

Normally, an investor will discount all the future FCF to estimate a firm intrinsic value. Read http://intelligentinvestor8.blogspot.com/2014/05/discounted-cash-flow-analysis-reverse.html for more details.

Hi stockoperator, thanks for the lengthy reply.

I am kinda risk averse and I like Charlie Munger view on cash management - "There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn't awash in cash - and I don't want to go back."

hi stockoperator, i am interesting to know more about b) Portfolio Management and Diversification and cash management.

what is your guideline for cash position on your portfolio? And, what will you do if the stock on the watchlist not reach your desired MOS?

for part c)Methodology

BUT IS Buying at Margin of Safety is the Only Answer?
There is many ways to determine when to buy a stock. But, if we want to minimize the downside, MOS is a very good way. I remember Ben Graham mentioned that "Confronted with a challenge to distil the secret of sound investment into three words, we venture the motto, Margin of Safety."
Do you have better way than buying at MOS?

How about the selling and holding part? When should i cut my losses? So, it leads you to the whole investment process.
Shall we cut loss if the price going south but the fundamental intact? Shoulnd't we buy more if there is a great discount? Remember what Seth Klarman say? "Value investing is the discipline of buying shares at a significant discount from their current underlying values and holding them until more of their value is realised. The element of a bargain is the key to the process."

For me, i will sell some when price move up and sell more and more when the price near to its intrinsic value (as the MOS is zero or almost zero).

Mr. Chong, thanks for your articles. It will take time if need to identify the pitfalls for all companies. Will you do it for all companies or you only will drill down to detail after filter out to a smaller number of companies?

hi stockoperator,

Your comment is good.

Basically, this is what i plan to do:-
1.) check how the ROE was achieved? I am looking for companies with high ROE that achived by high net profit margin, high asset turn over and low financial leverage. (http://intelligentinvestor8.blogspot.com/2014/05/dupont-analysis-dissecting-roe.html)

2.) then, is it worth to find out more on the companies and see if the comapny is a franchise with moat? (http://intelligentinvestor8.blogspot.com/search/label/Moat and http://intelligentinvestor8.blogspot.com/search/label/Franchise)

3.) Then, perform DCF valuation, and buy only if MOS > 30%. I believe it is relatively easier to forecase the FCF for a franchise business than normal business. (http://intelligentinvestor8.blogspot.com/search/label/DCF)

hi noby, yes. this is just a list to start. need some effort to study their ROE.

stockoperator, nice comment.

Mr Tan, I would like to participate in the stock pick.

My target CAGR is 15% and my stock pick for the 100k portfolio is

# Stock # of Share
1 AIRASIA 6,800
2 MULTICO 3,000
3 PTARAS 6,800
4 CSCENIC 9,100
5 KFIMA 2,600
6 LUXCHEM 3,800
7 TIENWAH 1,800
8 TOMYPAK 3,500
9 CBIP 3,100
10 FIMACOR 1,600
11 NOTION 14,700