Author: InvestingNook

How To Read An Annual Report

In the previous article, we touched on what you should be looking out for in an annual report. We shared with our readers that many investors skim through the annual report and perhaps only go into detail in 1 or 2 sections of the annual report, namely the financial statements. However, we argued that they are not fully exploiting the utility of analysing annual reports. We believe that the annual report reveals much more than such numbers and figures. Hence, we highlighted three large segments that investors should be focusing on, in order. Letter to shareholders Comments and remarks...

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What Should You Look Out For In An Annual Report

Everyone in the financial market knows that if you want to understand about a company, most of the essential information you need are embedded in the annual report. It is very important to know the information you can get out of it and the information you can’t. Only then will you be able to know what you should be looking out for in an annual report. Many investors are very messy in the way they analyze. While this may work for some, having no structure in investing may suggest that the individual is lost. Having no structure also leads...

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Tweedy, Browne: 10 Ways to Beat an Index (Part 2)

This article is a continuation of the 10 ways to beat an index by Tweedy, Browne. If you have no idea what Tweedy, Browne is and what they do, we strongly advise you to refer to the previous article for a complete story. Before we proceed with the remaining 5 ways, we would like to provide you with a short summary of what we have shared with you in the previous article: Invest in companies with characteristics that have produced market-beating returns in the past Invest in both big- and small-cap stocks Statistics and Specifics – Each company has...

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Tweedy, Browne: 10 ways to beat an index (Part 1)

There are numerous studies that have shown that most equity investment managers fail to outperform the stock index over the long term. What this suggests is that most investors are actually better off buying an Exchange Traded Fund (ETF) tracking the index and let the magic happen by itself. Why bother picking stocks when there’s a better and stress-free alternative? There is always an upward bias by glorifying the outperformers by Wall Street. If there isn’t any allure in making your own trades, there are no fees for the industry to be made. Having the full picture hidden from...

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The Importance Of Having A Circle Of Competence

The circle of competence is an idea that is espoused by the legendary value investor, Warren Buffett. Essentially, he encourages investors to stick to what they are good in and stay within that circle. Know what you don’t know and be better at what you know. “You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.” – Warren Buffett This doesn’t mean that you should narrow your lens...

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5 Key Traits of a Successful Investor

We believe that every successful value investor shares similar traits and characteristics that had played a pivotal role in their successes. There is a lack of comprehensive studies on the relationship between these traits and success, but common sense and early research have shown promising results. For instance, psychologists have discovered that the level of conscientiousness leads to an increased performance in the workplace, along with intellect and emotional intelligence. Of course, this is unsurprising. An individual who is hardworking and intelligent is more likely to do better in their role. This article will highlight 5 important traits that...

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Diversification, The Way To Reduce Risk

Diversification, as defined by the experts, is a risk management process of allocating capital in a way to reduce overall risk by investing in a variety of assets. Before asking what financial risk truly means to you but let us first introduce what majority of the finance industry believes risk to be. Here is a short excerpt adapted from Investopedia: “Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates the expected return...

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Are All Great Companies Great Investments?

What are some of the great companies that came to your mind when you read the title? Is it your favourite fast food restaurant McDonald’s or the well-known consumer electronics company Apple. Perhaps even American Express and Coca-Cola have popped up too? These are exactly the companies Warren Buffett’s Berkshire Hathaway has invested in. These are great companies with strong brand names. There are not many other companies in the world that are able to rival their standings in their respective industries. Investing in great companies While there are in different industries, you may have already noticed some common...

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Thoughts on Recent Yield Curve Inversion

Recently, on 25th March 2019, markets started panicking due to the yield curve inverting, where the 10-year yield dipped below the 3-month yield. Markets started fearing a looming recession. Why does this spark fear of a recession? Normally, yield curves should all slope upwards. This is because, all things being equal, people would demand higher interest rates for longer duration loans. Given that longer-term loans have various risks involved when lending (e.g. inflation risk) and the risks gets riskier over longer time horizons. So for the curve to invert implies that investors are forecasting that something unusual will happen. Something...

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Is Deep Value For Everyone

The idea behind value investing is very simple for most people. It is essentially about buying a business cheaper than how much it is worth. However, most find it extremely difficult to implement this simple logic in practice. Many may conclude that deep value investing does not work. Instead of buying low and selling high, they land into many psychological pitfalls in the market and end up doing the converse. Needless to say, their returns are probably nowhere near spectacular but yet, these are the very investors that make the most noise in the market. If not value, then...

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Essentials of Making Money by Walter Schloss [Part 2]

Walter Schloss, a legendary value investor, shared with us about the key guiding principles that have led to his success. In the previous article, Schloss shared with us 3 crucial mistakes value investors should never ever make. To summarize the first article, the crucial mistakes that you should never make are: Don’t buy on tips for a quick move Don’t let your emotions affect your judgement Don’t be in too much of a hurry to sell The underlying guiding principle to avoid the above three grave mistakes simply is that you must have an investment philosophy to keep you...

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Essentials of Making Money by Walter Schloss [Part 1]

Before we dive head down into the factors, you have probably heard of outstanding value investors such as Warren Buffett, Seth Klarman and probably Peter Lynch, but who is Walter Schloss? Walter Schloss was a legendary value investor who was also under Benjamin Graham’s guidance, along with Warren Buffett. Amongst the numerous capable investors highlighted in The Superinvestors of Graham-and-Doddsville by Warren Buffett, Schloss’s performance was nothing short of stunning. His partnership’s overall gain (gross and net of fees) has superseded the S&P 500 index by a large margin, consistently beating the index for many years. How can academics...

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10 Things You Need To Know Before Investing

Very often, I find investors are more excited about the act of investing than the acquisition of the wisdom. Investors are more fixated on short-term gratification than to focus on generating long-term sustainable returns. However, we are very fortunate to be made aware of a fool-proof philosophy by Seth Klarman, that will guide us through our investing journey – if we remain disciplined in what we learn. In this article, we will be sharing with you the 10 important things that you must know before investing like Seth Klarman. These nuggets of advice are taken from his famous book...

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Key Attitudes Required For Investing

After reading numerous books and articles about value investing, you probably have realised that value investors love to reiterate the importance of having the right psychology and philosophy. It dictates our attitude towards learning and investing. Bearing in mind about how fickle-minded and manic the market is, we are a lot more conscious about how the market is feeling and what we should be doing. However, value investors should take a step further beyond having a good grasp of the market psychology. Just because the market is overreacting, it does not mean that the securities affected are now undervalued....

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TheEdge Investment Forum 2018: Q&A

Having presented at TheEdge Investment Forum 2018, I thought I share some of the questions asked at the end of the presentation with the public. While these may not be all the questions being asked, I thought I share the top 3 questions here for everyone’s discussion and learning. Is deep value truly passive or do I have to constantly hunt for new positions? Comparing to Growth At Reasonable Price (GARP) investing, buying into and holding a good business and management.  Firstly, unless you are leaving your money in an ETF, actively picking stocks to purchase can never be...

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