Author: Growing your tree of prosperity

As a follow to our previous article, we will delve deeper into discretionary equity investing. Remember that discretionary equity investing can be challenging task as the field is highly competitive and there are a lot of brains chasing the same few investments in the market. It largely boils down to what investors perceive as the quality of a company: a) Growth It’s easy to just reduce growth to one metric like compound annual growth rate of revenue, but I can hardly see it work when I back-test portfolios which use this criteria. Good sustainable growth can result in bigger...

As promised, I tried accessing a Bloomberg terminal to backtest some of the ideas from TUB investing. Here are my findings : a) Dividends per unit P/B ratio was a strong screen. Dividends generally do well in backtests. Putting up a screen incorporating the cheapness of a stock makes it even better. There is some research done this year in the Financial Analysts Journals which back-up my findings. In fact, using Dividends divided by P/B ratio and setting it above a threshold value to target around 20 stocks yielded a return about 13.6% with a semi-variance of 13.51%. Returns...

I was in KL to support my mum for some family matters over the weekend and I was unable to put up articles on this blog, but now I am back an between my lectures and tutorials. KL is the land of great wisdom and my relatives have shared with me the ancient proverbs of Hakka/Cantonese origin. Unfortunately, while I am able to adapt these proverbs for investing, I am unable to transcribe their pronunciation on this blog. As of now, I can’t even tell whether they are Hakka or even Cantonese in origin. a) Flying a kite with...

Today’s article is short as we’re moving into equity investing territory and I don’t want to burden readers with too man equations on discounted cash or the residual method in equity valuation. Instead, when you read anther investment blogger, try to see whether you can lump him or her into one of the two categories : a) Discretionary equity investor Most financial bloggers fall into this category. These investors use their own personal judgment to decide which stocks to invest in. Typically such investors will use some equity valuation models but will often supplement it with discussions about firm’s...

I just experienced how tough it is to be in the investment education business. Like Brian Halim, I was invited to TUB’s value investing seminar. You can check out Brian’s account of today’s event here. A big problem which plagues the business is that investors have this Ten Year Series mentality. They want to skip the entire process of figuring out how to invest and go directly into buying the stocks that is  owned by the information vendor. Just like a secondary school student, they just want the model answers and do not really care for the process. This...

This post started out with Whatsapp discussion between friends who examined the difference between paper generals and entrepreneurs. The impression I got from a large part of the discussion is that entrepreneurs are heroes in Singapore society because they dare to take on business risks and very often take a personal stake in their enterprises. On the other hand, paper generals can broadly be used to reflect Singaporeans who were overladen paper qualifications and attain a degree of comfort without risking too much of their skin. This discussion reflects the dreams and desires of the common Singaporean. Everybody wants...

This books is really shaping up to be something that is good for novices and the experts. Today I will talk about six very basic principles of portfolio construction. It is actually quite humbling that my own portfolio does not make the cut for all of these principles. a) Diversification The first principle is to diversify your portfolio. This is the only known free lunch in finance. This is best done across asset classes and industries. For folks like me who focus on dividend yields, it is much harder to conform to these principles. I normally look at REITs,...

There are some murmurings that I am emerging as some sort of back-test guru but that cannot be further from the truth. I am still very much of a noob and have a whole lot more to learn. Today I will take about some aspects of backtesting that I will need to straighten out to improve some of my own investing strategies. a) Understanding superior returns The book explains that there are just two sources of superior returns. First, acceptance of liquidity risk. And second, superior information. Back-testing may refers to obtaining of superior information that compares strategies against...