We are going through a period of high inflation; this is something we have not seen in decades. What are the characteristics of businesses that are more resistant to inflation? Here is a list of the characteristics: Companies that can raise prices Low capital intensity High Gross Profit margin Companies that can Raise prices Companies … Read more
This week, we touch on intangible investments. Bandung is a traditional drink in SouthEast Asia made from rose syrup and sweetened soy milk. The following case study compares the challenges of measuring profit between our humble Bandung stand against a newer, service type business, say, technology. For our Bandung stand, there are 2 … Read more
We met Pat Dorsey in Singapore during pre-covid days when he publicized his book– The five rules for successful stock investing. We find a lot of common ground with Mr Dorsey’s thoughts and we’d like to share some of the learnings that we picked up. Moats refer to entry barriers or a sustainable competitive advantage … Read more
There has always been a debate on growth versus value stocks. Both of these broad classes of stocks have taken turns to outdo each other over various periods of time. Why not focus on quality instead of trying to time growth versus value? Quality stocks have strong balance sheets, high returns of invested capital, and … Read more
Assuming we bought high PE stocks 10 or so years ago with perfect foresight of their financial numbers, were they overvalued or undervalued at that time? Can a 25x PE stock be good value? Most traditional value investors would stay away from a 25x PE stock. How to Value Companies Let’s start by figuring how … Read more
Warren Buffett’s philosophy is investing in companies with a established record of success. In this video, we define great companies as those that deliver high owner earnings relative to the capital invested. Does it make sense to invest in these types of companies? Let’s check it out. To keep things simple, we’ll use cash flow … Read more
Improving Decisions Decision making is noisy when there’s a high degree of variability. When different radiologists analyse the same X- Ray, their diagnosis vary. Likewise in areas of medicine, law and finance, there are divergent opinions when experts are presented with identical data. Worse still, when the same data is presented to the same expert … Read more
Here is a short video explaining why markets are not rational at times. Anchoring is one of the most common mistakes people make in investing. Transcript of the video follows below. Behavioral Economics combines insights from psychology, judgement and decision making with economics to generate a more accurate understanding of market behavior. Traditional economic and … Read more
Our job is to twist the theories to fit the facts, not the facts to fit the theories.
We investors have a preconceived idea of what stock price a company should trade at. Sometimes, these ideas relay on irrational assumptions. With these “false” assumptions, we hesitate to allocate more of these stocks into our portfolio. Learn how we overcame our initial hesitancy to invest in TSMC.
Dividends are a recurring question from investors. You know, “XXX is a company with a high dividend yield. Should we invest?” This is not the real question. The question is whether high dividend yielding stocks make good investments. We believe that when investing in stocks, we should focus on the total return. That means share … Read more
Father with 80 Kids Assume a father has a family of 80 children (let’s not get into the details of how he fathered so many) How would his attention be divided among the children? The kids would all be competing for the father’s attention. Being human, his attention would turn to the ends of the … Read more
Old lady (Mdm Lim*) with modest means passed away at 90 years old donated 6mil to charity. Where did she get the money? She had a modest job as an admin assistant and lived a simple life. If you walked past this lady in a Chinatown market you would never believe that she was a … Read more
Behavioral Economics is the relatively new field of combining insights from psychology, judgement and decision making with economics to generate a more accurate understanding of human behaviour. Much of traditional economic and financial theory assumes individuals act rationally and consider all available information. Behavioral economics seeks to explain why people make decisions that are not … Read more
COVID has brought about many changes and challenges. Workplace changes and its challenges Work is not the same again now that you can get away from long haul flights and carry on business with Teams / Zoom calls. Work from home has also introduced Zoom fatigue. Where we used to plan travel buffer time between … Read more
The Half-Life of Facts by Samuel Arbesman Changing your opinion when the facts change sounds easy. But it turns out to be incredibly hard in practice. I finished the Half-Life of Facts recently. It’s a quick read and discusses how facts change all the time. Samuel Arbesman is a mathematician and scientist. Nonetheless, his observations … Read more
This is a sample of headlines clogging our spambox. The premise is that a second wave of infections is coming, leading to a second round of lockdowns. The lockdowns will lead to continued job losses, GDP contraction and thus poor returns for the stock market. The logic is intuitive. Is there a link between GDP … Read more
Charts like this are prevalent on social media. The dichotomy is false. We subscribe to Buffett’s view that growth and value are joined at the hip. We are value investors in the sense that we hope to buy low and sell high. Nonetheless, our circle of partners and friends gravitate to the cheap stock style. … Read more
In case you missed it, the massive rally in the US stock market has led to views that the stock market is too frothy. We’re not in the business of forecasting stock market movements. Indeed, we can’t tell if a correction is due in the coming months. However, we can study the available data and … Read more
Review of the 1st half bull market
