Is it Not every Businessman will do before they invest in a Business?

Since you are with me at this hour and so hard working. Pick a sector you like. Study all the company in that sector. List down all its strength and weakness. Also the latest development of that sector Or company. See if that strength is the Economic Moat that will last for years and years to come.

Now you have much better process of thinking. Remember what you just said and you will be doing well.

Correct or Not? IF you know the Business well like KC knows about Pintaras, he knows it will improve from single digit to double digit then from 20 to 30. IF you don't know the Business well, you will never know How come my investment in ROE went down from double digit to single digit OR down trending.

In that sense you will be becoming better Investor because you are NOW Businessman with Business mind. Study some corporate development and Learn how Businessman do Business ya.

Remember as well You will gain much more if your investment Now is a single digit ROE company then ONE day it improved to DOUBLE digit ROE.

Isn't it Better?

You still cant invest if you dont know their Business well. Buy One lot each?

Two questions always remains:

1. High ROE/Profit Margin still remains a single Digit Number=It can be up trending or Down trending. It can still be down trending like Hartalega.

2. What price do we pay?

It is Not an easy call for re-rating. Well who knows CPO might Hit above Rm3000 few months from Now?

Even if it did, what price do we pay for plantation stocks? So we better Buy now, is it so?

if i am right on the above then the undervaluation of Fima/Kfima is more towards liquidity issue, right? It is high time Now as Retained Earning especially on Fima is about 5x the issue capital. Do we have any accounting standards governing this issue?

Hi KC, i have the chance to look again your FCF model calculation on Kfima again based on above link.

1) It is noted that you use paid-up capital as your base and also included cash on hand of RM272m as your cash flow calculation but leaving out the retained earning whereas the retained earning and cash on hand is interlinked. If you leave out retained earning then your calculation is inflated, right?

2) IF you want to take in cash on hand then you have to take in the whole capital structure as your base that includes retained earnings right?

3) Probably we should leave out cash on hand and just take in share capital?

4) Retained Earning could be swapped for paid-up capital once Bonus declared and share price adjusted accordingly. But what we usually notice is that Share price will jump before and after the Bonus declared and issued to go back to prior level. Does it explain that we should take in the whole capital structure as our calculation that is shareholder funds?

Just want to clarify.

IF we are re-rating plantation companies based on CPO price fluctuation, then how many times we have to re-rated it in a year if it fluctuates in a wide range?

Even so, can we wait for CPO price to stabilize above Rm3000 before we call for re-rating. IS it not too soon Now for re-rating as price just manages from Bottom half a year ago?

Having said that, i sure agree on long term perspective.

well we accept price drops if earning is not up to expectation. Moving forward the earning Base is low Now.

To be fair the result is over whether good or bad. Going forward we shall see if company has capability to turnaround for current year.

1. I glance through your posting on Jae Jun stock picking Ratio and surely i agree with that. Monitoring those Ratio year to year changes for past ten years is more important than the SINGLE NUMBER of Ratio itself.

2. Also note that there is No absolute valuation in Jae Jun model and I also agree with that. As such don't work out so hard on that fair value and MOS as we are playing around with too many assumption and you will miss out on certain corporate development as DCF model is trying to value additional cash flow generated from new Development.

3. Having said that DCF model is best used to evaluate additional value to be added into the cash flow stream of income from additional corporate development NOT the Best valuation method for the company itself.

4. You may monitor those Ratio changes relative to the price of past ten years. If price is lagging behind because of MR MARKET for a few years and fundamental remains intact, then that is your Margin of Safety.

Well certainly, if price overshoot and there is no further corporate development and has outperform the Ratio percentage significantly over a period of time, it can be over valued.

If everybody keeps throwing everything that they don't want, I really wonder if the market will go Bust one day. Well, market just keeps everything that everybody throws and keeps quiet.

Well This is KC that we know.

So if i am 80% invested, that means I am fully invested. I hope i will never use my cash holding Ever and Ever.

Every Business involves certain small percentage of debt financing. It can 10-20% of your total portfolio in good times and bad times.

BUT I WILL STILL RETAIN MY CASH HOLDING.

Yape cut the loser and ride on the winner. Eventually ONLY those winner will take you to your Purpose in life.

When fundamental deteriorates 3 years in a row? Is it a Loser? OR if price ever drops more than 40%, do you want to know why? I dont want to know as i cant devise a good strategy for that. Well, most of the time it is still a profit taking and reinvest into winner.

Portfolio means other asset class other than stocks.

To manage the whole portfolio is like managing your whole health system. You know you need certain balancing and you cant over exercise/over invest as well. You are governed by Higher Law and principles.

You know your priority is Not A B or C but A-Z.

My Dear Intelligent, making money is a bit different from stock analysis.
Making tons of Money is again different. To be Rich is different again.

You can make things possible and you have skills and in great mental state.

I hope some concepts help in your process.

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.

2) Stock Diversification meaning the mix of High Quality mid cap company and small cap with the mix of High profit Growth and High Dividend yield will generate better results than well research Big Cap; We hope those will become blue of the blues One day;

3) Study the price chart of last ten years and noted the Biggest falls in percentage from high; it can be 23.6% or 38.2% and devise your strategy from here. And never Buy into any stocks which has fallen more than 38.2% before. Hold it forever and add on to it from time to time during correction;

4)Only Buy into Companies which has consolidated for sometimes and the Longer the Better it is as once the price break out. It is more likely to be more than 50%. So you are safe and most likely you can Hold it forever as you have studied the price before that it has never dropped below 38.2% in past ten years. You may find your MOS during this time as when price consolidates, company profits expands.

5) We are here to be Rich Not to take profit as if when we take the profit there must be something wrong in the whole process.

6)Liquid asset can be bank deposit, cash, current account, mutual funds or Bonds or anything liquid. Do you think Businessman is stupid with so much money in the current account with near zero interest? Opportunity is everywhere Not necessary from stock market crash, fair?

You are investing as well if you are Holding cash. Holding cash is part and parcel of the structure.

7) Opportunity is also everywhere Not necessary from Stock Market investment alone, fair?. Stock market is definitely Not the Only Holy Grail. So we need to widen our horizons. Look at property price and gold price of past 5 years for example. Or why not starts your own Business? In that way I am better investor because i am a Businessman and i am a better Businessman because i am an investor.

8) Learn to Borrow and Margin financing in good and bad times. It helps but keep it to the minimum.

9) Why should we be uncomfortable if our companies share price keeps on going up? We will ONLY become Uncomfortable if we Only want to take profit at Highest price as though we did not sell Now the price is to retrace immediately. Market will always punish those who wants to sell at Highest price, fair?

10) Why should you worry about price falls if you did not get to Buy at your defination of MOS as you are confident that price will bounce back next year if it drops this year? Market will also punish those who always want to Buy at lowest price. Fair as well?

Very Good Mr Ooi, we could be right and we could be wrong. But we dont sway around or jump ship until we are proven wrong.

Do we really think that Applying ROE or teaching people even techniques like DCF model is like teaching people How to fish.

How about before teaching people how to fish, we tell them before going out to the sea for fishing, they have to bring life jacket and even must know how to swim first, right? We tell them there could be storms or even the boats might sink.

IT is a survival issue and knowing the whole process that matters as well.

I like your 123 line of thoughts and I always like DCF model. SINCE you raise MOS, then i have also prioritized my 123 as follows:

a) OUR WINNING Mentality

Can you know that you will be Rich in stock investment? Are you sure? Can you imagine that? If not, please DONT TRY.

You cant invest you did not trust the company and the economy.

Your trust and Methodology will be seriously tested when:
1) Market Crash that is why it is cheap
2) Bad News on your company that is why it is cheap
3) Yearly or Quarterly drop of earning that is why it is cheap
4) Your Holding is under performed by Broad Market due to years of consolidation that is why it is cheap


b) Portfolio Management and Diversification and cash management

Our job is Not sitting here everyday waiting for Market Crash or any event of the above to happens OR wait until MOS reach whatever level.

Our job is to think of how to safeguard our investment return, invest with peace of mind, how to achieve efficient frontier, think of Eternity of Long term Compound, Study Business Model and KEEP INVESTING in our portfolio, Risk Control; Cash Management, margin control....

BASICALLY IF I HAVE CASH DURING MARKET crash or WHAT HAPPENS TO MY PORTFOLIO? OR when 90% of Broad market down, should i still strive for the balance of 10% that will still out perform?


c) Methodology

How do I do it? YES, you should buy at Huge MOS and your 123 above.

BUT IS Buying at Margin of Safety is the Only Answer? How about the selling and holding part? When should i cut my losses? So, it leads you to the whole investment process.

WE BASICALLY NEED TO HAVE A WHOLE MASTER PLAN DRAFTED OUT BEFORE COMING TO IMPLEMENT IT.

As you said it is a Good list to start by as those companies earning is way above asset/capital employed. They are mostly asset light and probably needs little capital expenditure. That itself is good Business.

Take note of those in natural growing market and company with strong management to capture market shares.

A growing trend of profit margin with strong revenue or growing trend of ROE/profit margin is better indicator than a SINGLE NUMBER OF ROE ITSELF.

TEHN again, what price do we pay?

A company with lower ROE, ROA or ROR can still manage to grow their Business. However their margin of Error is very small, that means they cannot afford to make any mistake and their Business future undertakings must be very Safe.

In that case, Business with High ROE, ROA or ROR can afford to wait for Better business opportunity to come by. Probably they can afford few average Business OR probably can afford few minor mistakes.

When we look at either ROE, ROA or ROR that gives us the pictures of good employment of Asset/Liability or Invested Capital or cash on hand.

1) How about the Growing of Business/Top Line, Growing of Bottom Line and its profit Margin to capture market share and growing its Business?

SO we look at cash flow statement. IF the CASH is piling up, then we can say management has yet to reinvest the return. IF there is a purchase of Land, factory, expansion, equipment and machinery, then there is High chance of reinvestment of profit/cash on hand for further Growth.

Growing GOOD Business is STILL a concern. ONLY when Business is becoming more valuable in term of growing size, profit and earning visibility then it will be reflected in share price.

2) if answer to question 1 is YES. THEN How about the Price we pay for such Business or management? That will determine our futures return.

I would still Buy on Lower Range based on Fundamentals after Long Consolidation of Minimum 6 months to A year.

If there is No Long consolidation, where can we find Break Out, right or Not? So Lower Range and Break Out. So for Short, it is Higher Range and Break down.

I like Monthly Break Out. If I ever want to trade I trade on Monthly Chart.

Well along the way, you must set Higher criteria and Higher law, and certain stocks does not meet your criteria again. So that is How you cash out and have extra cash again. Learn to let go again and again. We are committed to portfolio Not ever certain stock selection unless it is your spouse.

You must be willing to sell all the loser then you will have cash most of the time. To me selling the loser is just a good excuse of Profit Taking.

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.

if you dont have the mentality to invest at all time and the winning mentality How are you possibly being able to invest in market crash?

The winning mentality in market crash is Despite 90% of broad market down turn I still have to find the Balance 10% of stock that will continue to out perform the market. That is our profession and commitment to our ourselves.

Welcome to the world of Top 5% of the most powerful and riches.

If we trade price, then we must talk about price level.

Important price level is at double top, double bottom, neck line, waist line, knee and toe. Head and Shoulder. Rounding Bottom. Pivot line of Cup and handle.

What is the price reaction at that point of time at that price level? Dont look at the indicator first. Just have a good feel first.

A High conscious mind looking beyond your fear and greed and emotion generated from our own thoughtlessness. Then you know of survival ship, eternity,...long term compounding, peace of mind in investment..in fact everybody knows and i am just reminding.

You know what i mean? we should not talk about 15% or 20% or 25% ? But after 30 years where are we right?

I am the advocate of portfolio diversification instead of stock diversification. It is a new Horizon that is why it is called efficient frontier. We Really need to open up.

I am also learning cash management as I dont want to have a cash call or into the situation of what you said i would buy more if i have cash.

I want to make sure i am well prepared at all time and Nothing surprises me. This requires certain sacrifices in term of yields and mentality to think in the context of Eternity.

Ultimately My portfolio needs to survive so we can only talk about realization of long term compounding.

I know it is wrong of me to comment on different investment style as risk rewards of individuals are different and Nothing is absolute right and wrong.

Dear friends, KC reply is typical. You really need to analyse tons of company to come out answer in a seconds.

yape good company.

Mr Ooi here is senior. You can learn a lot from him in client managing. When he makes a call, everybody lines up.

Nothing is Right or Wrong that is knowledge that is why Graham suggests 60-100 stocks. Well, some people can do it and i dont doubt that.

I am also not saying there wont be market crash, well at least Not today, we can just take one day at a time. The conditions and Timing must be there for a market crash.

What i can understand in today Economy is How we manage our Economy debt Level. Remember asset and liability generates Profit Growth and profit generates cash flow. The debt we have Now must be well managed and be channeled to generate quality economy growth then it is a Good Debt.

Sometimes corporate using debt is a smart move as they need to capture market right away. Having said that too many corporate is hoarding cash Now and it might cause things to slow down a bit.

My Dear, client serving is a different mentality as you need to understand them and manage their expectation. And you have to understand the good condition and timing as well. Remember clients is your rice Bowl.

I agree Good Business with Good Return is the Margin of Safety.

Have a Good day.

Ok lah thanks for sharing dont take it seriously.