Never Run Out Of Investment Ideas with "The Magic Formula"!

techniques Apr 04, 2018

By Puah Soon Lim

 

Joel Greenblatt made his name running Gotham Capital and he made a lot of money doing it with annualized returns reported at 50% annually. He also wrote a very popular book “The Little Book that Beats the Market” which he shared in some of the public talks. He has the intention of teaching his children about investing and also to let them gain some insights into what a hedge fund manager does for a living. He wrote: “If you can’t explain the concept to a three-year-old, then you really do not understand it”. That is why I enjoy his book so much, and I have been recommending “ The Little Book that Still Beats The Market” in a lot of my talks. Greenblatt has a knack for explaining a complicated concept and distill them down to easy to understand snippets.

The central theme of the book is  “The Magic Formula” which is essentially a ranking system that he developed...

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Benjamin Graham's Net-Net Stocks

techniques Mar 21, 2018

By Puah Soon Lim

 

Cigar Butts Anyone?

Recognized as the father of securities analysis, Benjamin Graham argued for investing in stocks that were significantly undervalued relative to their intrinsic worth. Among the most widely adopted strategies of his is the cigar butts approach (also known as the Net-Net approach). This strategy alone brought him high profits in the 1930s to 1956. Buffett also successfully implemented this strategy during his Buffett Partnership years from 1956 to 1969.

The key measure of this approach is the ratio NCAV/MV which is the balance sheet current assets minus all the firm's (current and long-term) liabilities divide by market capitalization. Long-term assets (e.g. intangible assets and fixed assets) values are not counted. An undervalue investment will be one that has an NCAV that is above the market capitalization of the stock. In his classic book The Intelligent Investor, Graham recommended for a margin of safety to be built into this...

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Three Key Takeaways From Budget 2018

general Mar 07, 2018

 By Puah Soon Lim 

 

It is that time of the year where we pay attention to what the Budget will bring to the investor. There are many analysts who scramble to put out research report to try to translate the slew of adjustments to taxes and government scheme into how it will benefit specific industry and individual company.

Here is my attempt at interpreting the three most important things investors need to know about the Budget 2018:

1. Impact on stock market

Do not think that the $700 million bonus is going to affect the price of your stocks in any way. There was quite some analyst who thinks that the baby bonus handout of $700m is going to affect consumer plays like Genting Singapore, Sheng Siong, Dairy Farm International, Jumbo Group, Courts and FJ Benjamin. I am skeptical that it will create much of an impact. Just imagine the $700 m being distributed onto the revenue of these retail consumer play. It is really a drop in the ocean. There are simply too many...

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How to start to "do your homework"?

techniques Feb 22, 2018

By Puah Soon Lim 

 

Some twenty years ago, while sitting in front of my Bloomberg terminal, I remarked to my colleague sitting beside me that “doing your homework” is tough for an investor. Back then, I was already working in the finance industry for a few years and with my Accounting knowledge from my undergraduate days, and CFA Program, I was still grappling with “doing my homework".  

My colleague, who was a veteran bond trader, agreed wholeheartedly. He remarked, “Young man, you have a lot to learn.” Since then, I have always wondered how the rest of the retail investors cope with this task of “doing their homework.” 

Since then, I have always wondered how the rest of the retail investors cope with this task of “doing their homework.” We are advised by the experts to do our homework, study the report, and arrive at our buying and selling decisions. That is fine for some, but in my...

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A New Beginning

general Feb 01, 2018

By Puah Soon Lim

 

7 Oct 2017 was the date that I sent out the last copy of The Eggs N Tennis Balls Newsletter. I started this newsletter in the year 2013 on the urging of my clients who have been receiving them on a weekly basis. The intention then was to reach out to all those who followed me in my talks to quickly and easily get up to speed with what is happening in the financial market without following the news in the financial press. One could just spend a glance at the market barometer in the newsletter and quickly know whether this week’s market is in advancing mood or declining mood.

There was a summary of the market and a quote and a picture of the week segment. I told my newsletter subscribers that just by spending five minutes to go through my newsletter would keep them informed of the events that have unfolded in the week.  I also included links to articles which I have come across during the week which I felt would be beneficial to...

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