Nokia

Actually, I would like to add that margin of safety and choice of investment ARE supposed to be inter-linked, and should be different for every company. So you can't say margin of safety is insufficient for the wrong choice of company, for example - if the company were wrong in the first place you should simply walk away and not even consider margin of safety.

Only when the right company has been found, then you decide on the appropriate margin of safety.

But every biz has a price to it. Won't Nokia have an attractive margin of safety if it's priced at 0.1x P/B? If it's at x P/B, it maybe appropriate to say that margin of safety is insufficient.

(03-10-2012, 09:01 AM)CityFarmer Wrote:

(02-10-2012, 10:35 PM)Some-one Wrote: Call me stupid or what. I am vested in Nokia shares and yes, I am sufferring 50% losses now . However, the major losses does not come from the falling price of Nokia but from the depreciation of USD against SGD. In any case, I still believe in the Nokia story. If not because of QE3 which devalues USD, I would have buy more Nokia shares. Again, this form only 0.32% of my portfolio.

The success of investing (gains in $) needs two things right

- the right choice
- the right timing

Either one wrong, you might not succeed.

IMO, the choice might be right, but timing is definitely not right

There is no way for one would know when is the right time and when is the wrong time. Only hindsight would tell us when is the right time.

(03-10-2012, 09:24 AM)thefarside Wrote:

(02-10-2012, 10:35 PM)Some-one Wrote: Call me stupid or what. I am vested in Nokia shares and yes, I am sufferring 50% losses now . However, the major losses does not come from the falling price of Nokia but from the depreciation of USD against SGD. In any case, I still believe in the Nokia story. If not because of QE3 which devalues USD, I would have buy more Nokia shares. Again, this form only 0.32% of my portfolio.

For you to believe in the Nokia turnaround, the potential gain should be at least a 3-4 bagger from current levels. In this context, a 20% loss in currency value from 1.3 SGD/USD today to 1.1 SGD/USD would theoretically be small beer. If you think this has investment merit, it should not stop you from putting additional capital. If there is no merit, you should not be holding it. What you have now, and the proportion it forms as percentage of your portfolio, is irrelevant.

Every instance of deploying capital should be seen on its own merit, without the baggage of what is already owned and the historical cost of that ownership.

The potential gain that I am expecting is more than that. However, looking at all the bad news surrounding Nokia, it is not possible for me to write a long story on the business merits in the Nokia story. A lot of things that they are doing is debatable and would just go on non-stop from economy to technology to finance. One would only know if you are right or wrong 10 to 20 years down the road.

The percentage it form in my portfolio is relevant because there are too many extra charges associated with buying US stocks. Besides, I also cannot attend Nokia's AGM and may have some problems interpreting their financial statements. Basically, the margin of safety is so huge that I decide that it might be best for it to form a small part in my portfolio considering the bigger risks involved.

The reason why it forms a small part in my portfolio is not because I am not confident in the company but because the returns that I am getting is eaten by brokerage charges, custodian charges, FX risk.

(03-10-2012, 01:54 PM)Some-one Wrote: Basically, the margin of safety is so huge that I decide that it might be best for it to form a small part in my portfolio considering the bigger risks involved.

(03-10-2012, 01:54 PM)Some-one Wrote: The reason why it forms a small part in my portfolio is not because I am not confident in the company but because the returns that I am getting is eaten by brokerage charges, custodian charges, FX risk.

Hi - I am not trying to "interrogate" you or question your position make life difficult, but I feel that the two statements are somewhat contradictory. If you believe in the Nokia story and there is a turnaround coming, the scale of the position should be made such that you outweigh such costs, and can position your portfolio for outsized gains. If you are not sure, and you want to take a chance, why do it in a manner that is sub-scale and guarantees a loss when there are other things you can potentially look at, many of which are highlighted in this forum?

However this is just my two cents FWIW, wish you the best for your position in the stock.

PS: I like Nokia phones and I think their reception and talk quality is the best among all the phones I have used and I would still buy a Nokia if I had to get a simple, no frills phone. But where they are today, from a layman's point of view, I think you will not need 10-20 years to find out how this investment has done - its either a 10 bagger in five years or its bust.

Still, at 0.32% of your portfolio, it really makes no difference at all.

Look at it this way:
Assuming a S$1,000,000 portfolio asset, of which 0.32% of it is invested in Nokia - this translates into cost value of S$3,200 (assume no transaction cost).

Now, let's say you made 5 times on Nokia and it's now worth S$19,200.

Your portfolio asset will be now S$1,016,000 - assuming no change to other investments. This result in an overall gain of 1.6% on your portfolio.

Consider another case:
You made a 5% portfolio investment on a REIT which return 6% yield.

Going by the similar case, your portfolio asset will be S$1,053,000 and this reap an overall gain of 5.3%.

Of course, there is risk of capital loss in REIT but then again, there is risk of capital loss in holding Nokia as well.

(03-10-2012, 12:04 PM)Musicwhiz Wrote: Actually, I would like to add that margin of safety and choice of investment ARE supposed to be inter-linked, and should be different for every company. So you can't say margin of safety is insufficient for the wrong choice of company, for example - if the company were wrong in the first place you should simply walk away and not even consider margin of safety.

Only when the right company has been found, then you decide on the appropriate margin of safety.

Whether a choice is right or wrong, we will only know on hindsight.

Let me re-phase my point

For technology stock, if it is proven a wrong choice end of the day, even with high margin of safety in price, the outcome will still be far worse

For technology stock, a quest for margin of safety in price will always make you walk away from it. At the end of the day, it may proved to be a right choice which worth a bet on fair price

(03-10-2012, 02:45 PM)dzwm87 Wrote: Still, at 0.32% of your portfolio, it really makes no difference at all.

Look at it this way:
Assuming a S$1,000,000 portfolio asset, of which 0.32% of it is invested in Nokia - this translates into cost value of S$3,200 (assume no transaction cost).

Now, let's say you made 5 times on Nokia and it's now worth S$19,200.

Your portfolio asset will be now S$1,016,000 - assuming no change to other investments. This result in an overall gain of 1.6% on your portfolio.

Consider another case:
You made a 5% portfolio investment on a REIT which return 6% yield.

Going by the similar case, your portfolio asset will be S$1,053,000 and this reap an overall gain of 5.3%.

Of course, there is risk of capital loss in REIT but then again, there is risk of capital loss in holding Nokia as well.

Sounds like Kelly Formula. Extracts from wiki,

In recent years, Kelly has become a part of mainstream investment theory and the claim has been made that well-known successful investors including Warren Buffett and Bill Gross use Kelly methods.

That's probably what Warren Buffett meant by making a MEANINGFUL amount of investment whenever he finds the right stock.

(03-10-2012, 03:13 PM)KopiKat Wrote:

(03-10-2012, 02:45 PM)dzwm87 Wrote: Still, at 0.32% of your portfolio, it really makes no difference at all.

Look at it this way:
Assuming a S$1,000,000 portfolio asset, of which 0.32% of it is invested in Nokia - this translates into cost value of S$3,200 (assume no transaction cost).

Now, let's say you made 5 times on Nokia and it's now worth S$19,200.

Your portfolio asset will be now S$1,016,000 - assuming no change to other investments. This result in an overall gain of 1.6% on your portfolio.

Consider another case:
You made a 5% portfolio investment on a REIT which return 6% yield.

Going by the similar case, your portfolio asset will be S$1,053,000 and this reap an overall gain of 5.3%.

Of course, there is risk of capital loss in REIT but then again, there is risk of capital loss in holding Nokia as well.

Sounds like Kelly Formula. Extracts from wiki,

In recent years, Kelly has become a part of mainstream investment theory and the claim has been made that well-known successful investors including Warren Buffett and Bill Gross use Kelly methods.

That's probably what Warren Buffett meant by making a MEANINGFUL amount of investment whenever he finds the right stock.

Yes, i read Kelly formula from a book, but not able to remember the book name. (sign of age catching-up )

IMO, meaningful amount is at least 5%-10% of your portfolio, translated to 10-20 stocks at most. The % will increase with higher certainty of the investment

basically, Nokia is a risky bet on Windows Phone going to take a large smartphone market share.

The rest of Nokia's business are not good profit business(Nokia Siemens Network barely makes any money after so many years, feature phones, may have profit, but for how long with cheap smartphones) though smartphone is worse with loss, but better future (a lot of people touting mobile computing is the future, just like PC was in the 90s?).

But how bright is the future for Windows Phone in the smartphone market? Not bright at all. So far Windows Phone does not have any meaningful market share(worse than Windows Mobile, according to some market research), even Research in Motion has much bigger market share than Windows Phone + Windows Mobile combined and a lot of people thought Research in Motion is going to survive the smartphone war.

The next market segment still open for grab and can be market changer is the tablet that works like ipaq but able to do productive work.
If i am going to put my free money, it will be HP, Microsoft, Lenova, Intel, Samsung ... that have such product exposure.