Author: 8% Value Investhink

Shareholders’ Equity

By: Jay The balance sheet is basically an elaborated display of a simple equation. Assets – Liabiilities = Shareholders’ Equity or simply Equity What this means is that whatever assets that a company owns, subtracting whatever the company owes, gives you what’s left for shareholders. This is also known as the book value of the company. Shareholders’ Equity is usually at the bottom right of the balance sheet (Assets on the left side, Liabilities on the top right) and is usually broken down into the following sub components: Common stock Paid in capital Retained Earnings Preferred stock Treasury stock...

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Free Cash Flow Yield or FCF

By: Jay One advanced but quite useful financial ratio that has not been discussed on this blog is the Free Cash Flow Yield. This no. tries to determine how much return can an investor expect after the company has made its money and invested what it needs for future operations. It also gives an indication of how much the dividend yield could be. This ratio is not called an advanced ratio for nothing. For those who think investment is easy, well sorry, you have to read maybe 5-6 posts on this blog in order just to understand this one....

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To Cut or Not To Cut

By: Jay In Value Investing, you NEVER cut losses. If you have analysed the company and have determined that it is a good buy, and you bought it. If it goes down, you should be buying MORE of the stock. Since it is cheaper now. Well, that’s provided everything is still the same since the time you did your analysis. But for most novice investors, including this blogger, our analysis is usually flawed. There is probably something that we missed. Remember the market is not stupid. In fact we all know the saying don’t we, “The market is always...

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Of estimates and consensus thinking

By: Jay I attended an investment session where the instructor asked the class (of around 20 pple) to estimate the size of Thailand vs Singapore. Was it 50x bigger? Or 100x bigger? Or 500x or what? He wanted to prove a point. The true answer will lie in the range of everybody’s estimate. Bcos someone was bound to get it right. Well his point was quite valid, in the end, the answer did lie within the range of everyone’s estimate. But what was more striking to me was that most estimates are wrong and some VERY WRONG. For those...

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The Efficient Market Revisited

By: Jay There has been a lot of debate since the 1950s whether markets are efficient or not. Btw, if you are asking what the heck is an Efficient Market, you can read this posts first. Label: Modern Portfolio Theory Ok Efficient Market. Essentially, some academics came out with this theory that nobody can earn a superior return than the market return (ie average investment return) over an extended period of time bcos markets are damn bloody efficient. ie if there is an inefficiency (or a discrepancy between price and value), eg a stock is worth $5 but is...

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Barriers to Entry

By: Jay To determine whether a company has a business moat ie whether it can defend its turf when competitors come in, we look at what is called Barriers to Entry, one of Porter’s 5 Forces. I have identified a few common barriers but I must point out that the list is not exhaustive. Other barriers exist and it takes experience and knowledge to identify them. Again, investing is about life-long learning and hard-work. It is not about get-rich-quick. Market share This is the most basic edge a company can have over its competitors. When a company is the...

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