Investment for a living

I wish to further qualify that if you have $10m capital then cashflow is not as important as $1m capital which you need to feed yourself, family or debts. I'm assuming starting up it will be more the latter

Cashflow is not lumpy from a Fundy perspective, with Operational Cashflow the main anchor and the rest (including dividends) derives directly or indirectly from the ability to generate operational cashflow (current or projected future). That's what Buffett means that the exchange can be closed for next 10 years and you will be ok. Hoping for singular cashflow like special dividend, takeover etc are more like Special Situation strategies.

Then there is the Structure layer that separates business cashflow to OPMI cashflow. They are not the same. And it is decided by the major shareholders/ board rather than OPMI while the underlying business hums along. This is the part that I find Buffett didn't address enough. His famous story of taking over Berkshire because of $0.125 made him the controlling shareholder, or the capacity to do so like vulture funds nowadays. There is a difference

Gazprom in Russia will keep pumping out gas even if it's bankrupt. The business will hum along while the Structure layer changes and OPMI gets taken to the cleaners.

I observed Singaporeans generally don't know what Chairman of the Board is and looks to the CEO. Taiwanese on the other hand look to the Chairman. Structurally many don’t know OPMI owns the unconsolidated company as the listco until crap happens. The businesses the listco owns can be sold away and it’s the remaining asset minus liability of the listco with legal and maybe contingent liabilities is the actual equity left.

Personally I prefer to have cashflow from my work and invest on the side to be less stressful with "multiple source of income". Then again I'm not exactly entrepreneurial. But it’s a skill set that we can use after we retire as well.

(09-09-2023, 10:50 AM)ghchua Wrote:

(08-09-2023, 03:03 PM)specuvestor Wrote: asset allocation for cashflow rather than just capital gains will become important if investing for a living

This is an interesting comment which I wish to elaborate further. For me personally, I don't purposely asset allocate a stock for cash flow or capital gain when making my investment decision. Ultimately, capital gains (whether voluntary or involuntary) can become cash flow when it is being realized.

For example, I bought a stock when I deemed its undervalued. Then, a takeover offer came from the offeror. Involuntary, this investment becomes a sudden cash inflow as the company was taken out.

Though one might say takeover offer is not consistent cash flows like dividends, it had become more frequent recently, especially on SGX.

(09-09-2023, 07:16 AM)Choon Wrote:

(08-09-2023, 06:40 PM)weijian Wrote:

(08-09-2023, 07:22 AM)Choon Wrote: .

I can share mine too if anyone is interested.

If you don't mind, perhaps it might be a good idea to share, maybe can reinvigorate the robust discussions in this forum. 

Came across this a few days ago.

https://twitter.com/AyeshaTariq/status/1...8253358513

Once you get an in depth view of the company, the next time when you look into it, you will need much less time to refresh on the company.

20-30 companies a year and a few hundred companies after doing this for many years is possible

Building a profile/database in a company helps one to get a quick idea on a company

And not every company that you look into will end up a screaming buy

To find a fat pitch, you need hard work and luck. Hard work will increase the probability of finding one but how does one measure luck? Some said hard work will increase luck though.

In a pessimistic environment, you have a higher chance of finding a fat pitch when compared to a bullish environment.

For me personally, I hope to find one once a year or one every two years.

You need time to build up a stake in a company so from building a stake to getting out....two to three years might be a good deal to me. So if one is able to find another screaming buy in three years...it is kinda of lucky because you get to deploy your exiting funds(from an old buy) to a new one.

Hence you need savings to sustain your lifestyle and an investible amount to invest in when the fat pitch appears

(09-09-2023, 03:51 PM)Behappyalways Wrote: Came across this a few days ago.

https://twitter.com/AyeshaTariq/status/1...8253358513

Once you get an in depth view of the company, the next time when you look into it, you will need much less time to refresh on the company.

One person's deep dive is another person's first pass. Businesses are not static and it can't be a "once done and set for good". There might be innate biases too after thinking that you have done a "complete" look at it, missing out on other perspectives.

Just to add that a strong cash flow also provide optionality, allowing you to add when there is opportunity. A fixed portfolio size tend to be more challenging with rebalancing issues. Even if one say that I will just hold it for as long as it is undervalued, you will also need a steady cash flow to tide through your holding period. This gets even more challenging when there's additional family commitment. Of course, being single greatly minimize this but these are non-monetary trade-offs too.

(09-09-2023, 01:28 PM)dreamybear Wrote:

(09-09-2023, 07:16 AM)Choon Wrote:

(08-09-2023, 06:40 PM)weijian Wrote:

(08-09-2023, 07:22 AM)Choon Wrote: .

I can share mine too if anyone is interested.

If you don't mind, perhaps it might be a good idea to share, maybe can reinvigorate the robust discussions in this forum. 

I hold 6 stocks. In short, I see them all as growth companies, possessing strong / high-quality biz and run by people with integrity, talent and tenacity. 

From largest to smallest in terms of market value:
1) The Hour Glass
2) Wilmar
3) 9988
4) Hong Kong Land
5) Tencent
6) M&T

S wrote: "But it’s a skill set that we can use after we retire as well."

 That's the primary reason why I'm learning to invest.  I reckon that one day, when I'm not able to contribute back to the society or unable to travel, minimally, I could still keep my mind active by playing the stock market games.

Gratitude!


Enjoy: 罗刹海市

(10-09-2023, 12:51 AM)Choon Wrote:

(09-09-2023, 01:28 PM)dreamybear Wrote:

(09-09-2023, 07:16 AM)Choon Wrote:

(08-09-2023, 06:40 PM)weijian Wrote:

(08-09-2023, 07:22 AM)Choon Wrote: .

I can share mine too if anyone is interested.

If you don't mind, perhaps it might be a good idea to share, maybe can reinvigorate the robust discussions in this forum. 

I hold 6 stocks. In short, I see them all as growth companies, possessing strong / high-quality biz and run by people with integrity, talent and tenacity. 

From largest to smallest in terms of market value:
1) The Hour Glass
2) Wilmar
3) 9988
4) Hong Kong Land
5) Tencent
6) M&T

Thanks for your sharing. 

(09-09-2023, 12:07 PM)specuvestor Wrote: I wish to further qualify that if you have $10m capital then cashflow is not as important as $1m capital which you need to feed yourself, family or debts. I'm assuming starting up it will be more the latter

Cashflow is not lumpy from a Fundy perspective, with Operational Cashflow the main anchor and the rest (including dividends) derives directly or indirectly from the ability to generate operational cashflow (current or projected future). That's what Buffett means that the exchange can be closed for next 10 years and you will be ok. Hoping for singular cashflow like special dividend, takeover etc are more like Special Situation strategies.

Then there is the Structure layer that separates business cashflow to OPMI cashflow. They are not the same. And it is decided by the major shareholders/ board rather than OPMI while the underlying business hums along. This is the part that I find Buffett didn't address enough. His famous story of taking over Berkshire because of $0.125 made him the controlling shareholder, or the capacity to do so like vulture funds nowadays. There is a difference

Gazprom in Russia will keep pumping out gas even if it's bankrupt. The business will hum along while the Structure layer changes and OPMI gets taken to the cleaners.

I observed Singaporeans generally don't know what Chairman of the Board is and looks to the CEO. Taiwanese on the other hand look to the Chairman. Structurally many don’t know OPMI owns the unconsolidated company as the listco until crap happens. The businesses the listco owns can be sold away and it’s the remaining asset minus liability of the listco with legal and maybe contingent liabilities is the actual equity left.

Personally I prefer to have cashflow from my work and invest on the side to be less stressful with "multiple source of income". Then again I'm not exactly entrepreneurial. But it’s a skill set that we can use after we retire as well.

(09-09-2023, 10:50 AM)ghchua Wrote:

(08-09-2023, 03:03 PM)specuvestor Wrote: asset allocation for cashflow rather than just capital gains will become important if investing for a living

This is an interesting comment which I wish to elaborate further. For me personally, I don't purposely asset allocate a stock for cash flow or capital gain when making my investment decision. Ultimately, capital gains (whether voluntary or involuntary) can become cash flow when it is being realized.

For example, I bought a stock when I deemed its undervalued. Then, a takeover offer came from the offeror. Involuntary, this investment becomes a sudden cash inflow as the company was taken out.

Though one might say takeover offer is not consistent cash flows like dividends, it had become more frequent recently, especially on SGX.

I also think this strategy may be more suitable for investing as a side income rather than making a living (i.e. full-time investor) ?  Although takeovers may become more frequent, there is still a need for daily living expenses. Unless one's investment is big enough such that when the takeover offer comes(which is unpredictable), the net amount received is equivalent to at least one year's worth of daily expenses (for contingency purposes). 

Or perhaps the undervalued possible takeover candidates need to have a certain dividend yield for the strategy to work ? Then we can have both dividends(cash flow) + capital gains.   

Since we are at this topic ..... of course, everyone has different spending needs but I think given the increasing cost of living, it would probably hover around the figure described below ?

As such, investing for cash flow post retirement/full-time would mean something like more than $1m in 3.x% T-bills or $1m in 4.5% divi yield equities ???

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Is $3,800 a month enough to live comfortably? TikTok user breaks down fresh graduate pay and expenses
https://www.asiaone.com/lifestyle/3800-m...te-pay-and

(14-09-2023, 07:48 PM)dreamybear Wrote: I also think this strategy may be more suitable for investing as a side income rather than making a living (i.e. full-time investor) ?  Although takeovers may become more frequent, there is still a need for daily living expenses. Unless one's investment is big enough such that when the takeover offer comes(which is unpredictable), the net amount received is equivalent to at least one year's worth of daily expenses (for contingency purposes). 

Hi dreamybear,

Takeover offer is just one of the example that I have provided. It can also be in a form of capital reduction, one time special dividend payout, dividend in specie etc. These are some of the events that one might wish to happen if he/she bought a stock that is undervalued. Of course, it can also come in a form of consistent yearly dividend.

What I am trying to say here in reply to specuvestor is that I don't purposely asset allocate a stock for cash flow or capital gain when making my investment decision. It doesn't mean that the stock that I bought will not have any cash flow. It is just that it is not my primary criteria when choosing a stock to invest.