Question: Do you find it hard to get financial ratio?

The main point of it all is the process of getting to the numbers as part of screening and understanding.

How well can one really understand the normalized return on capital if your companies spans 20 sectors with different changing economics?

Dzwm87 is right that there is no substitute, digging into the original source is the best you can do. It will be tedious, but no one ever said it was easy.

I, in particular, took a good 3 months to analyse the numbers for 4 companies in a US sector. These companies are not your 700 page annual report companies in complex industries. Just 100+ pages of annual reports. But by the time you look back to data a decade ago, you would have well read 4000-6000 pages in order to have an appreciation of the companies.

Often, after you wade through the accounting with hidden assets/liabilities, your return on capital almost always differ from the 3rd party systems.

1500/100 is the same as 15/1. Information is lost when we try to simplify things. It is equivalent to saying running China is the same as running Singapore.

Ratios are a tool for screening. There is no substitute in understanding a business and it's history, structure and capabilities.

I think there are two sides to this argument. I've seen Buffett invest both ways - doing "deep dives" into businesses.

On the reverse front, he has done a lot of net-net investing, just by looking at the simplified financial ratios.

I think Seth Klarman has a quote where he says that one doesn't see an investment opportunity within a couple of hours, its probably not there. There's a diminishing return effect to it. An 80-20 principle at play if you will.

台上十分钟，台下十年工

It is also said that Buffett can do a deal over lunch on back of envelope. But that's in the context of a guy who reads AR like a hobby.

I think Klarman is saying don't try to look too hard for value.

IMHO approximately right is better than precisely wrong. But we do have to get it right.

(15-07-2014, 12:24 PM)theasiareport Wrote: I think there are two sides to this argument. I've seen Buffett invest both ways - doing "deep dives" into businesses.

On the reverse front, he has done a lot of net-net investing, just by looking at the simplified financial ratios.

I think Seth Klarman has a quote where he says that one doesn't see an investment opportunity within a couple of hours, its probably not there. There's a diminishing return effect to it. An 80-20 principle at play if you will.

As specuvestor mentioned, folks like WB, Seth Klarman have had decades of deliberate practice on their investment skills. Hence, they are able to reliably depend on their intuition to aid them. When Seth Klarman sees an investment opportunity, i am jolly well sure that the average retail guy sees it differently. Depending on their intuition is the average retail guy's worst nightmare.

(16-07-2014, 06:32 AM)weijian Wrote:

(15-07-2014, 12:24 PM)theasiareport Wrote: I think there are two sides to this argument. I've seen Buffett invest both ways - doing "deep dives" into businesses.

On the reverse front, he has done a lot of net-net investing, just by looking at the simplified financial ratios.

I think Seth Klarman has a quote where he says that one doesn't see an investment opportunity within a couple of hours, its probably not there. There's a diminishing return effect to it. An 80-20 principle at play if you will.

As specuvestor mentioned, folks like WB, Seth Klarman have had decades of deliberate practice on their investment skills. Hence, they are able to reliably depend on their intuition to aid them. When Seth Klarman sees an investment opportunity, i am jolly well sure that the average retail guy sees it differently. Depending on their intuition is the average retail guy's worst nightmare.

I recalled a little story from chialc88 in the other thread, about seaside picnic of three millionaires. The average retail guy might behave as the third millionaire.

http://www.valuebuddies.com/thread-5376-...l#pid88210

Well... I don't doubt that the more experienced investors are much quicker, but the Seth Klarman comment was directed at retail investors though.

Ben Graham said something similar along the lines that if someone is tall or overweight, you don't need a weighing scale to know.

I think the core of it is that if you can't see a good investment (taking into account you have some training) after a couple of hours, you should skip it.

Go for the 1 foot hurdle instead of the 10 foot hurdle.

Cheers,
theasiareport.com

(16-07-2014, 06:32 AM)weijian Wrote:

(15-07-2014, 12:24 PM)theasiareport Wrote: I think there are two sides to this argument. I've seen Buffett invest both ways - doing "deep dives" into businesses.

On the reverse front, he has done a lot of net-net investing, just by looking at the simplified financial ratios.

I think Seth Klarman has a quote where he says that one doesn't see an investment opportunity within a couple of hours, its probably not there. There's a diminishing return effect to it. An 80-20 principle at play if you will.

As specuvestor mentioned, folks like WB, Seth Klarman have had decades of deliberate practice on their investment skills. Hence, they are able to reliably depend on their intuition to aid them. When Seth Klarman sees an investment opportunity, i am jolly well sure that the average retail guy sees it differently. Depending on their intuition is the average retail guy's worst nightmare.

I have a Bloomberg terminal, takes less than 5 mins to get ratios.

alternatively, Bloomberg website provides free snapshot of company ratios, including dividend yield, P/E, EPS, P/B, etc.

http://www.bloomberg.com/quote/FR:SP

There are actually several other websites that do this, which one can use for free, you have to pay though if you want more features as per usual

www.capitalcube.com - it feeds data from Factset, and their ratio generation and financial summaries are free

Ft and bloomberg also generates a limited no. of ratios, but not too sure of their accuracy.