Wednesday, March 24, 2010
Wednesday, August 6, 2008
Warren Buffett Wealth
Having a disastrous record of 50% paper losses from my portfolio with another 3k of realized losses, I been pondering if I am a cut into trading/investing and kept asking what wrong with myself as some peers that I met online achieving a good track record in their investment and one friend of mine who has influence me into stock investing reaping a good profit by both trading and investing...
My friend had mentioned that I have started off using trading techniques without cutting losses, ignoring crucial valuations, suggests that I read some books about investing and recommended me Warren Buffett Wealth – Principles and Practical Methods Used by the world’s Greatest Investor.
This book gave a brief introduction about Warren Buffet, the investment talent he processes and his investment journey showcasing some of this brilliant investment he made since he was young such as reselling the coke from house to house with a decent return on investment of 20%(which later in life he acquired the shares), the joint business venture of pinball machine that boost his wealth substantially, the key investments in GEICO Auto Insurance, Coca-cola and Washington Post.
It also introduces general principles like “Learning from the Best to be the Best”, "one needs to devote his efforts in order to be successful" and shares with us that wealth is created through owning a business. It also teach an important concept of the Down Market Test where the true measure of a successful investor is not a comparison of performance against the NASDAQ, DJI, S&P but rather how well a portfolio performs during down markets.
It then relates the key processes to become wealthy:
- Begin investing and building wealth early
- Have confidence
- Understand accounting and how business work
- Set Goals
- Save, invest, and live below your income
- Read, study businesses over many decades before you invest
- Be a business analyst, not a market analyst
- Concern yourself with what is going on inside a business, and free yourself of any concern with what is going on in the outside markets
- Learn to value business and purchase pieces of them for below what you think they are worth
- Make a list of traits that you admire and before you know it you will become the person you want to be
- Create another set of character traits that you don’t admire which will also remind you of the person you don’t want to be
- Write down the habits you want to develop
- Select your mentors carefully
- Identify what passion you have that could create wealth
It also shows why wealth is created by owning business by giving an excellent example of how the ownership of a business created wealth and how the Barnes Foundation of Philadelphia strict rules against business ownership bankrupt its own funds as inflation drain the funds which only focuses on fixed income securities (bonds).
Then it prompted you to evaluate what kind of investor are you and show define what is an active investor and a passive investor, and the difference between an investor and a trader (speculator). It stated that this is important as it will determine ability to create wealth. Below are the definition of investors and the differences of an investor and a trader (speculator).
Definition of 2 types of investor
Passive investor - not wanting or enjoying the day to day activity of evaluating investments
Active investor - hands on, fascinated, energetic participant who enjoys intensive reading and learning about all things related to finance, business, the economy and the investment world
Stock Speculators VS Business Owners
Business owner is concerned with what’s going on inside the business – with its employees, customers, strategic plan, growth and sales, expense and cost reduction, as well as increasing profits and earnings.
Speculator is more concerned about what is going on outside the business or the stock’s market price: the speculator buys something today in order to sell it later at a higher price. “The sooner the better” is the motto of every trader and speculator. Speculator focus on the price, and owners focus on the business. Speculators are market analysts; owners are business analyst
Question to ask yourself if you are an owner or a trader.
1) Are you concern with the present and future earnings of a business, or are your evaluating the only its price?
2) Are you influenced by reading and research? Or do others influence you? (Following the madness of crowds)
Warren buffet and most value investors are by nature independent thinkers and get little satisfaction by being with the crowd. They do their own research and read nonstop. They observe others but do not follow, taking great delight in choosing their own path. Important step is to do some self discovery to determine your investment expectations, your time frame, and your risk tolerance.
Next, it guided us to develop our philosophy (plan) to achieve our results and speaks about the principles and methods Buffet use.
Warren Buffet Philosophy
Rule number 1: Don’t lose capital
Rule number 2: Don’t forget rule number 1
Buffet Investment Principles
1.Know what you own
2.Research before you buy
3.Own a business, not a stock
4.Make a total of only lifetime investments
5.Make one decision to own a stock and be a long term owner
Buffet method (cigar butt method)
Old economy stocks that have one or two puffs of earnings left (businesses that have low P/E with a lifespan of twenty years or less)
Attempt to buy a dollar worth of assets for 50 cents ( buy things for less that they worth)
Work out how much a business will pay you between now until judgment day. Discount that back to today and attempt to buy them cheaper.
Buy business you understand, with favorable long term prospects, operated by competent and honest people and available at attractive prices.
Calculation Method Used
Value Investing – it is about the careful review and calculation of a company’s book value and intrinsic value and its relationship to market value.
Book value is the simple subtraction of assets from liabilities.
Intrinsic value concept—what will you pay for a machine that generates $1 a year for ten years? You wouldn’t pay $10 because you would be just getting your money back over 10 years. You wouldn’t pay $9 today to get $1 a year for 10 Years, which would be a return of 11/1%, or 1% a year. What you would pay is determined by how much you seek in return on your investments. You seek an 11% annual return, which happens to be the long term rate of return o equalities over the last several decades, you will offer $3.52 for this machine.
Other methods: Present Value Calculation or Discounted Cash flow
Ways to evaluate Business
1) First, he looks at the business. Is it simple? Is it in an industry that he understands? Is it a high profit margin business? Any Debt? What is its return on equity?
2) Then he looks at its managers. Are they candid? What are their expansion plans? Are they well financed? How much Business do they own?
3) Then he looks at the market place. What is the business value? Can it be purchased at a discount to its market value?
Finally, wealth building requires that you know the valuation, price or management influence whether you’re buying, you know the management, the competition, and you understand what would be an attractive stock price.
Wednesday, June 18, 2008
Lately I have made 2 purchases with some mistakes on them.
I will blog them down and try not to commit the mistakes again.
Trade No 1: Allgreen ( auspicious name for all my counter to be green green turned haywire)
Reasons I brought
Based on valuation, allgreen at that time NAV is slightly above 1.50 with a dividend yield slightly above 4 percent. Seeing such such an attractive valuations, I have enter positions using technical analysis near the horizontal support of 1.09 expecting some tech rebound off the support line. RSI indicates that it is overly sold and stochastic has signals for price to go up but MCAD doesn't has any obvious signal.
Good news popping out in sluggish sector!!!
Demand in the property sector showed signs of weakness in the 1st quarter. This sector has been sluggish since July 2007 due to government introduces development charges on project and soaring materials.
However, lately, our Government had planned to relocate some of its agencies and statuory board out of the CBD vicinity to increase office space and NDB is going to release the news of masterplan in the night where all the developers were excited over it. Seeing the severe drop of stock prices since july high, I believe it is trading at a discount now and was optimisstic over the new masterplan results which would benefit the developers and drive the sector up.
But things didn't turn out well... the masterplan deliver no surprises to the developer and does not have any positive impact. The stocks prices then plunged to 0.99 breaching $1 support before rebounding above 1 and stayed there. I have decided to hold the counter till the next property boom which I hope to be within the next four years.
Mistakes and Reflections.
Although the valuations and technical charts are attractive, I should not have ignore the overall general market sentiment and the property sector which happens to considered the second weakest sector other than finance.... Now have to bite onto my fingers and pray it would fall back to 2003 -2004 prices.
Trade No 2: KS Energy ( The counter that never fails on me)
Well not really a big mistake on this just that i had entered slightly earlier even though I anticipated RSI will hit 30%. However seeing the price is at the lower band of bollinger band and near horizontal support and the mid term support line brings on temptation to make the purchase.
Things to note here will be wheather the 50 days Moving Average will hold. best entry would be after testing the moving averge.
Macd going to cross soon, looking to add more positions tml.
Friday, May 23, 2008
This stocks has been beaten badly, I feel that it has 'vomit' enough and is seeking some recuperation. For traders, I believe good entry point should be @ 1.6 and exit in the range of 1.68 to 1.70. Futherupside is expected when there are hugh vol near 50 Day moving average.
Do cut losses when 1.57 is breach unless of course you wish to hold.
Similar charts to this are Kim Eng and Starhub
My current watchlist:
GK Goh current price 0.99, 20 cents below NAV.
Tathong @ 2.21-2.23
Posted by Noob-trader at 2:56 AM
Tuesday, May 20, 2008
Perhaps it is because we understand more at a younger age these days; perhaps it is because we are allowed to experience more than we once could have; or perhaps it is because the world is getting smaller and our horizons are getting wider.
Whatever the reason may be, more and more graduates believe that they should...no, need to know exactly what they should do with their career once they leave university. Because many of you do not, you feel you have to "do" something else to help you find your way before you hit the job market. Whether it is taking a year out to travel, doing a Masters degree or volunteering to save the turtles in Venezuela, the reality is you probably will not be any wiser as to your future career.
But before you throw up your arms in exasperation, let me tell you one truth...most people never know exactly what they want to do with their lives when they leave university. Your parents probably did not, your uncles and aunts may not have had a clue, and I surely did not too! It is okay to be confused.
It is okay to be at a loss as to the kind of job you should take on when you leave university for the first time.
When I left university, I had a job in hand with Shell as a Finance graduate. I took it because it was the only job I interviewed for and heck, it was Shell! So I took a leap. My career journey since then has taken me through four career moves in six years but I have definitely enjoyed my ride in between. At 28, I can say I've found the perfect career in a great company that I might stick around with for a while - because I finally understand who I am and what makes me happy career-wise.
Your first few years out of university will be a process of discovery. You might get a job that bores you, is completely out of joint with your style or is in a field that does not engage you. Remember, you are not stuck in one job forever. When you have less obligations to deal with - being married with children, for example, IS an obligation - you have more leeway to make a few career mistakes. It only becomes a negative mistake if you do not learn from it.
Your career is one long journey that starts with your first job. At each job, you will learn new skills and enhance the ones you already have. These skills may not be specific knowledge in, say, database management or medicine. But they could take the form of project management, client liaison or business development - skills applicable in whatever field you are in. You also learn more about your own work style preferences - Do you like to work in a team or independently? Do you have a knack for managing financial numbers?
As you go down this journey, your skills base will build and you will understand your work style better. With each step in your journey, you will be able to focus your career path a little better because you are gaining real-life experience in a working environment. Taking a year out is great to experience life and challenge yourself as a person in different situations, undertaking a Masters will develop your knowledge in a specific field and keep your student lifestyle of studying and partying one or two years longer, volunteering to save turtles will contribute to the earth and your tan line. But if you're looking to figure out what you want to do with your career life, it is unlikely that you will find it doing these things. To get this kind of clarity, it takes a few years living your career journey, making choices, and learning from your successes and mistakes.
One day in a few years, you will wake up and be excited about work because you are doing exactly what you wanted to do. Trust me, when that happens, it's a great feeling!
by Koon Mei Ching
Okay, so its fine to be lost over what a person wanna do but to actually be able to find what a person really wants, the person will need to job hope into a few job to gain exposural. The good point is one get different experience but the disadvantage is they will suffer paycut when they jump to a different field... Haiz "One day in a few years", this quotation is subjective as most people don't actaully find what they like till the end of life...