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Showing posts from May, 2020

How To Mitigate Against Risks When Value Investing

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Fundamentals 03:  Risks differ depending on the type of assets and investment style.  This post looks at risk and risk mitigation from the perspective of a stock-picking value investor.  Revision date: 22 Aug 2020
When you invest in equities, the goal is of course to get a better return compared to keeping monies in fixed deposits. 
Unfortunately, the returns from equity investment are not guaranteed.  There will be times when you will make less than what you can from fixed deposits. 
Worst still there will be times when you lose all your investments. The challenge is how to mitigate against them.
There are 2 schools of thought when it comes to risks Those that treat risk as some form of varianceThose that consider risk as permanent loss of capital
This post is about how to mitigate against permanent loss of capital. This is because I look at investments from a long-term perspective. Any variance is a paper loss or gains that I do not worry about.
BTW, this is not some textbook treatise. Rat…

The Basics Of Valuing A Company

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Fundamentals 02: A framework for analyzing and valuing companies.   Revision date: 19 Aug 2020


Everyone loves a bargain. If you are offered a price for something you want that is at a significant discount to what it is worth, I am sure you will be thrilled. 
This is the heart of investing – to buy an equity stake in a company at a price that is at a discount to its value. The question then boils down to how to determine what the company is worth.

There is no one answer to what a company is worth. You have to triangulate from several angles. Yet you want to keep it simple so that you do not lose the forest from the trees.

Big picture. Simple yet insightful. Come from several perspectives.

To do all of these you need a framework. I have one that came from many trials and tribulations.
Contents How I approach valuationGetting a sense of the company's performance from the valuation resultsAnalyzing Asset ValuesAnalyzing Earnings ValueWhat do I assume in my valuation?Pulling it all together

An Introduction to Value Investing - confronting value traps

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Fundamentals 01: Originally published under "An Introduction to Investing in Listed Companies".  Cover issues to consider when investing.  Updated to include notes on how to analyze companies and other value investing tips. Revision date: 18 Oct 2020


If you want to invest in listed companies from a value investing perspective, but do not have the time or knowledge to analyze and value the companies, join me as I share my analysis and valuation of such companies. I hope to short cut your learning journey. 
As a value investor, you would be investing when the price is at a significant discount to the intrinsic value. The question then is whether your assessment of intrinsic value is accurate. If your valuation is wrong, then the stock is really cheap for a reason and you have a value trap.But if your assessment of intrinsic value is correct, then you have a bargain.
From the above perspective, value traps and bargains are two sides of the value investing coin.
More importantly, val…

Definitions

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Fundamentals 00: Definition of key terms used in the blog


While you don't need to be an accountant to understand my blog, there are some terms that I use throughout my analysis that are "technical jargon". Many terms come from different disciplines and may not be familiar even among accountants. That is why I have described them here.

As a person with a quantitative analysis background, I am very comfortable working with numbers. This has proven to be a blessing in my investing journey as I don't' get hung up on the numbers but instead see them as part of a company's story.

Along this line, I use many indicators and metrics that are computed based on information extracted from the company's' financial statements. The list below also provides an overview of the formula behind the various indicators and metrics.

This list is not meant to be exhaustive. I don't want to repeat what is readily available online so I have tried to keep the list short. Howe…