Author: 8% Value Investhink

Random Thoughts on Various Investment Topics

In this post I would like to share my thoughts on my stance on various matters in investing like whether EMH works or not, TA is bullshit or not etc. So let’s start! Value concepts: I subscribe to most value investing concepts like margin of safety, circle of competence, buy things on sale, value-for-money etc. Most of these are very common-sensical and I don’t think there is a need to argue with that. If you have no idea what are these, start reading this blog from the first post back in early 2006. EMH is bullshit: One thing that...

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Free Cash Flow and Dividend Stocks

As we enter the new year, this is the bonus post that hopefully can make us rich in time to come! Short Name Industry Subgroup Dividend Yield SINGAP SHIPPING Transport-Marine 10.53 SIA ENGINEERING Commercial Services 10.05 MOBILEONE LTD Cellular Telecom 9.864 SINGAP AIRPORT T Airport Develop/Maint 9.859 DEL MONTE PAC LT Food-Canned 9.586 SINGAP REINSURAN Reinsurance 9.154 SINGAP PRESS HGS Publishing-Newspapers 8.599 CEREBOS PACIFIC Food-Misc/Diversified 8.503 SINGAPORE POST Transport-Services 8.17 SINGAPORE FOOD Food-Misc/Diversified 7.684 SINGAPORE EXCH Finance-Other Services 7.49 HAW PAR CORP Diversified Operations 6.964 SINGAPURA FINANC Finance-Mtge Loan/Banker 6.667 UNITED O/S INSUR Property/Casualty Ins 6.55 HONG LEONG FINAN...

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Enterprise Value and Free Cash Flow I

Once upon a time, we talked about a radical ratio called EV/EBITDA which was invented and nearly won the Nobel Prize in Most Innovative Financial Ratio ever invented. Well someone topped that and invented EV/FCF which is Enterprise Value over Free Cash Flow. What’s so great about EV and its alphabetical soup of acronyms? Ok, let’s define the terms first. EV = Market cap + Net Interest bearing debt FCF = Cashflow from Operations – Capex For the uninitiated, pls follow the hyperlinks and read what is Market Cap, Cashflow from Operations etc. I will explain EV and FCF....

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Losers’ Game

This is the title of an essay and a book by one of the most prominent minds in finance. Just google it to read the original text. I will provide a brief summary here. In this world, there are two types of games being played. Winners’ games and Losers’ games. In winner’s games, the winner wins through his own actions. In loser’s games, the winner wins through his opponents actions. The usual example to illustrate this is tennis. There are actually two type of tennis being played in the world, as observed by some hotshot coach. Amateur tennis and...

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So when will the market bottom out?

The bottom will be somewhere in the next 12-24 mths. ie Dec 09 to Dec 10. What? 24 mths? So my portfolio has to suffer another dunno how many % downside? What kind of prediction is that!?? Well, let’s start with the disclaimer first, nobody ever predicted nothing. Bell said nobody needs phones, Ford said nobody needs cars, and the most famous one: Bill Gates said nobody needs computers. So that is just my contribution. It won’t be right. Maybe we have already seen the bottom. Who knows? Maybe we didnt avoid the Great Depression scenario. We just don’t...

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What could have happened?

A hypothetical pessimistic scenario painted by Jay on what could have happened. It’s like comparing the worst with the current situation now and one will feel that it’s actually not that bad after all. By: Jay The past few weeks actually went passed normally for most people NOT reading this blog. Common folks getting on with their daily lives, occasionally watching the news and see indices around the world fall 25% in one week, goes WOW and moved on. About 10,000 pple were disgusted bcos they got conned to buy some Lehman mini-bonds. But actually that’s quite far from...

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Value investing versus technical trading

By: Jay Some time back there have been some debate on other blogs about whether value investing works better, or technical trading works better or turtle style works better or whatever. It is very logical to think that technicians detest value investors and vice versa. Bcos their investment philosophy is completely different. One buys stocks that are mundane, cheap, stable earnings based on fundamental analysis. One buys based on short term newsflow, charts, momentum etc. It is very tempting to think that these different investors fight a lot. Like Cats versus Dogs, Chu vs Han kingdom, Man U vs...

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Lehman mini bonds

By: Jay 50,000 over investors in HK bought USD 1bn worth of mini bonds from Lehman. 1,000 of them protested public to seek explanation from authorities. Singapore – my guess, probably 60% of HK’s problem ie 30,000 investors, investing USD 600mn in mini bonds ie 1bn SGD DBS shareholder equity is SGD 23bn, net profit is 2bn SGD So theoretically, they can repay the investors out of goodwill with little impact. Eg. Repayment 20% over 5 yrs, SGD 200mn per yr -> 0.9% dent to their equity and 10% dent on net profit (quite big though) Of course, they...

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Focus on cashflow and not capital gainFocus on cashflow and not capital gain

By: Jay When people say they do investing, there is a tendency for most people to focus on the capital gain that each investment will bring in. Eg. Ah Beng buys SGX at $2, today is $6, so his perceived capital gain is 100% and he is happy like a bird. Or Ah Gou buys a property at District 10 for $1mn in 2006 and today it is valued at $2mn, his capital gain is again 100% and he goes and buy a Ferrari. This is very natural and it’s got to do with our primitive wiring and we...

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Are we at the bottom yet?

By: Jay The short answer is no, but… 1. In terms of magnitude, yes it’s pretty scaring, some markets are close to 70% from the previous peak, China is down 50%, India is down 40%. But the US, where everything started, is down only 28%, and Footsie down 27%. Developed Asia-wise, STI is also quite resilient, down about 36%. Hang Seng down 46%, Japan down 37%. So magnitude wise, maybe 60%-70% done. There may be another 10-15% downside, and things should pacify. Timeline-wise, things started to unfold only last June or so. We hit 1 year anniversary not too...

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Penny stocks – continued

By: Jay So, 600+ stocks out of the 700+ listed counters on SGX are penny stocks (trading less than $1). What are the implications? What are some takeaways one can develop? For me, the few takeaways are as follows: 1. The market is cheap. The stock market can tell you the prices of stocks, but not their true values. When these kind of statistics get on the newspaper, you can tell, yeah things are quite bad, there may be some real bargain going on. But somehow, it feels like it is not the bottom yet. It has to be...

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Hopes and Dreams

By: Jay Flipping through the newspaper everyday, I see so many dreams asking us to fork out top dollars to make them come true. Proprietary trading systems to help you trade and earn big money, ways to become millionaires, weight loss to a perfect figure, teaching methods to make your kid a genius, and many more others. Most of the time, they don’t work, bcos if they did, they won’t need these advertisements, people will just flock to their shops by the truckloads. But the sad truth is, people still pay top dollars to go through these useless programs...

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The Singapore Property Market: Personal Take II

By: Jay This is a continuation of the last post. Ok, so the bulls will say expats can pay. Now I do not know what is the average expat pay, but let’s just assume the average expat gets the same salary of the top 10% of our population ie $12k per mth. If you are an expat earning $12k per mth, will you fork out 33% of your salary for rent? For me, if I were an expat, I know I am not going to be in Singapore forever, I would rather stay somewhere cheap, save the extra $1-2k...

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The Singapore Property Market: Personal Take I

By: Jay In this post, I am going to give my two cents on the Singapore property market. As with people giving their two cents, usually it is worth about one cent, esp when people try to give their two cents in some arena where another 10,000 people already gave their answers to 6 million dollar questions. So always do your own analysis and learn to be an independent thinker. I think that should be everybody’s goal and that means also you shouldn’t be reading the rest of this post. Hehe. But read lah, just for entertainment lor. So...

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Mind Share

By: Jay This concept should be familiar to followers of the guru and value investing as well. Essentially, we should invest in companies that have a market share of our minds. The bigger the better. Well, basically, we are talking about branding, but Mind Share sounds so cool right! So let’s just use this term indiscriminately in this post. For the uninitiated, let’s try to define what’s Mind Share. In today’s world, most of us suffer from information overload, everywhere we go, we get bombarded by sexy ads, bright slogans, spam emails, fancy taglines, funny ringtones etc. We used...

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