How do valuebuddies do their homework?

[Nick]

1) Randomly reading annual reports when released on SGX. I aim to read every annual report - at least the Chairman Statement and quick glance of the FS- to get a gist of what is going on in the various industries and whether the Company is worthy to be looked into.

2) If I identify a worthy target, I would prepare a spreadsheet consisting of all the necessary financial figures and ratios over the past 5 - 10 years.

3) As I prepare the figures, I would read the Annual Report for each of the 5 - 10 years to get an insight on the challenges they faced and the strategies they used.

4) I would read every announcement posted on SGX over the past 5 years.

5) I would compile a 'milestone' for the Company based on 3 and 4 and discuss whether the Company is managed properly.

6) Read all the analyst reports and some rival annual reports.

7) Email Company IR for any clarifications

8) If it is deemed to be good, I will try to value it and then set a buy price.

Basically no magic formula. Just involves a lot of reading and thinking. Best to have some like minded investment buddies or a forum to sound out your ideas too.

[Temperament]

1) over-rated. can try but I reminded what WB says. most people would assume that Charlie and myself spends a lot of time on this. but actually, we don't care about this when we invest our $.
2) of course, I would try but the result is far from satisfactory. partly due to #1) but mainly due to big brother already taken up all the positions that they wanted and then let out the news ... for me to buy.
3) of course, I would try but again limited knowledge/contact to make a fruitful return (yet).
4&5) No Debt, good cashflow - very funny. Some of my favorites was purchased when their results was in -ve territory. They are rock solid companies but with a few Q of bad results. Then, you'll notice that some famous VB/forums will says that they will not own the stock... then, I started to initiate my position. very ironic - even I felt myself.
6) yes! I remind myself again that I'm buying risk!

Love Compassion

i think you are right. When the market is at its most risky stage, is also the time to buy. if you dare!

[chialc88]

On Nick:
1) 望尘莫及
2) me too
3,4&5) me too. I scout the oldest AR and study like PSLE. I take notes and see how the game pan out. I pay special weightage for their actions during crisis. Frankly speaking, I felt acquainted with the chairman after following him for so many years.
6) no need lar. I read VB and another 2 more favorites
7) not for me. If in doubt, I ditch
8) me too

Love Compassion



Earth day - save the world everyday.

[D.L]

This is how I am doing my homework since I started out investing.

I am not sure whether am I right.

1) Generate an idea and screen out those companies accordingly.

2) I will tabulate the financial statements into ecxcel while excel will calculate the ratios for me.

3) Anaylsing of the financial statements and financial statements notes.

4) Read the annual report and it's prospectus to anaylse it's business model.

5) After doing the above step, I will read the announcement and other information available such as newspaper article or any other relevant information.

6) If nothing wrong,I will read the quarterly statements.

7) once all this done, I will proceed to value the company.

[wahkao]

I use TA + FA, both say buy, then i buy
if 1 never say buy, i never buy

I even made a cool banner for it!

[Image: mVpGBgg.jpg]

[mrEngineer]

I will screen with consistent yields of more than 6% and less than 15% and profitable business. Then after I get my targets I will study them deeper.

Some of the buddies here investigate the potential asset values that can be unlocked. But it will usually take some time.

[Temperament]

So you see there are so many ways to to go about before one plonk down the money.
For me the pedigree of an animal is comparable to a stock's "pedigree".
Now who can tell me it's not from all past data up to current that you use, to help you to project the future progress of the company?
Even for new upcoming company you still have to use the past data up to the current. For new company since there is no pedigree to fall back on, you really have to understand the business as well as insiders. Or at least you are in the same line.
As long as you don't lose money, you will have the your capital to spot an opportunity to invest.

Afterall:-

MORE INFORMATION IS NOT NECESSARILY A GOOD THING


Many investors give little or not thought as to how they actually go about making decisions. One bias they have is: I know better, because I know more. The illusion of knowledge is the tendency for people to believe that the accuracy of their forecasts increases with more information. The simple truth is that more information is not necessarily better information. Another bias: I can make a judgment based on what it looks like. Companies that have seen growth in the previous five years are forecast by analysts to continue to see very high earnings growth in the next five years.
Analysts are effectively looking at the company’s past performance and saying this company has been great, and hence it will continue to be great.
Analysts fail to understand that earnings growth is a highly mean-reverting process over a 5 year period.
Effectively, analysts judge companies by how they appear, rather than how likely they are to sustain their competitive edge with a growing earnings base. Another bias of investors: that is not the way I remember it.
Our minds are not supercomputers, or even good filing cabinets.
They bear more resemblance to post-it notes that have been thrown into the bin, and covered in coffee, which we then try to unfold and read. People are more likely to recall vivid, well-publicized or recent information.
Simonsohn Et Al hypothesizes that one reason for overweighting of direct experience is the impact of emotion. “Directly experienced information triggers emotional reactions which vicarious information doesn’t.” investors experience will be a major determinant of their perception of reality.
Shalom.

[CityFarmer]

1) Randomly reading annual reports when released on SGX. I aim to read every annual report - at least the Chairman Statement and quick glance of the FS- to get a gist of what is going on in the various industries and whether the Company is worthy to be looked into.

2) If I identify a worthy target, I would prepare a spreadsheet consisting of all the necessary financial figures and ratios over the past 5 - 10 years.

3) As I prepare the figures, I would read the Annual Report for each of the 5 - 10 years to get an insight on the challenges they faced and the strategies they used.

4) I would read every announcement posted on SGX over the past 5 years.

5) I would compile a 'milestone' for the Company based on 3 and 4 and discuss whether the Company is managed properly.

6) Read all the analyst reports and some rival annual reports.

7) Email Company IR for any clarifications

8) If it is deemed to be good, I will try to value it and then set a buy price.

Basically no magic formula. Just involves a lot of reading and thinking. Best to have some like minded investment buddies or a forum to sound out your ideas too.

In a nutshell, the approach is fundamental first, then valuation. I have followed the same approach. Look for the best, then buy at cheap or at most at fair value. The order is critical, IMO

The sources of targeted companies are varies.

- A research on waste-water sector, has linked me to Sound Global
- Sheng Siong show has linked me to Sheng Siong
- Read VB posts, has linked me to YZJ, and Penguin etc
- I read SGX announcement daily, and randomly pick news to source for investment ideas.

The analysis method is a bit different, i.e. Q&A method. I asked myself lots of relevant questions on the company, and looked for the answers from ARs, announcements, analyst reports, IR queries etc. An excel for one targeted stock to capture all answers and relevant numbers.

I agree with Nick, no magic formula, just a lot of reading and thinking.

[valuebuddies]

Just random questions:

1. Is profit or dividend/cash flow important?
My answer: I view dividends/cash flows more important than profits as the latter can be manipulated regardless of S-Chips or not. I tend to see the historical dividend yield rather than the historical PE, but off course best will be companies with high dividend yield and profitability.

2. Is profit margin or earnings yield important?
My answer: Profit margin. I prefer a company with higher stable profit margin with high PE than company with lower margin but low PE. Company with higher margin tends to withstand competition/crisis and cost increases but the opposite will easily swing into losses anytime.

3. Is cash rich or debt-free important?
My answer: It seems no sense if a company owns a huge cash pile but still on debts, so I actually prefer company which is debt-free though don't have lots of cash in the bank. I dislike company that hold on to cash for many years and yet not decide to re-invest or return, it causes me to doubt on the existence of this real cash.

On financial fundamental analysis, these are the 3 areas I will look into. What are your thoughts buddies?

[Temperament]

My answer is one only one-if they(insiders) want to do it all items can be manipulated. Including cash in the bank.