Today, i'm attending a value investing seminar in NTU, held by the Investment Academy Club and the trainers consist of Paul Chen, Pete, Resh
The focus is on Warren Buffet style of Value Investing.
1. McDonalds (MCD) as Case Study
- Derive revenue from customers that buy food (model: Ask for Upsize)
Stock market, in the short term, is influenced heavily by emotions/ demand & supply
2. How to determine a Good Company?
- Operating Cashflow
- Pricing power
- Industrial Changes
- Scale-ability
- Debt?
3. Moats
Moats are like the water region surrounding a castle, safeguarding it from dangers.
- What & where are the products and services
- Will it be here for the next 10 years?
- Intangible Assets
# Brands, Patents
- Pharmaceutical
- Efficient Scale
# Industry so small to compete; such as airport
- SGX
- ST Engineering (Niche Market)
- Network Effect (Makes the product better)
# Grab, Uber
# Credit cards/ Banks
- Switching Costs
# Adobe software
4. Risk
Important Goods vs Harmful Goods
If you were to invest in a random country...
- Look for beer companies
- Lockheed Martin?
- British American Tobacco
Regulations can affect a company, avoid these companies if possible
Inflation Risk
Pricing power
- McDonalds can increase price easily
- Airlines lack pricing power
Cost Strategy
Diaso/ Value Dollar
Luxury hotels, Ferrari, LV
Case Study: Coach
- Growing company
- Decided to go to outlet stores
- Led to Brand dilution
- Lose customers
Science & Tech
Buffet thinks technology companies change too fast
- Businesses that require developing new products have risk
Case Study
Dow Jones Index: Kodak
Steven Sasson- Introduced digital camera but shut off the idea.
1989 - developed DSLR
Resistance to change killed Kodak
Facebook - Worth investing?
- Sceptical
- Are you confident it will still be around?
- Changed everyone's life: Provides news, advertising, host group chats, company profiles.
Key People Risk
"Invest in a business a fool can run because one day, a fool can run it."
AKLTG - Adam Khoo
If your business has your name on it, it will be discounted at 30% off.
2 most important days of your life
- The day you're born
- The day you find out why
Mechanics
Try out MorningStar for stock information
4 kinds of Companies
Stalwart - Big, reliable, slow growth
Fast Growth
Slow Growth - Dividends
Cyclicals - On cycle
Fast-growing Stalwart: Facebook; Alibaba
Cash is King
- Different to manipulate Cashflow
- If profits consistent but cash from operating is negative..
# Bad collection policy
# Fraud
Look at Operating Cashflow
ROE above 15%
Conservative: Low Debt/Equity (Less than 0.5)
- But interest coverage high?
#Happens when shares are low but debt high, income can cover debt (Banks)
You will never make money if you only buy Good Companies.
* BUY GOOD COMPANIES AT SENSIBLE PRICES
3 Types of Business
- Growth
# PE < G
- Dividends
#Div Yield > 5%
* BUY Good Companies that pay CONSISTENT Dividends
- Asset Play: Buy at a discount (Banks)
# PB < 0.8
PIEC Analysis - Profit, Inflow, Efficiency, Conservative
EPS consistency
Positive OCF
ROE > 15%
D/E < 0.5
Investment Thesis
1. Good Company
2. Economic Moats
3. PIEC
4. RISK
5. Valuations
Margin of Safety
MOS: Intrinsic/ Current - 1
