Conviction #3: There is always more than one view - often times an exact opposite one

convictions Jan 26, 2022

Have you ever keyed in your order and about to click submit and started to have cold feet and pressed the cancel button instead? The thoughts go like this for me, when I look at the order book, I can see that someone is selling at the same pricing level that I am trying to buy. In fact, there are equal numbers of buyers and sellers on each side. Think about it this way, every last done price that you see represent a buyer who thinks the stock is going up and a seller who thinks it's going down. What's really interesting is that institutional investors today account for a large percentage of the trade in all major exchanges globally. In other words, there is a high chance that your counterpart may be a professional(a hedge fund, mutual fund, arbitrate desk or even program trading) instead of an amateur. It's unnerving to think that these professionals have an opinion that is different from yours.

Buy, Buy, Buy - The tendency of the sell-side to give a "buy" recommendation.

Another...

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Core Conviction #2: Doing Your Homework is Overrated

core convictions Dec 17, 2021

Have you ever received a recommendation from your advisor, investment guru that you followed, a friend or someone you trust about a specific stock that he thinks is about to move? And he claims the company is doing these amazing things, and it's a rare opportunity. You dug up the information yourself to verify. You bought some shares of the company and, it happily goes up after that. But then it starts to go down after a while, and it gets lower and lower. Your trusted "adviser" (could be your brother or sister) keeps telling you all the reasons why it shouldn't be. The thing is that all the good things you hear about the company may turn out to be true. Both you and your trusted "adviser" have done your homework diligently. But here is the point: there is a disconnect between what you know and what the market knows, and as a result, the share price of the company that you research may not react to what you expect. This often leads to confusion and frustration, not to mention...

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Investment Books That I Recommend

books Jan 19, 2021

I have often been asked in my investment class what book should a beginning investor read to improve investment knowhow. Here is my booklist.


These are books that I feel are written by authors who are not only gifted in this pursue of investing but are also willing to share with us their wisdom.


There are classic that I am reluctant to throw away and they include titles like The Intelligent Investor, A Random Walk Down Wall Street, The Little Book That Still Beats The Market and Winning The Loser's Game. My bookshelf is stack three-level high on many of these books that I am reluctant to throw away.


So here are my recommendation organise in three categories:

Category 1: Highly Recommended

The Intelligent Investor by Benjamin Graham
The Little Book that Beats the Market by Joel Greenblatt
Winning The Loser's Game by Charles D Ellis
Warren Buffet's Annual Letter Archived at www.berkshirehathaway.com
The Essays of Warren Buffett by Lawrence A. Cunningham
Margin of Safety by Seth A. Klarman
...

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A Financially Empowered Person

concept Dec 21, 2020

According to the Merriam-Webster dictionary, to be empowered means having the knowledge, confidence, means, or ability to do things or make decisions for oneself.

When is the last time you feel the true meaning of the word "empowerment"?

For me, I felt it many times in my life. For example, the first time that I learn to ride a bicycle, the first time that I learn how to swim and the first time that I got my driving license. Those were skills that I pick up that I will make me experience life in totally new ways. I know I could go to different places. I feel a sense of hope and real accomplishment. Most of all, I gain confidence in doing it. And the more I engage with the skill sets, the better I become.

Just a few weeks ago, I was reminded again how empowerment looks like. My son just finished his PSLE examination, and like all kids in this generation, he likes to play with his mobile phones. My wife and I are concerned that he is simply spending too much time on the mobile phone....

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Making Better Choices

concept Dec 18, 2020

"Life is like a multiple-choice question; sometimes, the choices confuse you, not the problem itself." ~ Anonymous

Have you ever attempt a test in a multiple-choice question format? Do you notice that those who finished the test early tend to be the one that ace the test? You might be one of them at some point in your life. When you are competent in the subject tested, the answer jump at you. You will find the test effortless. And yet, within the same test itself, there are probably others who took a bit longer and still come out failing it. Same test, but the knowledge level differ quite a bit. There are some investment skills here that we can learn from the MCQ test. The most important skill is that of working the odds and thereby making better choices.

Let's say you attempt a question with four choices, and only one of them is correct. The odds are one in four that you will choose the right answer. That is assuming that you know nothing about the subject.

But once you know...

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What does it mean to have better awareness in investing?

concept Dec 04, 2020

With better awareness comes better choices. Better choices lead to better results.

The above sounds like the quote from Spiderman -- With more power comes responsibility.

The Better Awareness - Better Choices - Better Results quote, I learn it from my superhero, Robin Sharma. I first read about it in the 5 AM Club, and I realise that it applies to living our life to the fullest as well, not just to investing.

Let me share an incident on how this would apply in the investing context.

In early 2012, I met a prospect in my office who was looking to invest in my discretionary investment account. The client has been a civil servant her entire life and has just retired at age 55. She has withdrawn her CPF savings, sold her freehold landed property and had an initial sum of $2.4 million to invest. We did not have a conversation on whether there is a need for her to invest. She was business-like, there were no small talks, the discussion straight away was about the return. Specifically, she...

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Core Conviction #1: Nobody Has The Answer

core convictions Feb 17, 2020

The most common question that I get in my speaking involvement at various conferences in the region is: “What is your view of the stock market for the next year?”. It never fails to amaze me how often this question is asked time after time. And then there is the reporter’s request for a quote on what I think explained today’s movement.

 

The blunt reply is “I do not know, and your guess is as good as mine.” That sounds arrogant. But I am candid here. In truth, I am not trying to keep any secret to myself. All that I am saying is that nobody has the answer.

I would even go to the extent of saying that the chimps in the zoo have a good chance of being right as the “savvy” professional. The stock market is complex, confusing, not to mention perplexing, puzzling and unfathomable. This is a theme that I will keep coming back to. And because it is so complex, and nobody really has the answer. There will always be people who proclaim...

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The Implication of Cash Conversion Cycle on Liquidity

concept Apr 18, 2019
 

 By Puah Soon Lim

Today’s post is going to be about a question that I receive from one of my student at the recent weekend class at the SGX Academy. It concerns the CCC and its impact on a company’s liquidity. Specifically, this is the question that she asked:

“My calculations of the cash conversion cycle for Coy A is 179 days and for Coy B is (-74 days).  Does a negative number indicate more liquidity? In this case, is Coy B more liquid than A?”

She did a calculation for CCC and for Company A, it is 179 days and for company B, it is a negative 74 days. She asked “Does a negative number indicate more liquidity?  In this case, is Coy B more liquid than A?”

 

I feel that this is a good question to answer and I am going to answer it in this blog post. You may also write to us at this address and if we feel that this is a good question to answer, I will feature it in my blog post.

Just to give all of you a heads up, I have given two...

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What I Learned About Learning and Investing

behavior Apr 05, 2019
 

By Puah Soon Lim

Today I want to talk about learning. It is a subject that I am very passionate about. When I was growing up, I have difficulty learning. Particularly when I was in primary school. I failed all of my subjects and I have trouble staying focus and I was easily distracted.

Naturally, I have nightmares about taking an examination.  Some of those early nightmares stay with me till today. I still have anxieties attack in my sleep when I have dreams about going for an examination even though those days were long past me. I studied hard in my schooling years but I realized that knowledge doesn’t stay with me when all that I do is studying for an exam by rote learning and not through understanding.

I have already returned a large portion of what I learn to my school teacher and lecturer over the years. But I am someone that embrace lifelong learning. I am still having joy discovering new things, learning new things each and every day.  At the moment, I am...

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How to use Price-to-Book Value Ratio

techniques May 16, 2018
 

By Puah Soon Lim

To test my student's understanding of the price-to-book ratio in one of my investment classes called the “Building Blocks for Value Investing” held at the SGX Academy, I asked the class to guess if a stock's price to book valuation is better to be below one or greater than one.  Most of them were able to guess correctly, but when I asked them to explain why they categorize a stock's P/BV < 1 or P/BV > 1,  all of them have a hard time explaining the rationale. This is a ratio that is more complex than it looks.

In this article, I will attempt to provide more clarity on the price to book ratio and how to use it in your investment analysis. More importantly, as value investors, how to use this ratio as a value screen.

For those who are keen to test your take on this ratio, the eight companies that I used in class are the following:

Noble Group
CapitaLand Limited
Singapore Airlines
Singapore Telecommunication Ltd
Nestle (Malaysia)...

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