Posted by cephasyu > 2016-06-20 14:53 | Report Abuse

Thanks for summarizing the KCChong & Stockmanmy debate with your own flavor. Great read!

Posted by Ricky Yeo > 2016-06-20 14:57 | Report Abuse

Earnings growth is far from an assurance of immediate outperformance. If the company cannot cover its cost of capital or market has priced in a far rosier growth, earning growth is an immediate underperformance.

Posted by probability > 2016-06-20 15:05 | 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..

Posted by soros228 > 2016-06-20 15:06 | Report Abuse

Well written.

Posted by stockmanmy > 2016-06-20 15:06 | Report Abuse

Or you can be value investor and buy WTK
NTA $ 3 price $1 see whether you will be rewarded
Or buy L&G NTA 70 sen of which 50 is cash, price 40 sen.

How often are value investors looking for bargains rewarded?

Seems almost all of them are value traps.

Posted by kcchongnz > 2016-06-20 15:13 | Report Abuse

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 probability > 2016-06-20 15:22 | Report Abuse

thanks KC :)

Posted by leno > 2016-06-20 15:41 |

Post removed.Why?

Posted by goreng_goreng > 2016-06-20 15:52 | Report Abuse

what about third factor,which is, leno is the MOST PANLAI. hahahahahaha

Posted by SejukSam > 2016-06-20 15:59 | Report Abuse

i seriously do not think this stockmanmy guy is worth the title "titan" in here.

Posted by Icon8888 > 2016-06-20 16:00 | Report Abuse

Actually, "Titan" refers to the investment strategy, not the personality

Posted by SejukSam > 2016-06-20 16:01 | Report Abuse

alamak even worse hahahhahaha

icon we shld name him "titanfall"

Posted by Henry HO > 2016-06-20 16:48 | Report Abuse

to icon8888...you are one great writer...
hv you ever considering publishing a book on yr articles???
Must hv spend alot of time reading & doing research before you write..salute you..

Posted by Icon8888 > 2016-06-20 17:03 | Report Abuse

Mr Ho I no energy write book

Posted by value88 > 2016-06-20 17:03 | Report Abuse

I agree with Icon8888's opinions above. I have both growth stocks and value stocks in my portfolio albeit the proportion may not be 70%/30%.
I think being flexible (but must be right) can maximise the return for our investment. For example, if we are rigid and follow strictly to some investment guru to avoid airline stock, we would have missed Asia Asia this year.
Both growth and value stocks are good investment choice, and the best is undervalued growth stocks.

Posted by Icon8888 > 2016-06-20 17:06 | Report Abuse

It is good if we can always aim for growth like what stockmanmy said

Unfortunately that kind of opportunities don't always exist

We must learn to invest based on patience, if necessary

Posted by Icon8888 > 2016-06-20 17:07 | Report Abuse

That is actually the key message of this article

Posted by Najib Zamry > 2016-06-20 17:49 | Report Abuse

Haio will be my best bet for "GROWTH STOCK".......MLM business is coming back if I am not wrong due to current weak economic environment.

Posted by kcchongnz > 2016-06-20 18:08 | Report Abuse

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 Intelligent Investor > 2016-06-20 18:13 | Report Abuse

“In our opinion, the two approaches (value and growth) are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive...” - Warren Buffett

Posted by Intelligent Investor > 2016-06-20 18:16 | Report Abuse

What's Mr Chong's view on Grow?

Grow Baby Grow kcchongnz

Actually there is no issue about growth,. Generally, a firm with a higher growth will grow its earnings at an accelerated rate and maximizes shareholder value. There are a few important things to look for though basing on the above examples. It is not just growth, growth, growth, but what is this growth and what is the quality of this growth.


Make sure you don't overpay for growth, as for the example of Microsoft in year 2000. This you must a feel of the value of the stock before you decide to pay a price for it, even for great companies.

The growth in revenue must be accompanied by the corresponding growth in earnings as shown in the case of KNM, London biscuits and GCB, or rather not shown.

Even growth in earnings is not necessary a good thing. After all a company can borrow another RM1 billion and earns RM10m a year from it, it is only 1% and way below the cost of capital. This is actually happening to all the first three companies mentioned above. They borrow huge amount of money but earn pittance, and their borrowings exploded, not earnings exploded. The return above its costs of capitals is the thing investor should look forward to, not growth in revenue, nor earnings.

Make sure the expected growth is not a hope like what happened to Hibiscus, and all new SPACs, Asia Media and SmarTag. Otherwise you would end up with instead a soul full of hope, but a hole full of soap.
Make sure you understand what their reported earnings are and their quality. This is an issue for all those stocks mentioned above, without any exception. What a coincidence, or is it?


http://klse.i3investor.com/blogs/kcchongnz/63777.jsp

Posted by Intelligent Investor > 2016-06-20 18:17 | Report Abuse

Mr. Icon, please consider above post from Mr. Chong when you quote his view on grow. Thanks!

Posted by sanchez > 2016-06-20 18:17 | Report Abuse

Everything you said, every statement you gave must be supported by data and statistically proven. Otherwise it is just a gun without bullet.

Posted by Icon8888 > 2016-06-20 18:31 | 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

My eyes @@

Posted by thteh > 2016-06-20 19:37 | Report Abuse

Good article. Thank you.

Posted by kcchongnz > 2016-06-20 19:56 | Report Abuse

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.

Posted by chl1989 > 2016-06-20 20:06 | Report Abuse

Food for thought. I would say kc's method is relatively much easier coz u are only analyzing what've already happened i.e. past business performance. Earning forecast strategy requires a lot of due diligence as well as high lvl of intelligence n experience for you to forecast correctly. Not to mention high lvl of risk.

Posted by Icon8888 > 2016-06-20 20:08 | Report Abuse

I guess different method is suitable for different people

find one that suits you

Posted by gotcon999 > 2016-06-20 20:17 | Report Abuse

This blog conducts a competition very year. The results are known to all.

Posted by chl1989 > 2016-06-20 20:24 | Report Abuse

No right or wrong. As long as u are comfortable with the strategy and consistently make money, then no one can judge u :)

Posted by sunztzhe > 2016-06-20 20:33 | Report Abuse

Past business performance does not guarantee continued future performance.

Fundamental Investors rely on past historical record to forecast its Intrinsic Value.

TA investors assume that price history repeats itself and the fundamentals are already in the price whether one is aware of it or not.

Both rely on past price records to make decision on buy, hold or sell

It does not matter who is more right. What matters is you make consistent money with the investment system that u r most comfortable with in making money.

Posted by probability > 2016-06-20 20:37 | Report Abuse

Guess Icon's strategy is mainly focused on near term E-arnings visibility which is significantly improving/growing combined with low current P/E...relatively discarding or giving less weightage on other aspects of valuation.

Of course best method is if you take into consideration on the IV too (considering all factors of valuation) with high MOS and then combined it with the above simple & effective strategy.

Posted by sunztzhe > 2016-06-20 20:52 | Report Abuse

The Determination of IV is an art in making the appropriate assumptions required in the determination of the IV and different people will arrive at different values of IV for a given stock and consequently the MOS may be extremely good, average or not good and that is dependent on whether one's assumptions is optimistic, realistic or pessimistic.

Posted by probability > 2016-06-20 20:54 | Report Abuse

on should derive IV with pessimism. Or more accurately - 'realistic pessimism'.

Posted by sunztzhe > 2016-06-20 20:58 | Report Abuse

As determination of the IV is an art, subjectivism influences the determination of the IV of a given stock. As such some even ask....WHY BOTHER given that there will be different IV for a given stock.

Posted by probability > 2016-06-20 20:59 | Report Abuse

Depending on how close you think the 'artistic IV derivation' is to science...i.e the level of your own confidence on its derivation, you can inversely decrease your MOS criteria. Proportional increase it if your confidence level is low...

Posted by sunztzhe > 2016-06-20 21:03 | Report Abuse

John Burr Williams set forth the equation for value:

The value of any stock, bond or business today is determined by the cash inflows and outflows – discounted at an appropriate interest rate – that can be expected to occur during the remaining life of the asset.

Posted by Blacksails > 2016-06-20 21:11 | Report Abuse

In conclusion, and penultimately it comes down to Timing, timing and conviction for value investing and less so for future growth investing?

Posted by sunztzhe > 2016-06-20 21:13 | Report Abuse

HOW BUFFETT INVESTS

Estimate Long-Term Earnings, Buy with a Margin of Safety

When Charlie and I buy stocks – which we think of as small portions of businesses – our analysis is very similar to that which we use in buying entire businesses. We first have to decide whether we can sensibly estimate an earnings range for five years out, or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate. If, however, we lack the ability to estimate future earnings – which is usually the case – we simply move on to other prospects. In the 54 years we have worked together, we have never foregone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.

Stay Within Your Circle of Competence

Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.

Focus on Value, Not Price

With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays

Posted by probability > 2016-06-20 21:13 | Report Abuse

yes...that's the tricky part...the estimation of the future probable net cash in flows... so many factors influences it...and that's why they call it an art... when u probe deeper and deeper...then u will start to think as hard as the business owner itself...ha ha ha

to avoid all these...they have come with simple proven value investment strategies based on historical data & statistics to validate it.

Posted by Ricky Yeo > 2016-06-20 21:40 | Report Abuse

Lay it in simple facts. Every investors out there have access to more or less the same information and news of a particular stocks, I would say 99% similarity. So what differentiate one over another investor can be many factors, but namely analytical edge, psychological edge etc and so on. All these edges add up to what you call skills, or Alpha.

Where do you get your Alpha? Read, read, read and apply what you have learn and refine it over time. So if you are able to do that, your skills will improve, your return will be better than others over the long term.

When you observe someone says 'Net cash is not a good predictor of share price'. That is obviously true. It isn't. And there are indeed investors that use things like net cash, low PE, below NTA to decide a stock is undervalued. That is because they are learning, they're climbing the skills level.

"All animals with wings can fly". You know this statement is not true because you're smart. But if you are a kid I bet you won't know that because you are learning.

Same thing. We learn through attribute. Attribute is things like low PE, net cash, below NTA makes money. Same as saying all animals with WINGS can fly. Wings, PE, Cash, NTA becomes the attribute. But as learning improved, people move from attributes to circumstances. So you will say hey wings doesnt determine if an animal can fly, the wings must be aerodynamic to lift the weight of the object. Now you are applying circumstance. AKA 'it depends'.

So same thing happen here in investing world. People using attribute is in a learning process. And that is also true when the very same person says 'the best predictor of share price is earning growth". That is another attribute 'Earning growth'. So you have a person that learned an attribute (earning growth) trying to tell everyone other attribute (net cash) is not reliable. So he is half right without knowing he is wrong as well.

Posted by Blacksails > 2016-06-20 21:56 | Report Abuse

Can learn about how to Time the market or not? And how conviction?

Posted by paperplane2016 > 2016-06-20 23:00 | Report Abuse

This post is waste of time and resources. Admin shld delete

Posted by stockmanmy > 2016-06-21 00:51 | Report Abuse

Or you can be value investor and buy WTK
NTA $ 3 price $1 see whether you will be rewarded
Or buy L&G NTA 70 sen of which 50 is cash, price 40 sen.

How often are value investors looking for bargains rewarded?

Seems almost all of them are value traps.

I agree with value investing.

But value is not what the company has

But value is what the Company do with what it has.


For what the Company has, it is not necessary that I can enjoy

But what the company do with what it has, I can relate to that.



Don't look down at what I say............


For it can fundamentally change the way you value stocks.......and for the better.





You have to throw out your Mathis and formulas.....keep the calculators in the drawers and think about what the company do with what it has.

Posted by paperplane2016 > 2016-06-21 01:03 | Report Abuse

Thts why the forMula shld be, value, plus high div yield all these years. At least higher than fd.

Posted by stockmanmy > 2016-06-21 01:11 | Report Abuse

wrong, plane.

It is not dividend even, it is about what the Company do with what it has.
That is why shares like Tesla ( or Berkshire) with no dividends can be so high, or Alibaba or Google that we all like what they do with what they have.



paperplane2016 > Jun 21, 2016 01:03 AM | Report Abuse

Thts why the forMula shld be, value, plus high div yield all these years. At least higher than fd.

Posted by paperplane2016 > 2016-06-21 01:14 | Report Abuse

In local context can aplly meh., local no such quality... seldom.
I only see jobst got previously, now sold.
And airasia now..... the others klci, ermmmm

Posted by ipomember > 2016-06-21 01:35 | Report Abuse

Those valuation method are heavily depend on past year figure to make future projection, it is even more subjective when comes to deciding what rate to use? After all these and you come out with your valuation but somehow it is Mr market who decides the price of the stock. Holding a stock which you deemed as undervalued but it seems like never achieving the target price appeared to be stubborn for me. I have gone through this and ever since i changed my strategies, the fruit bears (well maybe i am lucky). I am looking more on the business as i believed the value lies within the business, the competency of management, or even a windfall sometimes! Value might be something not everyone can see, if everyone can calculate that, can see that i dont think there is value anymore, market are more than efficient to close up this gap of opportunity(of course we all know valuation is not the only factor affect the prices). If the business model is so good that it is gaining more and more profits, isn't it a value that you found before it happened? If the management are capable to adapt on market competition or any policy change, isn't it a value too? I agreed that past year performance is important for us to judge a company as of today, but never buy a stock just depend on the past year figures. What i am trying to say is both methods are subjective, in fact investment is subjective, but neither one is foolproof. That's why a combination of both is vital, and i believed putting more effort on anything related to the business are rather important...and yes, figures can always be manipulated, that is what i learned thorough financial reporting. Cheers

Posted by ipomember > 2016-06-21 01:39 | Report Abuse

and i would like to recommend felicity, the blogger for serious investing is doing so well on these method. I love how he did the analyst. Logic with proven data.

Posted by stockmanmy > 2016-06-21 02:19 | Report Abuse

cheers


============
i believed putting more effort on anything related to the business are rather important...and yes, figures can always be manipulated, that is what i learned thorough financial reporting. Cheers

cheers