Author: 8% Value Investhink

The Oral Care Industry

Value investors love mundane sectors and what could be more mundane than brushing your teeth? Nobody ever talks about brushing their teeth, how they enjoy it or how they look forward to it every morning. Well basically I think nobody does, that’s why it’s ever been talked about. But as far as investing is concerned, this is one of the best business to be it. We will talk about a few important points: Everyday Necessity (Consumer Staples) Well, first of all, everyone brushes teeth at least once a day right? Toothpaste runs out fast, and people just buy back...

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DB Brazil ETF – Part II

The second risk is China’s decreasing steel consumption. The last five years saw China’s big ambition to develop its infrastructure and mass market condos for its people and hence steel consumption went through the roof, resulting in the bull market in steel and shipping (of iron ore to make steel). That party is now probably going into its 11th hour and Cinderella is ready to drop her glass shoe. China needs to shift its economy from manufacturing to services, which would need less steel and hence less iron ore. Not to mention that after getting squeezed by the Australian...

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DB Brazil ETF – Part I

Last checked, there are now 75 listed ETFs in Singapore. As blogged a couple of times, ETFs present an easy way for lay people to invest into stocks and shares without having to put in too much effort (ie do a lot of study and research). Basically, you just buy into the regional/sector growth of the ETF. To learn more, simply click on the ETF label at the end of this post. Today’s post is about Deutsche Bank’s Brazil ETF listed on SGX. It seemed like this might be one of the cheaper ETFs out there amidst global bullishness on...

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DB Brazil ETF – Part I

Last checked, there are now 75 listed ETFs in Singapore. As blogged a couple of times, ETFs present an easy way for lay people to invest into stocks and shares without having to put in too much effort (ie do a lot of study and research). Basically, you just buy into the regional/sector growth of the ETF. To learn more, simply click on the ETF label at the end of this post. Today’s post is about Deutsche Bank’s Brazil ETF listed on SGX. It seemed like this might be one of the cheaper ETFs out there amidst global bullishness on...

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Habits and Snowballing

The Snowball, the much talked about book on Warren Buffett sits on my shelf waiting to be read. It would probably take me some time to get to it, as my reading list is so damn long, with at least 10 books on it. Not to mention the other big book that also lies in waiting: Poor Charlie’s Almanac. The concept of the title was made known by its author, again both simple and insightful and really apt to describe Warren Buffett. Perhaps you might already have heard of it. Anyways, here is my interpretation of it. Basically, the...

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Habits and Snowballing

The Snowball, the much talked about book on Warren Buffett sits on my shelf waiting to be read. It would probably take me some time to get to it, as my reading list is so damn long, with at least 10 books on it. Not to mention the other big book that also lies in waiting: Poor Charlie’s Almanac. The concept of the title was made known by its author, again both simple and insightful and really apt to describe Warren Buffett. Perhaps you might already have heard of it. Anyways, here is my interpretation of it. Basically, the...

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Steel Industry

After 186 posts about value investment philosophy, I think it’s about time to write about something else. Well, after all, value philosophy can actually be surmised into just 3 words. So, I am actually quite amazed why I could write so much. So going forward, hopefully I can write about industries and individual stocks. As and when new ideas hit, I will still talk about value philosophy and the big picture. Ultimately, that is what’s most important and what will drive long term return for investors. In this post, I would like to talk about the steel industry. Steel...

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From Free Cash Flow to Willingness to Pay Shareholders

A while back, I wrote this post about stocks that have good record of free cash flow and naturally they also gave a lot of dividends. I thought I would just delve a bit deeper into how free cash flow affects dividend while also looking at 1 or 2 other factors. Basically, to determine whether a company can consistently pay dividends and grow them, we need to know: 1. The firm’s balance sheet, esp the size of its debt 2. The firm’s ability to generate good cashflow or even grow it 3. The top management’s willingness in actually paying...

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Payout Ratio

Payout ratio is simply Dividend Per Share (DPS) divided by Earnings Per Share (EPS), which tells you how much buffer does the company have for it to increase its dividends. E.g. EPS for Singtel is about 22c and DPS is 11c on average for the last few years, so the payout ratio is 50%. But what is a good payout ratio? If the payout ratio is 30-40%, which I would say is probably below the global average, then you know the company has some room to increase dividends. If the payout ratio is close to 100%, ie the company...

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Singapore’s Dividend Aristocrats

The S&P Dividend Aristocrats is a list of stocks in the S&P 500 index that has increased dividends for at least 25 years. As you might guess, this is definitely a very tall order and as of 2010, if I remember correctly, only 10% or 50 stocks made it to the list. It is expected that the list will further dwindle to 40 stocks or so which prompted some to ask whether the criteria is too stringent. Well, that is the way with our world, I guess, when we don’t make the cut, we can always lower the bar...

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What constitute an investment?

The way I see it, an investment has to be something that can generate cashflow. Stocks give dividends, bonds give interest and real estate gives rental income. These are real investments. However in the strange World of Wall Street Craft, anything and everything becomes a feasible investment, an asset class of its own. The recent boom earlier this decade being commodities. But if you think about it, commodities shouldn’t be considered an investment bcos you don’t get a cashflow. Holding a ton of copper, or a ton of wheat doesn’t give you cashflow. The whole premise is based on...

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Valuation Expansion

On Wall Street, a lot of educated monkeys like to talk about valuation expansion. Basically valuation expansion simply means that some stock trading at 15x PE should be trading at 25x PE bcos its industry is sexy, or the company has undergone transformation of its business to become the new growth story or some other cock-and-bull story. So say the stock price today is $15, and the stock earns an EPS of $1 ie PE is 15x. Valuation expansion simply means that the stock should be $25 bcos PE should be 25x. The basis of this argument is that...

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Portfolio Management for Retail Investors

Ok so much so for institutional portfolio managers. On average, they are crap. Once in a while, you find stars like Peter Lynch, Seth Klarman and Warren Buffett. But these exceptional people are far and few in between. The interesting story about Seth Klarman is always about this book that he had written like ages ago, called “Margin of Safety”. It talks about value investing and it didn’t sell well at all. So it went out of print. But recently, some Wall Street people started to bid for it on Ebay and it was sold for US$1,000! Well, I...

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How to Fail in Portfolio Management

Portfolio managers as a group has not contributed anything to the society at large. I mean a barber helps to cut people’s hair, a doctor saves lives and a teacher educates our children. Lawyers, politicians, portfolio managers, as a whole, subtracted value from the society, if you ask me. The famous stats is this, and I must state again: more than 80% of all fund managers fail to beat market indices over long periods of time. Some of them do beat the index for like 1 or 2 yrs, only to falter in the 3rd or 4th. The market...

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Portfolio Management: The Job

So basically portfolio management boils down to over or underweighting some benchmark stocks. Now that doesn’t sound too difficult, why should they be paid exorbitant salaries? And despite getting paid so much, they FAIL to deliver the results? Well first we talk about the skills needed. The portfolio manager needs to know a lot to do his job. And I really do mean A LOT. If you think in terms of those 300 page university textbooks, it’s probably 30-40 of them (CFA has 18 for 3 levels). Plus, 10-20 years worth of global news material, that is maybe volume...

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