GiraffeValue

[wintersonata1234]

It has been quite a while since I last posted. Two blog post for you today.

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Thanks Giraffe. Where is the link?

 

[GiraffeValue]

Oh **** don't know why the text all gone.

Kingboard Copper Foil – Graham Net-Net or Schip Net-Net-Net?

http://www.giraffevalue.com/investing/pec-ltd/

15 Criteria For Deep Value Stock Selection

-Low P/E – the lowest of 20-30% of SGX stocks (use EV/PBIT if possible)

-Low P/B – the lowest of 20-30% of SGX stocks

-Low/No debt

-Dividend Yield – good to have

-Low/No cash burn rate – best is to have increasing cash flow year after year.

-Insider buying/Regular share buyback – if not then at least no serious selling by its management

-Hold a basket of at least 20 stocks

-Portfolio re-balancing (Yearly)

-Strong balance sheet – hard assets like property and land are great, high cash reserve is awesome, high receivable – must be extra careful. Never reduce its total liabilities. Pay special attention to disclosure note particularly on hard assets.

-Google or visit forums like ValueBuddies – to check whether are there things that you have oversight, and discern whether is it just noise or concern.

– Equally-weighted portfolio – to prevent making the mistake of favoritism towards any particular stock

– Knowledge-cost averaging – lump-sum investing fails when the stock price going down, dollar-cost averaging fails when the stock price going up. Knowledge-cost averaging wins in both ways since it’s based on the idea of monthly investing plus accumulating of knowledge. DCA investor will keep buying even though the valuation is stupidly high, whereas KCA investor would have accumulated enough knowledge to tell that valuation is high and it’s time to exit or at least not making panicky mistakes .

-Keep a record of your holdings and transaction – it’s completely pointless to say you make 4 digits, 5 digits or even 6 digits without making reference to your “risk” capital invested. The most basic at least record the date and amount of buying/selling transaction in your Excel, and use “=XIRR” to compute your annual return.(google XIRR for more info).

– Be mentally prepared your portfolio value may fall 20-30% at any unexpected event, and 50% or more during global financial crisis. Statistically speaking(low p/fundamental vs high p/fundamental) it will be more resilient than blue chips stocks. Not mentioning that blue chips are more speculative in nature than low cap stocks.

Just think about it if you are a trader/speculator would you trade a low cap stock that you have never heard of or Singtel, or Apple, or Google? You will definitely choose the one that is the most watched, the most liquid stock of all so that you can get in and out easily.

You may not agree but the higher the quality of the stock is, the more speculative it actually is. And as a long term investor this is very bad for you.

why?

Just imagine for a moment that you are investing for a long term on a stock that filled with many participants, largely make up of traders/speculators that playing the game of who-can-be-the-first-one-to-hit-sell-equal-win, and never forget there’s also another batch of professional managers who are using sophisticated trading model that making short-selling bet against you.

Those are not even the worst, the worst is that those traders/speculators/managers aren’t even human! They are bots/algos like the one we saw in movie terminator. They are programmed to sell at lightning speed before the price quote even reaches your broker screen. Unless you were John Conner who can lead a resistance team of long term investors to fight against the bots/algo, even so your chances of surviving is still very slim

Oh… No no no no. It’s all wrong. ****, even John Conner is terminator!

-Ignore Schip

-Ignore stocks that have a history of doing regular rights issue, warrants and private placement.

 

[GiraffeValue]

Asia Enterprise, another net net stock.

NCAV: 0.283 [Mkt is trading at 29.38% below NCAV]
NNWC: 0.227 [Mkt price is trading 12.02% below Ben Graham NetNet]

Full write up over here

Conclusion:

Do keep a lookout that there is a 2Q15 Net Loss Of (S$470K) Vs 2Q14 Net Profit Of S$699K. The price did drop to 0.185 on early Aug, but now has rebounded back to 0.2(I don’t quite bother on this actually).

My value investing uncle has written a short post on his blog (NSFW), he takes a more qualitative approach. You may like to read up.

I like its low EV/PBIT of 4.72(2014 fig) and trading under its NCAV and NNWC. And also its pretty decent dividend yield. Their generosity on paying dividend as well. Despite of their declining net profit, their dividend has actually increased. Some have even suggested that this is a clear sign of company is returning its assets to shareholders.

My take is if it happens that is great. A good way to unlock the value. However, I would not buy a stock based an expectation like this. I buy it because it forms a good part of my portfolio as one of the ugly little monsters.