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Showing posts from November, 2020

Baby steps in Asset Allocation for a Value Investor

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Fundamentals 05:  Basics on how to allocate your net worth to several asset classes from a value investor's perspective. The article was first published on 29 Nov 2020.  I have since updated it so that there is a clear “how-to” section as part of section 1.  Revision date: 14 Feb 2021 "You should have a strategic asset allocation mix that assumes that you don't know what the future is going to hold."  Ray Dalio   You invest your savings to protect the purchasing power from being eroded by inflation. You grow your wealth at the same time. If you know which assets will give the best return, you would be an idiot not to put all the savings into this one asset. In reality, you do not know how the future will turn out so you spread your savings into several asset classes.  You hope that if one does badly, the others will do well enough to more than offset the bad performance. This is asset allocation.   There are two goals in asset allocation: How to achieve returns u

Is White Horse a Value Trap? (Part 2 of 2)

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Value Investing Case Study 06-2:  This 2-parter is on the fundamental analysis and valuation of White Horse Berhad.  Part 2 here focuses on valuation and risks White Horse Bhd (White Horse or the Group) is cheap with a market price of RM 0.60 per share (as of 2 Nov 2020) compared to its Book Value of RM 2.63 per share (as of 30 Jun 2020) But how can you tell that it is not a value trap? Many will say that the Group has made losses for the past 2 years and the current year is likely to be another loss-making one. There are also those who will say that the share price has declined from its 5-years peak of RM 2.18 and is likely to remain low due to the projected losses. I would contend that comparing the current price with historical prices is not the correct way to assess a value trap.  Any comparison should be made with intrinsic value. Join me in Part 2 of this series as I present my valuation of White Horse and argue why it is not a value trap.  Now as to whether you should go an

The Basics Of Valuation - Picking out Value Traps

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Fundamentals 02: A framework for analyzing and valuing companies.   This post was originally published on 28 May as "The Basics of Valuing A Company".  This has been updated to include among others special situations in valuation.  Revision date: 15 Nov 2020 "Price is what you pay, value is what you get" Warren Buffett 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 value 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. At the same time. you have to be wary of value traps. How do you tell what is cheap for a reason (a value trap) vs what is undervalued (a bargain)?  Valuation is the key to picking out value traps. There is no one answer to what a company is worth. You have to triangulate from several angles. Yet

Is White Horse a Value Trap? (Part 1 of 2)

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Value Investing Case Study 06-1:  This 2-parter is on the fundamental analysis and valuation of White Horse Berhad.  Part 1 here focuses on the company analysis White Horse Berhad (White Horse or the Group) is the leading tile manufacturer in Malaysia that is currently trading at RM 0.60 per share (as of 2 Nov 2020). This is much lower than its Graham Net Net price of RM 0.76 per share (as of 30 Jun 2020). The Graham Net Net is often taken as a proxy for the liquidation value.   Even if White Horse is liquidated at RM 0.76 per share, there are still the fixed assets of RM 1.87 per share (as of 30 Jun 2020) available for the shareholders. Is the market suggesting that all the fixed assets are worthless?   White Horse is definitely trading at a low price relative to its valuation.  Is this a value trap? It is only a value trap if the valuation is wrong. In this 2-parter I will lay out my case why I think White Horse is not a value trap.  I present Part 1 here while Part 2 was publi

Digital marketing - Did Malaysian Property Developers seize the opportunities?

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Case Notes 05:  This article is about using website performance as a proxy in assessing the extent to which Malaysian property developers have embraced digital marketing.  Many Malaysian property developers have turned to digital marketing because of Covid-19. “Digital marketing is the use of the internet, mobile devices, social media, search engines to reach consumers.” Investopedia The centrepiece of all digital marketing activities is the company’s website.  “Your website is the key to a successful digital marketing strategy because all other digital marketing elements direct guests to your website." Digital Marketing Skill Institute There are many ways to assess how far companies have embraced digital marketing.  Given its central role, the first step is to look at companies’ website performance.   One way to assess this is to compare the website domain score and organic traffic.  As an investor, you want to know how far Bursa property companies have adopted digital marke