Cold Eye’s 5 yardsticks for investment

Cold Eye listed 5 important criteria on his talk on 16-March-2013.

1. Return on Equity (ROE)
2. Cash Flow from Operations (OCF) and Free Cash Flow (FCF)
3. Price-Earning Ratio (P/E)
4. Dividend Yield (DY)
5. Net Tangible Asset (NTA) per share

 

Return on Equity (ROE)

• Investor want to have a reasonable return from the capital for the equity put in.
• The return rate depend on the business risk.
• You would want to have a risk that higher than a risk free rate. Says, bank FD provide interest rate of 4%, you will target for a min return say 10%-15% (6% - 11% above FD rate) for the risk you take.
• [Note]: There is some issues and pitfall on ROE, do perform DuPont analysis on the ROE, or alternately I prefer to use ROIC. 

Cash Flow

• Business owner would expect debtors pay you promptly and you don;t have to stock up a lot of inventories which tied up your capital.
• Else, you have to put in more capital each year even you make one.
• Do expect the hard cash received must be about the earnings each year.
• For each year, the business need capex to keep it going (so the owner can ear more in future) - e.g. buy more/relenish equipment, buy/open more shops.
• It would be good if the capex can be met with the cash I receveid from operations and owner no need to come up with more money.
• It will be fantastic if there is still leftover money to draw out (diviend), or the company can have extra money to invest in other lucrative business.
• Check
• Average OCF same as reported earnigns over the years?
• Is FCF in genral positive over the years?
• Is the average FCF >= 5% of Revenue?
• [Note]: You may want to read more on Cash Flow Statement Analaysis.

Price-Earning Ratio (P/E)

• A business might not be a right investment if price is nor right. If you buy a business with good ROE (say 30%)  on P/E of 33 will only give you a earnings yield of only 3%.
• If the yield is less than FD, you may want to put the money to bank to earn risk free return.
• The prowess in investing is not knowing how to buying great companies at any price, but good companies at a cheap price.
• We should look for company < 10 or < 15 (good company with growth prospect)
•  [Note]: P/E will ignore the debt an cash on the balance sheet. EV and EBIT is a good alternative if an investor want to take care on this item. 

 

Dividend Yield (DY)

• How nice if my bussiness can have extra cash (FCF) after CAPEX investment and the left over money send back to owner as Dividend. (You may want to read more on Cash Flow Statement Analaysis.)
• This way, the owner can have additional money to spend while the business is still growing and the dividend is likely ti increase in the future.
• DY = Dividend per Share for a Year / Stock Price
• It could be a good investment if DY > FD rate.

Net Tangible Asset (NTA) per share

• Investor can recoup the initial investment if the NTA worth more than what he put in.
• If the NTA per share > stock price, you may be in for a bargain.
• More valuable (e.g. hard cash, property, land) asset is better.
• Receiveables - debtors might not want to pay me.
• Inventories - it may be outdated.
• Some business (e.g. service industry) where the important assets is not tangible e.g. its technology, brand name, people......
• [Note]: This is align with Benjamin Graham Net Net & Negative Enterprise Value.

More cold eye sharings can be found on below links:-

• 冷眼分享集
• 新冷眼分享集 
• 冷眼分享锦集

莫做更大傻瓜

Author: Tan KW   |   Publish date: Thu, 13 Sep 15:44

---

2010-05-08 12:40

当股价暴跌时，对你这个股票投资者来说，到底是一场“灾难”，还是一个“机会”？

如果是“灾难”，那说明了你多数是个投机者。

投机者的两大特征是：

(1) 对股价你不问高低，只问会不会起。如果有消息说该股会起，即使股价已极高，你也不在乎，照买不误。

高价买股，被讥为“傻瓜”。

但是，有人却愿意以更高的价格买进，这个人被称为“更大的傻瓜”。

更大傻瓜高价买进

股市中人把这种现象称为“更大傻瓜理论”(The greater fool theory)，视股价暴跌为“灾难”者，多数是“更大傻瓜”的徒弟。

(2) 不理会企业的基本面，是投机者的另一个特征。对他们来说，股票只是赌桌上的筹码，筹码是用来下注的，并不是用来收藏的。筹码是要不停地转手，赌徒才有机会 赢钱(或输钱)，紧握筹码不下注，是不可能赢钱的。对股市中的投机者来说，股票的价值根本不重要，重要的是交投要活跃，股价要会起。

股价会起就是好股；不会起就是坏股。“好”“坏”决定于股价，不决定于基本面。他们进入股市，志在做买卖(To Trade)，赚取价差。当天买当天卖的人叫“一日鲜交易商”(Day Trader)。在西方股市，这是“投机客”的别名。视股价下跌为“灾难”的，尽是此辈。

如果你视股价暴跌是一个“机会”，那么，你多数是个认真的投资者，而且是很有耐心的长期投资者，这类投资者，赢家居多。

长期投资者的特征：

(1) 对股市，他采取“反向”的政策，只有当股价暴跌，股票价值被严重低估时，才进场购买，买进后就不轻易卖出，因为他知道，低价买进好股的机会不常有，也许 三、五年，甚至十年、八年才出现一次，所以他珍惜这个机会，珍惜他低价买进的好公司股份，他持着参股做生意的态度投资股票，股价暴跌是低价参股好公司的良 机。这良机只在股价暴跌时才出现，故暴跌不是“灾难”而是机会，是低价买进好公司股份的机会。

(2) 投资者特别注重股票的基本面，对他们来说，股票只不过是公司股份的证书，其作用只不过是证明投资者的股份巴仙率，这巴仙率其实就是对公司资产拥有权的巴仙率。

股票代表公司的资产，跟地契代表屋子没有两样。地契的价值等于屋子的价值，对于这个“等号”，他从不置疑；你何以对股票的价值等于公司资产的价值，却总是不相信？真正的投资者对股票代表公司资产的概念，深信不疑，就好像他对地契代表屋子，深信不疑一样。

不是“灾难”

有了这个明确的、正面的认识，股票对他来说绝不是筹码，而是拥有资产作为后盾的有价证券，这一纸证书的价值，就是股份的价值。股份的价值，等于资产的价 值，买股票就是买资产，当然是价格越低越合算；买股票理所当然也是股价越低越合算。基于此，股价大跌是机会，不是“灾难”。

严肃的股票投资，平时做足功课，对于股票的价值了如指掌。作为长期投资者，他锁定了一批五星级股票作为投资目标，他渴望有机会参股于这些优秀的企业，分享 这些企业所创造的财富。遗憾的是这些优质股的股价，长期高企不下，他想买进，又觉得股价太高，买不下手。不买进，又以未能拥有这些优秀企业的股份为遗憾， 这使他进退维谷。

化危机为良机

1998和2009年，机会终于浮现，金融海啸横扫全球，许多优质股跟着股市的崩溃而暴跌，有些跌到只等于其真实价值的三分之一，甚至十分之一。他知道这 样的机会恐怕一、二十年才会出现一次，他有信心优秀的企业在金融风暴中只是暂时受挫，一旦风平浪静，必大力反弹，于是他大胆出击，全力以赴大买好股，买进 后就抱紧不放。到现在虽然有些股价已翻了几番，他仍无意脱手。这就是优秀投资者把股价暴跌这样的危机，转为创富良机的典型例子。

如果你认为上述的投资者对股票投资有超人的本领，那你就大错特错。其实，只要是正常人都可以做到。我所认识的成功投资者，其实都很平凡，但很踏实。

无需特异功能

当百货公司大减价时，人头攒动，这些趁低价抢购货物的人，都是正常人，采取了正常的行动，被低价所吸引，是正常的反应。

1998年东南亚货币风暴和2008-9年的金融海啸，股票大减价，被低价吸引而进场买进股票的投资者，他们的反应跟普通人涌进大减价百货公司的反应没有两样，都不过是普通人的正常反应而已。

所以，要做个成功的投资者，只要做个正常人就行了。正常人的正常反应是低价才买，高价不买。每一个普通人，包括上班族都可以做到，无需特异功能。

做个正常人吧，切勿做“更大的傻瓜”。

●冯时能 股票研究人
http://www.nanyang.com.my/node/278691?tid=459

cold eye

职场新鲜人，要想在股市赚钱，第一步要做的就是多阅读投资典籍，第二步就是要研究个别上市公司——越深入越有利。
股市没有免费的午餐，一分耕耘，才有可能有一分的收获，如果你想在股市投机取巧，要快捷致富的话，我劝你最好不要踏入股市，因为股市将成为你的坟墓。
职场新鲜人，比起40年前我开始研究股票的年代，你们是占更大优势，你们是幸福得多了，如果你们在这方面没有成就，见识不足，只能怪自己没有兴趣，信心不足或意志不够坚定 。那就只能怪自己，怪不了别人了。

资料俱足，只欠用功！
http://klse.i3investor.com/blogs/coldeyedsharing/16896.jsp

The 42 Stocks By "Cold Eye"

The 42 Stocks By "Cold Eye"

One of the most famous and successful stock market investor in Malaysia, Fong Siling (Cold Eye) has given the public a list of 42 good stocks in Malaysia stock market earlier this year. Fong Siling is a "value investor", like Warren Buffet, who adopts fundamental analysis to identify good stocks and hold for long term.

       "Cold Eye"

Most of us want to know what stocks Mr Fong actually hold. However he probably won't let us know. You can screen all listed companies annual reports to find out their top 30 shareholders to see whether Fong Siling's name is there.

Now you can save your time, as Mr Fong has given us 42 stocks potential which he thinks are worth to invest in or at least pay attention to. This means that he will probably own these stocks or plan to own them in the future.

So if you are lazy to screen the stock market with more than 1000 stacks, just concentrate on these few stocks and pick a few which you think the best after doing your homework.

Below are the summary of the 42 stocks from nanyang press, published on 17 March 2013. Since it was 3 months ago, a lot of things have changed.

Translation in English:

1. PPB - Share price drops recently, mainly due to drop of Singapore major shareholder Wilmar International. However, temporary setback is also an opportunity.

2. Orient - Has good assets. Can pay attention.

3. MSC - Predict that this year it can get good profit & pay dividend. Actually a good blue chip. Has good management team. Besides, the price of tin has risen 40% since last year.

4. Canone - Personal suggestion is "buy". Share price is stagnant recently because of legal issue. Though slight high gearing, but I'm not too concern, as cash flow & earning are very good.

5. PIE - High dividend yield, but share price did not move much.

6. Scientx - Business covers plastic mould & property development. No debt.

7. Tecnic - Has good earning record. Give dividend and no debt.

8. MBSB - Personally think it is good. Has the potential to become a good blue chip, but need time.

9. NHFatt -Has good earning record.

10. Harta - Personally think it is the best glove stock. Though high PE ratio, its future plan is great.

11. Kossan - Personally think that glove market is still growing, must choose strictly. This is not bad.

12. QL - Ordinary business. Continue to grow. A company with a good management team.

13. Jobst - "Not bad" company.

14. Hapseng - A low share price company is not necessarily not good. A good company with diversified business.

15. Suria - Owns all ports in Sabah. Not bad.

16. ECS - Sell computer components. No debt. Has advanced and good management team.

17. Multico - Has good prospect. No borrowing. Has contracts on hand. Has chance to give dividend.

18. Favco - International company. Has factories in many countries. Has many contracts on hand.

19. Faber - Government-linked. Cash rich. Recently announced new contracts. Can give good dividend.

20. FACBInd - Has good cash flow.

21. GCB - Operate largest cocoa factory in the world. Big business. Good management.

22. Coastal - A shipping company. Can pay attention.

23. Benalec - Can pay attention. Do your own homework.

24. GTronic - Profit increased for the past 2 years. Estimate the trend can continue for 2-3 years.

25. Huayang - Property developer. Has good future plan. Build affordable homes.

26. Prestariang - Good dividend policy.

27. P&O - The best in insurance industry.

28. Pwroot - Can pay attention.

29. Unimech - Indonesia's business expands rapidly and can reach Malaysia's business size in 3-4 years. Can even hope to be listed in Indonesia.

30. UOADev - Cash rich. Good business skill.

31. Maybulk - A stock with contrary thinking. Suggest to buy in 2nd half 2013 or 1st half 2014. Company not only involves in shipping, but also ships trading. Recently bought a few good ships, which indicates shipping industry cycle has reach bottom. However, need to wait and do homework.

32. Cypark - Good business. Can pay attention.

33. Hevea - Particleboard and furniture business. Cash rich. Successful in entering China market.

34. Fitters - Diversified business, develops property. Debt free.

35. Daya - Can pay attention. Yearly profit RM2.8 billion, and plans to reach RM10 billion in 2015.

36. Ivory - There is rumour that condominium in Penang are sold at RM700psf, and 70% were sold without advertisement. Estimate that it can be even better after election.

37. L&G - Share price has dropped from peak to bottom, but successfully turned land without value into valuable land. Should perform well in the next 2-3 quarters. Cash rich, low gearing.

38. JCY - Semi conductor industry is affected by business cycle.  Recently its share price begins to rise, but can't guarantee the trend will continue. But, the room for drop is limited.

39. Unisem - Another semi conductor company that worth paying attention to. Can buy when it drops, and hold it.

40. MBL - A plantation company with good dividend yield.

41. MMode - A stock in ACE market. Has cash, in net cash position, pay dividend. Can hold.

42. Tambun - A stock that pay dividend and in net cash position.

You may think that a few stocks are not worth to be in the list or a few other stocks are even better than these. It is your choice, you do your own study, you made your own decision with your own money.