We should stick to low-risk investments

[specuvestor]

What makes u think u can unlock value? If you are a corp raider or TCC or Lippo with firepower then yes

If just OPMI most of the time we need others to realize value.

Identity crisis can be costly

[specuvestor]

The common perception of market timing is that it is a binary decision. Mr Market don't require that. A stock at 0.5X book is just as value as 0.6X Book. If you buy at 0.5X or 0.6X you are still a value investor but the difference for the purchase at 0.6 and 0.5 is 20%, so there is value in market timing. Better is the one that averages the purchase to significantly dilute the benefit of market timing.

Catalyst is not the same as market timing: catalyst is to figure out what has changed, so you need to know the past and what timeframe you are looking for the new event to unfold. Vlaue can remain value for a long time without catalysts.

I tell brokers that if they issue a report, and change the date to 5 years ago and it is still valid, then there is no catalyst.

> allow me to add on to this to the first para

true that buying cheaper appears better if all other things being the same. If one buys at 0.4x, 0.5x, or any fraction, whereby the numerator is less than the demominator, even if one feels that he has become a value investor due to his purchase, the much more important question he needs to ask himself is how this low PB can translate to risk/benefit to himself. Is the company earning money? If so, does this earning pass out as cash ie dividends to the shareholders. Just waiting to buy low PB companies alone to save on that 20% benefit (ie PB 0.6 c.f. PB 0.5) is not a prudent act per se, at least to me, in the long run. Whether the company is able to pay me money and increasingly so is a far more important consideration than that 20% difference.

> allow me to add on to the second and third para

I agree that catalyst is an attractive factor when considering whether to buy into a company. I also agree that in life, most of the time, it is not so straightforward. It might happen, or it might not. If it happens, the question is when. Thus there is so much uncertaintly. To me, I buy into a company if I think the chance of a catalyst happening is probable but timing unknown, if and only if, it pays an acceptable dividend to me for that waiting. So that in the meantime, I can still maintain my cash flow while waiting. I have the option to use that cash flow to purchase more shares so that in the event this positive awaiting happens, it would magnify my wealth even more. I don't want to be in a position having stuck a significant amount of my money in a company and having lost a potential cash flow path which i can use it to create elsewhere.

gautam

I agree with u. I'm not a believer of a simplistic approach to investing like looking for a magic ratio. But I'm using a simple P/B to illustrate value investing

[cfa]

What makes u think u can unlock value? If you are a corp raider or TCC or Lippo with firepower then yes

If just OPMI most of the time we need others to realize value.

Identity crisis can be costly

Hi specuvestor,

Please advise what is OPMI ? Thanks.

[chialc88]

other people money


A Life not Reflected is a Life not Worth Living.

[cyclone]

other people money


A Life not Reflected is a Life not Worth Living.

Outside Passive Minority Investor ?

[chialc88]

thanks Cyclone


A Life not Reflected is a Life not Worth Living.

[opmi]

Is earning (in future) more assurable then solid assets?
Thai Bev. swallowing F&N is more for it's assets (cash hoard included) or it's future earnings?

It is comparing existing recurring earning vs. existing assets. In other words, it is more on earning power, than net worth...

Juz to clarify... I thought we were talking about net net and not asset play?

For my example, it is pure graham type of net net. Current assets - total liabilities.
Current assets are all cash (local and fx) and blue chips shares.

I guess CF is using 'earnings power' as a comparison.

Ok then my answer still the same, will probably buy even for the more common cases where cash accounts for part of current assets, since the rest is usually actual working capital required for the business.

OK. Will try to summarize the different schools of thots so far. Pls clarify if not accurate.

Camp 1: Wont buy. Coz no visible catalyst. No certain timeline to realise the value so may have to wait forever. Some prefer recurring earnings over assets. Even in this case, when the assets are cash and blue chips. Will not buy unless being paid some dividends to wait for catalyst to appear.
Camp 2. Will buy. Coz it is undervalued. Provided it is SGX, non S chips penny. Will buy even the cash is part of working capital for business ops. Some in this camp preferred solid assets (cash) are preferred over uncertain earnings.

opmi: More info on the stock. I bot City e-Solution (557 HK) in 2009. Coz it is HKD 0.4 for net assets of HKD 1.5, represented by cash and blue chips. That’s like paying 26 cents for 1 dollar. No operating business even better coz no cash burn to eat away cash. No catalyst in sight. Sleeping company which is a result of selling all its hotels to CDL’s M&C Hotel group.


For me, the cheapness would justify a very long holding period e.g If stock take 10 years to realize full value (some how), the CAGR will 14.1% pa. 30% pa CAGR if take 5 years. Even if there is no catalyst, the stock trading at 73% discount in stressful 2009 situation. I assume under normal conditions, will probably trade to 50-60% discount to cash. That’s would still double the money without anything happening.
Anyway, after 2 years, I sold it off after losing patience at around 70-80 cents…hahaha. The stock continued to trade around that range for another 2 years. Recently, CDL decided to sell off the listed shell (pending details) and the stock went up to a high $2.05.

Comments pls.

[smallcaps]

It is comparing existing recurring earning vs. existing assets. In other words, it is more on earning power, than net worth...

Juz to clarify... I thought we were talking about net net and not asset play?

For my example, it is pure graham type of net net. Current assets - total liabilities.
Current assets are all cash (local and fx) and blue chips shares.

I guess CF is using 'earnings power' as a comparison.

Ok then my answer still the same, will probably buy even for the more common cases where cash accounts for part of current assets, since the rest is usually actual working capital required for the business.

OK. Will try to summarize the different schools of thots so far. Pls clarify if not accurate.

Camp 1: Wont buy. Coz no visible catalyst. No certain timeline to realise the value so may have to wait forever. Some prefer recurring earnings over assets. Even in this case, when the assets are cash and blue chips. Will not buy unless being paid some dividends to wait for catalyst to appear.
Camp 2. Will buy. Coz it is undervalued. Provided it is SGX, non S chips penny. Will buy even the cash is part of working capital for business ops. Some in this camp preferred solid assets (cash) are preferred over uncertain earnings.

opmi: More info on the stock. I bot City e-Solution (557 HK) in 2009. Coz it is HKD 0.4 for net assets of HKD 1.5, represented by cash and blue chips. That’s like paying 26 cents for 1 dollar. No operating business even better coz no cash burn to eat away cash. No catalyst in sight. Sleeping company which is a result of selling all its hotels to CDL’s M&C Hotel group.


For me, the cheapness would justify a very long holding period e.g If stock take 10 years to realize full value (some how), the CAGR will 14.1% pa. 30% pa CAGR if take 5 years. Even if there is no catalyst, the stock trading at 73% discount in stressful 2009 situation. I assume under normal conditions, will probably trade to 50-60% discount to cash. That’s would still double the money without anything happening.
Anyway, after 2 years, I sold it off after losing patience at around 70-80 cents…hahaha. The stock continued to trade around that range for another 2 years. Recently, CDL decided to sell off the listed shell (pending details) and the stock went up to a high $2.05.

Comments pls.

Three to four years lor. Peter lynch. A pity though. A net net with backing, not many of those around...

[specuvestor]

Key with the example is who is the shareholders in control. Is reputation more important? Can they get away with it? Are they vested in the value of the equity or just control of the equity? K1 and e-Solution is one end of spectrum; most S-chips, Hong Fok and even UIS are the other end

Cash burn dont have to be with business cash burn like days of dot com. Pay employees and directors fee can liao, not including fringe benefits like car and housing

[candy188]

Let say you start trading with a $10,000 capital. If you loss 20% on a trade (ie your trading account drop till $8,000), you will need to make a 25% profit on the reminder capital ($2,000/$8,000) to come back to breakeven.

If you loss 50% of your initial capital, you will need to Make a 100% Profit from the Remaining Capital so that you can restore back to the initial capital ($5,000/$5,000).


Below is a chart showing the different percentages of loss and how much gain (in term of percentages) is required to restore back to the initial capital.

[Image: jbkaQrgUPCRIx0.png]

From the above, you can see that to make up for any loss taken from the stock market, you will need to make a higher percentage of gain then the loss incurred.

http://www.trade-stock-option.com/money-...-tips.html

The Larger the amount you LOSE, the Greater the IMPACT on your ability to earn money in the future.

- The Tao of Warren Buffett

[Image: jbh2byNkZhNcXt.png]

Variance drain sounds so chimp. Basically it is that upside and downside returns are asymmetric

A stock lost 50% and gain 50% does not go back to par. That's why absolute return strategy makes sense