Posted by sostupid > Jun 29, 2016 11:02 AM | Report Abuse
Investing is investing in yourself. Stupid. Money don't drop down from the sky freely. Warren Buffett quote: If you are stupid yourself the world will always look flat to you all the time, whether it is yesterday or in the future.


First time fully agree with you.

Read, read read. Learn, learn, and learn. Practice, practice and practice.

There ain't no tooth fairy in Bursa, Idiot!

Investing is the same.

Without the necessary knowledge and experience, how do you know a stock is good to invest in?

Without knowledge and experience, how can one earn extra-ordinary return from the stock market?

Posted by valuelurker > Jun 28, 2016 05:27 PM | Report Abuse
Its all rather tiring kcchong. Everyday its about harping the same old stories, "im better, backed by research" bla bla bla.
Look, we know. FA works. We know
You could have been so much more. Instead you chose a path of mediocrity.
Spouting useless articles 'defending' your methods, 'answering' all the detractors when we all know its just a pitiful attempt to drum up interest in your course.
Do you see any of the value investing guru's touting their courses? Nay.
So much more, yet you chose the path of mediocrity. Wisdom is wasted on the old. You would think the old would want to leave a legacy, but nay, they want your small fees. A pity, really.


Sounds like some kind of advice for me. Seldom get any advice nowadays. But what is it? Shoot!

Posted by soros228 > Jun 27, 2016 10:28 PM | Report Abuse
Well written.
Icon 1-0 KC.


Agreed. Thanks icon8888 for this article.

Posted by stockmanmy > Jun 27, 2016 05:49 PM | Report Abuse
one can understand the business is prepared for all eventualities...and gives an enjoyable read.
one who can understand the business and gives a logical profit forecast has done all that we want our analysts to do.
fund managers and professional analysts place so much time on profit forecasts they even have consensus estimates.
Have you seen sifus who make no attempt at profit forecasts but gives 20 formulas and 5 valuation methods based on the past and no indication he/shes even know what business it is in.?

I know of sifus who used a number of ratios and valuation methods.

Benjamin Graham, the father of value investing,who had made huge profit for his investors over a long period of time used them,but may be less metrics, 10 may be.

Mohnish Pabrai, a modern value investors uses a checklist, may be 10-20 items, and he made closed to 30% a year for his investors for an extended period of 20 years.

Thee are many more of them. But no, I have not seen one of them who has "no indication he/shes even know what business it is in.?"

Posted by stockmanmy > Jun 27, 2016 12:09 PM | Report Abuse
Isn't BA part of FA?
No.......in the hands of some of the bloggers and sifus here, it is not and that is a big problem.
I have seen spreadsheets of 20 formulas and 5 valuation methods.....all done without thinking, done without using the brains., done mechanically, treating every company , every industry as if their differences do not exist, do not count.
Have you seen such sifus?
PE must be xyz
Gearing must be abc
Net cash must be def
Roe must be ghi
Roic must be jkl
Lots of funny people in this world
If anyone has found computer algorithms that can be successful....why is he selling his algorithm?
Why need humans to trade?

A good pilot has a checklist of scores of items to check before flying. Likewise an investor with safety in mind would also have a checklist.

What is wrong having "20 formulas and 5 valuation"?

To me it is a good and prudent strategy. Any time better than whatever BA or BS.

Posted by stockmanmy > Jun 23, 2016 05:05 PM | Report Abuse
there are sifus offering TA for a fee
also sifus offering FA for a fee
too bad no sifus offering BA.
not Bachelor of Arts............Business Analysis.
too bad.
we get so many incomplete analysis
Equity Analysis stands on a tripod
But i3 produces bipod analysis.
not all
sometimes, we do get bloggers who cover all 3 legs
what I cannot stand are spreadsheets of FA without any BA.



Not sure why your BA is so great. Wish to know more what is the difference from FA.

Can't stand FA without your apa ini BA?

Why don't you start to give course on your "Tripod" then?

Posted by stockmanmy > Jun 27, 2016 09:32 AM | Report Abuse

There is no place for the past in investing or in trading.....that is why FA and TA experts without BA is not just incomplete...it is down right misleading.

Why are you keeping on harping on BA? What is so special about your BA?

Isn't BA part of FA?

Posted by Ezra_Investor > Jun 23, 2016 05:17 AM | Report Abuse

To be fair, you don't need to be bothered about his portfolio performance. Because his portfolio performance is not the point in his articles. Besides, if he has 10 apples but few of them are spoiled, he still gains as long as his winners are more than his losers.

What you want is to learn how to fish from him, not for him to provide fish for you. There is no free lunch in the world, it's not a matter of whether he is rich or not. You want something, you have to give something. It's called the "the law of equivalent exchange".



Bull's eye

Posted by haikeyila > Jun 22, 2016 11:16 AM | Report Abuse

it is always great to learn from the experiences of long term value investors, thanks.
one question I always have though is - if value investing really is what all its touted to be - how come still very, very, very few people in the world are successful with it?
It is surely not that hard to learn value investing with all the books and articles out there, the principles and calculations are generally simple, but why are not more people using it, or more importantly become successful with it?
Anybody has any theory?



You may find your answer here,

http://klse.i3investor.com/blogs/kcchongnz/50988.jsp

And because very few can be true value investors.

Posted by stockmanmy > Jun 22, 2016 02:06 PM | Report Abuse
But growth stocks that deliver growth are the first to reach new highs on rebounds, strongest, earliest rebounds, outpacing and out beating all those boring value stocks that people falsely think gives them margin of safety.
In other words, growth stocks gives you the better gains, faster gains and less time spend in detention.


I have shown you evidence of extra-ordinary return of the super investors in value investing in my previous article below

http://klse.i3investor.com/blogs/kcchongnz/98599.jsp

I have also shown you my personal experience in this article.

Why don't you show us something similar to justify your statement above?

Posted by Frank Soweto > Jun 22, 2016 11:44 AM | Report Abuse
HI Kc
Hope all is well. The table 1 under appendix is showing the divvy 16 portfolio instead of GE watch 13.
Thanks for another great article - as always :)


Hi Frank, long time no see. Hope you are well too. Thanks for pointing out the mistake on Table 1. I have amended it.

Btw, why you always appear together with this "followblindly" fellow?

Posted by Jeffbkt > Jun 21, 2016 10:44 PM | Report Abuse

holding a portfolio for a very long period of time may not be consistently increase the return Year on Year. Your portfolio may return 300% in 2015 but this year the portfolio return may be reduced to 200% which means this year your net return is -ve 100%. So comparing the buying price vs. the current price is not a good measurement if the same portfolio is not able to generate compounded profit Year on Year.


What makes you think as such? I do know most people reshuffling their portfolios frequently but the results were not good compared with if they just stay put with their stocks. Investing doesn't mean there must be constant actions.

BTW, the portfolios were put up to show others, may be not you, that value investing for long term works.

Posted by donfollowblindly > Jun 21, 2016 10:55 PM | Report Abuse
Why no mention how Coastal Contract perform? Recommended at RM 3.27 today only RM 1.52 or loss of 53.5%.
http://klse.i3investor.com/blogs/kcchongnz/70035.jsp

Coastal is definitely one of my stock picks along the years. It did has its price dropped badly. I still have a few more which lost money. However, they were all not meant to be in the three portfolios posted.

The first two portfolios were (officially)posted way before that and it was by a third party, Tan KW. The last one was just the recent one; not supposed to be in a portfolio too, but just a summary of my write-up end of last year.

I am amazed you never follow me to buy any stock in these three portfolios which made big money. Instead you followed me blindly to buy a few, and so surprisingly, all are losing stocks.

What big sin have you committed that you were published like that?

Posted by leno > Jun 21, 2016 09:40 AM | Report Abuse
Stock manny ... name one wat-fak-growth stock and KC CHong to name one wat-fak-value stock TODAY ... and we see the result by end of june THIS year 2016 ... meaning about 10 days to go. See who win than can tok more kok.


What, is that what you understand about investing?

Tikam kah?

"tok kok is cheap ... any fakkers also can tok kok"

Posted by Icon8888 > Jun 20, 2016 06:31 PM | Report Abuse
Hey guys, I am shocked. My article must be so badly written until most people misunderstood the topic under discussion. If you read my article carefully, it is about "future forecast" vs "historical data", not growth vs. value investing


It doesn't make any difference. When you make forecasts about the future earnings and invest, when you got it right, you make money. Say if out of 10 times, you get it correct 6 times. Does it mean investing based on forecasting the future earnings should work?

If one thousand people make forecast about the earnings in the future, and 550 got them correct the last time and make money in investing. Does it mean if you invest based on forecasting the future is the right strategy and must work?

I will only conclude something works if thousands of people do it thousands of times judiciously, and more than 90% of the time it works.

When you follow a certain investing strategy, say base on profit growth strategy; when profit increase, share price must go up. Say if out of 10 times, you get it correct 6 times. Does it mean your strategy is a proven successful strategy?

If one thousand people follow this strategy, and 550 got them correct the last time. Does it mean this strategy must work?

Can they be due to randomness, the law of chance?

Welcome to the world of statistics, what it means by statistically significant.

Those who refuse to talk about statistic, instead "gut feeling", good luck.

Posted by probability > Jun 20, 2016 03:05 PM | Report Abuse
KC was actually saying the same thing I would say...just that stockman did not give a quantitative / logical argument on how to value the growth itself...how to give a price for it? & with what MOS?
If keep saying 'gut feeling'...how la? We need to give a quantitative impact analysis of the gut bacteria also ma...
everything finally boils down to maths & probability. I.e magnitude & the potential direction...without these info...all will sound like great speculation by politicians..


That is what value investing is. Well done probability.

Posted by sostupid > Jun 20, 2016 11:19 AM | Report Abuse
Even if you are very stupid please do not assume that other people are very stupid like you, try to change the focus, try to ask everybody to speak in your language, when somebody says something else, you try to say garbage to change the focus, you start to act like you are not a man anymore. Today, you can go home and wear a skirt, nobody see it also never mind. I don't blame you just because you like to wear a skirt. That is your own rights. Wearing a skirt, dancing like a baboo, it is your own rights.


I counter your arguments point by point. But what do you do? "Wearing a skirt, dancing like a baboo". Your above statement fits you very very well.

Btw, who gives you such a wonderful and befitting name.

Posted by sostupid > Jun 20, 2016 10:48 AM | Report Abuse
For example, american express, you said you don't have american express you will not die? If you go traveling overseas, you have no money to buy, you die there in Turkey or what. Or, you go to New Zeland without an american express, when even taxi fare also you can not afford, without the american express you die or not. american express has a global network, you go to Africa or Shahara desert also you can use. Get it.

WHY GO TRAVELING OVERSEAS WHEN YOU DON'T HAVE MONEY?
NO MONEY TO PAY TAXI FARE CAN DIE AH? UHH!
MUST GO TO SAHARA DESSERT, SOME MORE DON'T BRING OR BUY WATER AH?
WHY GO TO SHARA DESSERT IN ORDER TO USE AMERICAN EXPRESS?
MASTER CARD, VISA CARD NO USE AH?
NO COKE TO DRINK CAN DIE AH? WHAT ABOUT DRINKING PEPSI, WATER(FROM TAP NOT FROM COKE, I DIDN'T KNOW COCA COLA SELLS WATER)
NO,I DON'T GET IT.

Insurance included if you have american express for traveling when luggages are stolen. Value investing is invest in people's urgency, get it. At that time there is no uncertaintly and there is no need to use mathamatics when people are very urgent, at time, when you are urgent even calculator also is redundent.

LUGGAGE LOSS CAN DIE AH? WHY MUST HAVE INSURANCE, AND PARTICULARLY FROM AMEX? SO URGENT TO HAVE INSURANCE TO COVER LUGGAGE LOSS AH?

NO,I STILL DON'T GET IT!

Posted by sostupid > Jun 20, 2016 10:32 AM | Report Abuse
Which is which; do you know linear regression and statistics, or don't know?
All statisticians used linear regression, I believe you need to brush up on your mathematics.


Who is a statistician? I don't claim myself to be one,and I don't use, although I have learned it before.

Yes, all statisticians have learned linear regression, but are you sure all statisticians use regression in their work? i highly doubt so.

Posted by sostupid > Jun 20, 2016 10:20 AM | Report Abuse
Why "urgent needs" in Coca Cola, American Express, Geico, duracell? Because people will die without them?
You need people to inform that no drinking water, no money, no car insurance, no battery, all these will not die when you don't have them but you will die if you don't have these when you need them.
Even this also I need to tell you, you are more kindergarten in investing than I thought you are?

So investor must invest in Coca Cola because you need to drink its water. Must have Amex card, must buy duracell, insurance must be from Geico, if not "you will die if you don't have these when you need them"?

Really?

And also must buy no matter what prices are they selling?

"Even this also I need to tell you, you are more kindergarten in investing than I thought you are?"

I can understand why you refer yourself in your above statement now.

"I know linear regression and statistics I also don't use those complicated garbage to teach people."

"I don't know mathematics"

Which is which; do you know linear regression and statistics, or don't know?

Who uses linear regression and statistics to teach value investing? I do know those thingy,but do I use them to teach value investing?

"Value investing: for example, when there is a river and there is no bridge, if there is a bridge there would be a value when it is urgent for people to cross the bridge. Value investing is investing is something that people has urgent needs. Like investing in Coca-Cola, Wells Fargo, American Express, Geico, and duracell and others, all of these companies give people urgent needs."

What "urgent needs"?

Why "urgent needs" in Coca Cola, American Express, Geico, duracell? Because people will die without them?


"At least get the defintion of value investing right yourself, because that imposter does not even understand what is value investing and he is always taking about he is the only one who knows what is a value investing but other people don't know, top secret, I think the mathematics are even bigger top secrets that you should keep away."

I have written numerous articles on value investing in i3. Mind to gives some specific comments to prove your above statement?

So we must follow your definition of value investing that "Investing in companies that provide urgent needs are value investing"?

Posted by sostupid > Jun 20, 2016 09:48 AM | Report Abuse
Give you mathematics or statistics lessons for the purpose of taking your money away from you is not value investing. You take value from people (the money) away from people is not value investing, it is called daylight robbery.


Do you consider this as "Daylight robbery"?

Posted by Intelligent Investor > Dec 21, 2015 08:24 PM | Report Abuse “An investment in Mr. Chong course provide me the ever best return.”

Posted by coolio > Oct 22, 2015 11:58 AM | Report Abuse I just want to take this opportunity to say thank you again because recently I have achieved 7 figure in my investing journey...hehehe.. Thanks for your investing methods, no 8 wonders in the world is really amazing!

Posted by stockmanmy > Jun 20, 2016 04:39 AM | Report Abuse
Using 20 formulas and 5 valuation methods and advanced Maths is fine when applied to portfolio theory, how a portfolio will perform in uncertainties.
But in predicting the projection of any particular stock, I think I will rely on my trusted guts.
Reminds me of the quantum theory and uncertainty Principles
Don't forget, academia have given on stock picking..
They like to tell the story of the darts and the monkeys.
So why you keep pestering me for academic research on my methods?

"20 formulas and 5 valuation methods". Which ratios and methods you are referring to?

"advanced Maths", What advanced Maths you are talking about?

"predicting the projection of any particular stock, I think I will rely on my trusted guts." What "guts" is yours?


"Reminds me of the quantum theory and uncertainty Principles, Please elaborate!


"Don't forget, academia have given on stock picking..
They like to tell the story of the darts and the monkeys."

Don't you think your above two statements contradicting each other?


"So why you keep pestering me for academic research on my methods?

Why? Because just simply talk and use one or two examples to approve or disapprove something is useless.

"Before dismissing academic research as pure theory or useless information, please note that unlike most stories telling and sweeping statements, all yours included, academic studies are the product of months or years of work; they carry out econometric analysis of large sets of data and provide empirical evidence, rather than basing on a few observations to make an inference. It gives answers; not just yes or no, but also why and how and has to be proven with precise weighing of evidence. The essence of the scientific method is to come up with a hypothesis, test it, and then make sure it can be repeated — and not skewed by external factors."

Posted by sostupid > Jun 20, 2016 08:27 AM | Report Abuse
To those who always like to use mathematics and called themselves value investors. Let me explain to you how mathematics does not work for investing. A horse that can count from 1 to 10 is a very smart horse but the horse is still the horse and why can horse pick stocks that are of value to investors in the long term. A horse only picks anything that looks green, a horse eat grass, probably. If you learn from the horse you will become a horse by picking everything that look only green, you think only grean color you buy, in the end of the day, you only buy a bunch of grass, and grass cost very little in Malaysia.


Are you talking about this thingy "sostupid"?

Surely it can't be those super investors who use value investing which I have shown the fantastic long-term return they have proven to make, can it?

Posted by stockmanmy > Jun 19, 2016 07:49 PM | Report Abuse
Growth.....that is all based on projections and opinions.
it changes at the drop of a hat. That is what makes it exciting.
I can chase the stock, I can cut loss, I can do what I like.

Posted by stockmanmy > Jun 19, 2016 08:04 PM | Report Abuse
In growth, no need so many formulas, so many uncertainties, unless it is a TNB IPP or completed toll roads.
just back of envelop calculations will do.
after that , it is all gut feeling.


All based on "projections" and "opinions". So that is your "growth" investing?

"back of envelop calculations? Gut feeling?

Interesting!

Please elaborate, and with some examples, research backing etc. And also your experience of extra-ordinary return using these thingy.

Posted by stockmanmy > Jun 19, 2016 06:18 PM | Report Abuse
growth stocks vs value stocks.
growth stocks tend to go higher and higher, breaking new high all the time.
value stocks tend to go lower and lower and discounts getting wider and wider.....hahahahaha
anyway I have say all I want to say on this topic here...especially in the comments section.


But you are just muttering without showing any research of statistical significance.

Posted by GlobalValueInvestor > Jun 18, 2016 04:33 PM | Report Abuse

Trust me, without paying mr chong you already learn much more than you pay him. In forum, he shared case studies directly, if you understand you would, if not even you pay him is wasted money. My intention of paying mr. chong is a good will, compensate of his time spending to share here.

If you grateful like I do, do "donation" to mr. chong, you might feel better than paying him for the course.


GlobalValueInvestor,

I am glad you learn a lot by just reading my articles. It makes me feel proud.

However, I think you are the exception. Few can understand the case studies I presented like you do as most retail stock market players do not have much knowledge of fundamentals in investing.

My course aims to teach them from the basic and also goes into in-depth knowledge about FA. It is done in a structured manner. But again on individual; not how smart they are, but how committed they are in spending some time to learn about it.

It is my passion to do that. I have done okay in investing. I do not need donation.

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!!!!!!

Posted by MG9231 > Jun 15, 2016 10:04 PM | Report Abuse
To make good money in long run by paying a small fees for investment lessons is worth while. "小财不出， 大财怎么会进".
Further, when you pay for your investment lessons, I think you are serious and will pay full attention instead of Play-play only.


words of wisdom from a successful investor

Posted by iamsoonoob > Jun 15, 2016 09:29 PM | Report Abuse
hi and good evening mr kcchong,do you think it is wise to invest in stock market now?since there is this coming brexit referendum,uncertainty surrounding fed rate policy,the controversial imdb issue and china economy slowdown?

and one of those might lead to a market crash soon....even if a very good fundamental company will be dragged by this.....so what is your honest opinion about this?


iamsoonoob,
I am just a small time retail investor. So I am in no position to answer your qeustion.

However, this guy Howard Marks may be able to help you.

http://klse.i3investor.com/blogs/kianweiaritcles/43793.jsp

Posted by duitKWSPkita > Jun 17, 2016 12:45 AM | Report Abuse

Kc Chong.. Good evening
How are you Kc chong? NZ still?


Good morning duit. I feel wonderful reading all the comments here.

Posted by bluefun > Jun 15, 2016 08:12 PM | Report Abuse
"Nothing is free", based on KC Chong investment article, bluefun has learn a lots by doing analysis. Currently he buy share based on cash yield, EBIT Multiple and ROIC.
Thanks to Mr. KC Chong, bluefun didn't give KC Chong even single cents, but KC Chong willing to share with us his thought and his knowledge.
You are my sifu forever Mr KC Chong, please continue to share with us your article in future
Kikiki :)
Anak Murid,
bluefun


Bluefun, I am proud of you. Yes, those three metrics; ROIC, Ebit multiple and CY are my top metrics in investing.

Posted by dick20 > Jun 15, 2016 08:19 AM | Report Abuse
yeah, everybody gets paid when they go to work. KC is working. He should be paid whether we make profits or not in the market. Nothing is for free!


Sounds very logical.

He teaches you the way to fish. If you go to a place where there is no fish, you shouldn't blame him that you didn't get any fish. On the other hand, when there are fish around, you probably will catch more and better fish than others. Note the term "Probably".

Did I recommend Insas warrant, or was it an educational article talking about valuation of Insas Preference shares and warrants?

Please read carefully over and over again, where is the word "recommend"?

http://klse.i3investor.com/blogs/kcchongnz/74746.jsp

Lets go straight to the point, answer my below questions, instead of just throwing mud.



What do you mean by "low price"? RM1, RM2 share low price?

As far as I can see, there are many fantastic companies selling at RM1-RM2, or even selling at few tens sens.

Do you compare price to earnings?

How do you consider "low quality" share? Please share for as far as I can see from the portfolio, most shares are of good companies.

Company warrants are derivative of some underlying share, and hence please share which warrant recommended is of "low quality" company.

"what for you constantly recommended low price low quality stocks and warrants to small investors?"



What do you mean by "low price"? RM1, RM2 share low price?

As far as I can see, there are many fantastic companies selling at RM1-RM2, or even selling at few tens sens.

Do you compare price to earnings?

How do you consider "low quality" share? Please share for as far as I can see from the portfolio, most shares are of good companies.

Company warrants are derivative of some underlying share, and hence please share which warrant recommended is of "low quality" company.

Often, people ignore simple valuation methods such as the PE ratio. It is easy to understand and easily calculated.


"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 mis-pricing."

“THE VALUE OF A SHARE DEPENDS ON ITS FUTURE DIVIDENDS” 

“THE VALUE OF A SHARE DEPENDS ON ITS FUTURE DIVIDENDS”

-Dr Neoh Soon Kean

"經過了一年多來股價RM8掉到RM6 的高潮低潮, 又在一次證明我們堅信的長期價值投資是會有回報的!"

“I just want to take advantage of prices away from value. If you do good valuation work and you are right, Mr. Market will pay you back. In the short term, one to two years, the market is inefficient. But in the long-term, the market has to get it right—it will pay you back in two to three years. Keep that in mind when you do your analysis. You don’t have to look at the next quarter, the next six months, if you do good valuation work—Mr. Market will pay you.”

Joel Greenblatt

Posted by Ntpboon > Jun 6, 2016 09:46 AM | Report Abuse

唉!
“两岸猿声啼不住，轻舟已过万重山。”?



说得好

But

一山还有一山高

Posted by stockmanmy > May 30, 2016 09:53 AM | Report Abuse
"extrapolate past earning" fundamental analysis would be the only competitive for a guy from NZ
and NZ market is too boring to cari market.
no need to know the business.


Fundamental analysis is "extrapolate past earnings", and "no need to know the business"?

Is your opinion above an opinion of self proclaimed accountant?

Posted by cheahsk > May 30, 2016 09:14 AM | Report Abuse
Hi KC,
Could you please explain a little bit more of what you mean in the last part of your statement?
"The return on equity and invested capitals, both of which are my favourite metrics to measure ..........., have both shot up to 22%, way above its costs".
Thank you
Yes, it is so good to see you back.


Customarily, most investors measure annual company performance by looking at earnings per share (EPS). Did they increase over last year? Are they high enough to brag about? For his part, Buffett considers EPS a smokescreen. Most companies retain a portion of their previous year's earnings as a way of increasing their equity base, so he sees no reason to get excited about record earnings per share. There is nothing spectacular about a company that increases earnings per share by 10%, if at the same time, it is growing its equity base by 10%. That's no different, he explains, from putting money in a savings account and letting the interest accumulate and compound. Worse still, there are many companies borrow huge amount of money to improve EPS, but the marginal return is way below its borrowing costs.

For example, a company borrows RM100 m and invest in a new project making RM2 m for the year. Its earnings would grow by RM2 m for the year. Is that a good move? Obviously not. How can making a 2% of an additional capital a good thing?

The test of economic performance, he believes, is whether a company achieves a high earnings rate on equity capital ("without undue leverage, accounting gimmickry, etc."), not whether it has consistent gains in EPS.

If your cost of capital is 10%, and your return on the capital is 20%, isn't that wonderful?

Posted by Ezra_Investor > May 30, 2016 04:53 AM | Report Abuse
KC, I usually use 5 years data when doing Fundamental Analysis.
Do you advise to use 10 years data instead of 5 years?
Because I kinda think 10 years is quite far fetched because the macro and micro economy has changed drastically.


Investing is about the future. The past is used as a guide. What to use depends how well one knows about the industry, and the company is specific.

Sometimes I use 5 years' past as a guide, sometimes 10 years, but sometimes just the last year. If there is a good guidance from the company or the analysts about the future, that should be a better guide.

I kind of agree with you because not only macro has changed, the micro of the company may have changed too. So using the past too far back may not be right.

Posted by stockmanmy > May 29, 2016 08:09 PM | Report Abuse
fcf.....
there is nothing you can get anywhere that is subject to as much fluctuations as FCF..................
and all for very legit reasons.

Posted by stockmanmy > May 29, 2016 08:16 PM | Report Abuse
people in i3 have been trained to look at cash levels in the Balance Sheet. Even go calculate cash per share as if give them margin of safety.
some have comments like high cash levels good.
well, if cash so important for share price, nobody will want to declare dividends.


Without FCF, and without cash in the balance sheet, tell us where the money from dividend payment comes from?

And tell us, not looking at balance sheet, free cash flow, PE etc, how do you do your investment?

"Instinct", "Intuition", "gut feeling"? Tell us your personal experience how you have made your big money?

Someone have done that? Provide us with evidence, say the last 5 years, a history and record of how big money he has made? This is the clue, the history and record can be found, just right here, in i3investor.

Without doing the above, how are you going to convince us that basing on those instinct, intuition and gut feeling is a better way to go in investing?

Posted by bcllct > May 29, 2016 03:14 PM | Report Abuse
Great write up KC.
I noted that the 5 yr average FCL of 53.5m is much higher than the 5 yrs ave PAT of 29m i.e. over the last five yrs it produced 120m more cash than its PAT.
on closer analysis the bulk of the excess came from its 127m non cash depreciation charges vs its 38.4m net capital expenses. I am wondering is this sustainable ?

Great observation bcllct.

The high free cash flow is due to the charge back of depreciation from the very high capex made in 2005 and 2006. No, the continuous high Free cash flow is not sustainable. Eventually capex has to be about depreciation, and hence FCF closely follows net income.

Hence my estimate of FCF using its average last 5 years FCF is too liberal. Thanks for pointing out.

However, its latest trailing net profit of RM57m closely resemble my my assumption of base FCf of RM56.2m used in the constant growth model.

Valuation is also an art, but I believe it is better than "intuition" and "gut feeling".

Posted by stockmanmy > May 29, 2016 03:49 PM | Report Abuse
1)450 m shares
120 m warrants
is it really under valued?
2)The reason it is relatively unaffected by adverse currency movements against USD is because its sales are mainly to Japan and China. ...not USD.
3)If you want to buy, go ahead la.
4)warning.....FA of the type preached are based on historical records , how much of a predictive power, I leave it to you.


In your first concern (1), if you read and can understand the valuation in Table 4, you won't ask this question any more, especially if you are an accountant.

Your good friend, who aren't an accountant have corrected your statement (2) aptly, a statement of an accountant.

3) Did I ask you to buy?

4) You have posed this same statement again and again as below

Posted by stockmanmy > Mar 3, 2016 10:48 AM | Report Abuse http://cdn1.i3investor.com/cm/icon/trans16.gif
What Fa what Ta?
It is instincts ......either you got it or you don't.

I have addressed your statement in a full article with evidence here. Please read and appreciate your further comments.

http://klse.i3investor.com/blogs/kcchongnz/92580.jsp

I am still awaiting your substantiation and evidence on your statement of "It is instincts ......either you got it or you don't."

Mind to share with us the academic research that instinct is the way to go in investing?

Posted by Blacksails > May 29, 2016 01:43 AM | Report Abuse
Stock investment is a funny thing;if a stock has no strong supporters or sponsors like fun managers, it is not going to perform well long term. Hevea
could be one of them. Funny thing is that sometimes FA isn't important.


Where do your statistics come from?

I have shown many cases contrary to your point of view. Here is one of them

http://klse.i3investor.com/blogs/kcchongnz/92580.jsp

Posted by stockmanmy > May 28, 2016 11:09 AM | Report Abuse
I also know .... Super investor is one with a few more zeroes in their cheques compared to mine. A super educated writer is one with a few more alphabets after their name.
All means nothing to me.
I am here to enjoy myself.


Given a choice

1) A happy and contended "super educated writer is one with a few more alphabets after their name." who earn a honest living

2)"Super investor is one with a few more zeroes in their cheques compared to mine." who is so poor that what he has is just that


I wold have "fold my eyes and tie my hands" to choose the former. There just simply no comparison which is a better choice.

Posted by Lee David > May 29, 2016 11:57 AM | Report Abuse
Kc, can i know what is the intrinsic.value.of wtk?


How I wish I am a super know-all investor and I can help you to answer your question. Sigh, I am just a small time investor who also have limited time.

Posted by moneySIFU > May 28, 2016 11:57 PM | Report Abuse
Mr Chong, what do you think on the dividend payout by the management?

Posted by iamsoonoob > May 29, 2016 12:27 AM | Report Abuse
hello,kc and thanks for your great analysis on hevea.i do agree with the calculation and the metric benchmark but too bad in my personal opinion,its dividend payout not consistent and not so attractive to me......maybe its depend on individual taste though.......


The most important thing for a business is its ability to produce cash flows from its core operations over a period of time, free cash flows (FCF) in particular after spending on necessary capita expenses for growth.

It is from this FCF that the company can do a few shareholder value enhancing things:

1) To invest in new ventures which yield higher return than the alternative investment the company can use this FCF

2) To pay down debts

3) To buy back its own shares if they are selling cheap

4) To pay dividend.

I roughly rank this order of importance for its use of FCF.

If the debt of a company i manageable, like what happen to Hevea now, and it can make better use of the money to pay down debt, (2) may not be that important any more.

Hevea was having huge USD denominated debts a few years ago which made its operation risky in time of economic down turn. It is no longer the case.