Jason Fried: Why work doesn't happen at work | Video on TED.com
Tuesday, November 30, 2010
Friday, November 12, 2010
How do Roger Montgomery and Peter Switzer select stocks for the Switzer Montgomery portfolio?
In a very special appearance on Switer TV, Peter Switzer combines his cautionary investing style for Self Managed Super Funds with Roger Montgomery's Value.able intrinsic valuation technique to produce a portfolio of extraordinary businesses that generate high ROE, plenty of cash and whose intrinsic values is forecast to rise over the coming years. Visit http://www.rogermontgomery.com/ for Roger Montgomery's step-by-step Value.able guide to valuing a company.
Tuesday, November 9, 2010
Lessons learnt from my first four share trades
As a Value Investor, my investment strategy is as follows: To invest in exceptional businesses that its share price is trading at a discount to its intrinsic value. Characteristic of an exceptional business includes strong competitive advantage, little or no debt, track record of high return on equity and positive cash flows, and its intrinsic value is forecast to rise in the future.
With this in mind, I am going assess this strategy with my first 4 trades (when I didn't have a defined strategy)
My first trade was to buy a well known retailer. It is a good business, making consistent high return on equity, low debt, and I believe it has a competitive advantage from its network of stores and the ability to drive cost lower than its competitors. It fits most of my current investment strategy, except one... the price I paid was too high. My entry price was almost equivalent to its Intrinsic Value 18 months in the future. The share price did went up in the short run but thereafter, it drop significantly and was going sideways.
Second trade was a technology company that provides medical software. This trade was executed a month later from my first trade which was still in positive gains. Why did I buy it? I got excited about buying shares and want to buy more. "I was told" that the company has big plans in the future. However, the company is not an exceptional business, in fact, it was the total opposite. The company has made numerous acquisitions and had paid too much, resulting in significant amount of Goodwill in their financials. Not surprisingly, that didn't go too well either.
Two bad trades with losses got me worried and cautious. Hence, I started to keep up-to-date with the latest market news, share prices movement. I have also started reading investment books and listen to comments from various market experts.
Eight months later, I executed my third trade buying a well diversified miner. I bought it at a low price (when Greece debt crisis intensify and riots were reported on the streets). That was my first profit and the key lesson I learned is patience. There will always be buying opportunities as long as you are willing to wait.
Fourth trade was an engineering services company, and a turning point for me. By then, I have developed my own model to calculate intrinsic value and I have read both analyst reports and the annual report before making the investment. Although it was trading at all time high, my analysis indicates that its share price is still trading below its intrinsic and it ticked all the boxes of my investment strategy. To me, this trade is executed based on my own analysis which is an informed decision. Currently, I am sitting on 20% return on investment.
Looking back, the first four trades taught me alot about Investments, and I hope you it will be a good reminder for you.. or at least a laugh
PS: Roger Montgomery's book Value.able is instrumental to my investment strategy.
With this in mind, I am going assess this strategy with my first 4 trades (when I didn't have a defined strategy)
My first trade was to buy a well known retailer. It is a good business, making consistent high return on equity, low debt, and I believe it has a competitive advantage from its network of stores and the ability to drive cost lower than its competitors. It fits most of my current investment strategy, except one... the price I paid was too high. My entry price was almost equivalent to its Intrinsic Value 18 months in the future. The share price did went up in the short run but thereafter, it drop significantly and was going sideways.
Second trade was a technology company that provides medical software. This trade was executed a month later from my first trade which was still in positive gains. Why did I buy it? I got excited about buying shares and want to buy more. "I was told" that the company has big plans in the future. However, the company is not an exceptional business, in fact, it was the total opposite. The company has made numerous acquisitions and had paid too much, resulting in significant amount of Goodwill in their financials. Not surprisingly, that didn't go too well either.
Two bad trades with losses got me worried and cautious. Hence, I started to keep up-to-date with the latest market news, share prices movement. I have also started reading investment books and listen to comments from various market experts.
Eight months later, I executed my third trade buying a well diversified miner. I bought it at a low price (when Greece debt crisis intensify and riots were reported on the streets). That was my first profit and the key lesson I learned is patience. There will always be buying opportunities as long as you are willing to wait.
Fourth trade was an engineering services company, and a turning point for me. By then, I have developed my own model to calculate intrinsic value and I have read both analyst reports and the annual report before making the investment. Although it was trading at all time high, my analysis indicates that its share price is still trading below its intrinsic and it ticked all the boxes of my investment strategy. To me, this trade is executed based on my own analysis which is an informed decision. Currently, I am sitting on 20% return on investment.
Looking back, the first four trades taught me alot about Investments, and I hope you it will be a good reminder for you.. or at least a laugh
PS: Roger Montgomery's book Value.able is instrumental to my investment strategy.
Wednesday, November 3, 2010
Tulip mania
In the recent movie Wall Street: Money never sleeps, Tulip mania was referred to as the first economic bubble in history. Below is a brief history lesson I have extracted from Wikipedia.
Reiterating from above, an economic bubble occurs when asset prices deviates from intrinsic values. So to avoid a bubble (according to this definition), one should conclude the ability to estimate intrinsic value is critical.
To succeed in Investing, you need to have the ability to conduct your own research in order to make a sound decision. Buying shares from a hunch, hoping the price will go up; or following the crowd is not a successful investment strategy.
For shares investments, there are 2 broad strategies one can adopt,, namely Value Investing (Fundamentals) and Technical Analysis (Charts). As an accountant, Value Investing appeals to me since I am familiar with Financial Reports. I was also fortunate enough to find a great Value Investor who is willing to share his methods of calculating Intrinsic Value and has benefitted alot from him.
That said, I think it is more important to have a strategy, rather than which strategy is better. One main reason for having a strategy (system) is that it allows you to execute investment decision based on logical assessments, not emotions. This is one of the pitfalls for new investor. In my next post, I will share my lessons learnt from my first 4 trades, which are valuable to me. And yes, I made the same mistakes like everyone else.
Tulip mania was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (i.e. economic bubble), The term "tulip mania" is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).
The event was popularized in 1841 by the book Extraordinary Popular Delusions and the Madness of Crowds, written by British journalist Charles Mackay. According to Mackay, at one point 12 acres of land were offered for a Semper Augustus bulb. Mackay claims that many such investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock.
Reiterating from above, an economic bubble occurs when asset prices deviates from intrinsic values. So to avoid a bubble (according to this definition), one should conclude the ability to estimate intrinsic value is critical.
To succeed in Investing, you need to have the ability to conduct your own research in order to make a sound decision. Buying shares from a hunch, hoping the price will go up; or following the crowd is not a successful investment strategy.
For shares investments, there are 2 broad strategies one can adopt,, namely Value Investing (Fundamentals) and Technical Analysis (Charts). As an accountant, Value Investing appeals to me since I am familiar with Financial Reports. I was also fortunate enough to find a great Value Investor who is willing to share his methods of calculating Intrinsic Value and has benefitted alot from him.
That said, I think it is more important to have a strategy, rather than which strategy is better. One main reason for having a strategy (system) is that it allows you to execute investment decision based on logical assessments, not emotions. This is one of the pitfalls for new investor. In my next post, I will share my lessons learnt from my first 4 trades, which are valuable to me. And yes, I made the same mistakes like everyone else.
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