Friday, March 26, 2010

On myself and my journey for value investing

I am a self confessed cheapo, buying things banged out of favor and cheap. My first counter was Keppel Corp (Singapore listed) when i was in secondary school or high school equivalent. The counter was on my parents account. Back then I started with charts and all as I leaned towards the numerical side. It was 1998/9, I was 14, that was before the stock split and it subsequently doubled thereafter. My thoughts on it:
  • Firm is one of the largest rig builders in the world
  • Strong FCF (I did not have that strong a grasp on financial statement analysis yet)
  • Rig cycle was in a uptrend then
  • Strong buffer from non rig businesses such as property, telcos and tech
  • Charts were showing long term up trends
But Alas, I do not have the gift of persuasion/gab and the counter was sold prematurely.
My read on value started a year after, I noticed charts failed to capture certain situations due to the following reasons among many others. 
  • Sudden catalysts (news flow, unleaked corporate information)
  • Special situations (Indexing, spinoffs etc)
  • Quality of management especially when theres a change
  • Poor firms with poor ROI but massively giving dividends or share buybacks
  • Firm Intrinsic value as charting is based on last/relative price (value takes time to unlock)
  • Low float / short-ability of stocks affects the price movements but not the value
I went to read the usual value literature, emptied the libraries for those books. Graham, P.Fisher, Lynch, Seth. After a while, the concepts were more or less similar and I experimented with unconventional literature like Dreman, Oneill, Greenblatt, Fishers, Stark.

From equity, i also went into credit and noting what the professionals were doing or have done in the past. Reverse engineering works but requires enormous amount of effort and the mindset has to be flexible to fit into that certain time frame. I don't know why it is so, but i love to read, to learn and to apply. Somehow, investing provides a fertile ground for this.

One thing i noted is that reading non investment books and leading a life not bent on finding ideas will often lead you to ideas. But the most important takeaway - Learn and share (process is self enforcing).



Excellent value investing.

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