Sunday, June 29, 2008


I watched a wonderful movie titled “Wanted” last weekend.

This movie had the philosophical depth of ‘Fight club’ (starring Brad Pitt and Edward Norton) and similarly, it had nothing to do with violence as any review of the movie would have you believe. The underlying theme of the movie is destiny and fate. Is one’s destiny in life determined by fate?

The main character is Wesley (it’s rare that I remembered the names of the characters). An accountant by professional, he suddenly found himself having the talents to be one of the greatest assassins in a brotherhood called the Fraternity. This brotherhood of assassin believes that the end justifies the mean – a theme explored by Niccolo Machavelli’s classic work “The Prince”. The assassins under the Fraternity will be issued a cloth, whose threads lay out a binary code which can be decoded to give the name of the person which had to be killed in order to preserve the fabric of life. Thus, there is a struggle within each assassin as they had to deal with the moral conflict of doing evil for a greater good.

To drive in the point of the main theme, the Fraternity also owns a yarn factory, where threads are woven into cloth. There is a special room where the encoded cloth is woven and decoded before given to the assassins to carry out the necessary. I half-expected to see three old hags inside, spinning threads into cloth. But no, they are not inside the movie, though the similarity in the Greek mythology of the old hags of Destiny and Fate – The Three Fates - is not lost on me. According to Greek legend, these old hags run a yarn operation. One of them spins the thread of life, the second allocates the length of the yarn and the third snips it off. Good and evil is all woven in one’s destiny and nobody can escape it, not even the Gods.

The story then goes on as the irony of it all unfolds. It’s not for me to reveal the ‘destiny’ of the plot in this review.

‘Wanted’ is a combination of the best of different movies – the philosophical depth of ‘Fight Club’, the awesomeness of John Woo’s slow-mo-matrix-like directing style and the hard thumping Ramstein-like heavy chugging soundtrack. In fact, the movie has the feel of ‘Nightwatch’ and ‘Daywatch’ that the main actor of these two movies even appeared in ‘Wanted’. As I was reading this review, I realized that both had the same director!

I’ll make a daring and bold statement – if you like watching ‘Daywatch’ and ‘Nightwatch’, you’ll love this movie even more. Watch it and think about what you’ve done lately to fulfill your destiny!

Friday, June 27, 2008

Not so popular

FY08 results analysis

This is just a brief analysis of popular. Time is too short to analyse too much on a company that I think does not constitute a good business. The report comes from here.

Turnover went up higher in FY08 than FY07, but gross profit doesn't follow through. In fact, gross margin fell from 17.1% in FY07 to 15.3% FY08. However, net profit margin increased slightly from 2.9% to 3.1%. They mentioned that the increase in turnover was mainly attributed to their retail and distribution business, due to more outlets opened in Singapore and M'sia.

Some important business news - they closed down their two english-learning schools and discontinued their school franchise business in Taiwan to minimise the risk and losses given the shrinking Taiwan economy and increasing credit risk in distribution industry. I did notice that their provision for doubtful debts increased from 155k to 370k in FY08, an increase of 1387%. They seem to do better in HK, where two of their pre-primary textbooks were adopted by schools, thus capturing a good market share to sustain their dominant leading position. More discounts were given (hinting you the strength of their pricing power) and more money spent on marketing their books. I think they should continue their pre-primary textbook business. I believe that based on Singapore's strong pre to primary textbook branding, they will do very good in this aspect.

Net margins, though improved slightly (might be just the usual business fluctuations, rather than real improvements), are still very low at around 3%. ROE improved to near 10% though. While current ratios seem healthy, their total debts to equity actually increased. We can see that their cash flow statement shows negative net cash from operating activities, negative investing activities but very positive cash flow coming from financing activities. Looking at it more carefully, there is an increase in long-term bank loan to the tune of $52,267,000 for their new property business. That alone constitutes a huge part of their cash/cash equivalent for the period.

Popular gave a dividend of $0.012 (tax exempt) in total this and last FY. Given last closing of $0.270, that's a dividend yield of 4.44%, constituting a payout ratio of 40%. PE (based on FY08) is 9x.

Thursday, June 26, 2008


I’m in a rather pensive and introspective mood these days. Such days are usually my most creative days too. I remember doing some artwork when my mood is at the worst, perhaps I’ll share with my shareholders here one day.

I’m thinking a lot about the probability and chances since I’m in the midst of reading the book by Nassim Nicolas Taleb’s The Black Swan. Let me ask these 2 questions:

Question A: 90% of residents living in Tanah Merah are rich. I live in Tanah Merah, so what’s the probability of me being rich?

Question B: 90% of residents living in Tanah Merah are rich. I’m going to live in Tanah Merah, so what’s the probability of me being rich?

(Interesting note: I had to answer this question more often than I had to, so I thought I’ll be quite interesting to think harder about it when I was traveling on the bus today)

In question A, the probability of me being rich is 90%. Since I live in Tanah Merah and I’m considered a resident there, therefore I’m subjected to the sample which the probability of 90% is calculated. In 100 different alternate and parallel realities, I have (on average) 90 realities in which I’ll be rich.

In question B, the probability becomes unknown. If one didn’t think hard enough and gives it a fleeting thought only, it becomes quite tempting to think that the probability of me being rich is 90% too, based on ‘statistical data’. But did you notice that that there is not enough information to determine the probability of me being rich? This is quite different if I’m already living in Tanah Merah. In that case, my probability is 90%. Yet if I’m going to live in Tanah Merah, the probability cannot be determined.

Thus, the probability of past data will be changed when a new comer enters the data base. Yet, the past probability cannot be extended to the new comer.

Do we commit the same logical error when we’re chasing after historical results? Did we place too much faith on extrapolating past data to predict the future?

I can think of more such (hypothetical) questions:

1. A fund manager has 90% chance of making good returns, based on past data. If I’m already vested when the probability of 90% is calculated, I’ve 90% chances of good returns (I mean out of 10 alternate and parallel realities, 9 of the realities I had good returns). But if I’m thinking of investing with this fund manager, do I still have 90% chance of good returns?

2. 9 out of 10 adults developed cancer in their lifetime, or a 90% chance of getting cancer in one’s lifetime, based on historical data. Do I also have 90% chance of getting cancer?

3. From past statistics, 90% of people who cross a road get into accidents. I’m going to cross that road now, will I get a 90% chance of getting into an accident?

4. From my records, 90% of my students get A for mathematics after tutoring them. You’re going to be my student, will you also get 90% chance of getting A for mathematics?

5. From past data, 90% of traders fail to make money. I’m going to be a trader, does it mean I have 90% chance of failing to make money?

Don’t get me wrong, I’m not saying historical data are not important and one shouldn’t take a look at them when trying to predict the future. What I’m saying here is that one shouldn’t treat past data as sacred. The future remains as unpredictable with or without a good track record, hence it’s better to be on the safe side when making prediction. Always prepare yourself for the low probabilistic outlier event (a.k.a. black swans).

Monday, June 23, 2008

Indulge in a little narcissistic activity

A lazy sunday night, so thought I'll try out a few surveys for fun. Turns out to be quite accurate, despite the seemingly small amount of questions asked in each survey. Don't we all love to find out more about ourselves - we little narcissistic self-lover? :) haha!

What the House Test Says About You

You consider yourself important, but no more important than anyone else. You love attention, but you don't feel like you deserve more of it than anyone else.

You are a fairly community oriented person. You like to get to know your neighbors, but you also like your privacy. You get attached to neighborhoods and cities.

You are a playful, charming, and seductive person. People feel instantly close to you.

You look good in a low maintenance sort of way. You do the minimum required to be attractive.

You are moved by romance and love. You are optimistic about people, and you love hearing about happy endings.

Your Five Factor Personality Profile


You have low extroversion.

You are quiet and reserved in most social situations.

A low key, laid back lifestyle is important to you.

You tend to bond slowly, over time, with one or two people.


You have high conscientiousness.

Intelligent and reliable, you tend to succeed in life.

Most things in your life are organized and planned well.

But you borderline on being a total perfectionist.


You have high agreeableness.

You are easy to get along with, and you value harmony highly.

Helpful and generous, you are willing to compromise with almost anyone.

You give people the benefit of the doubt and don't mind giving someone a second chance.


You have low neuroticism.

You are very emotionally stable and mentally together.

Only the greatest setbacks upset you, and you bounce back quickly.

Overall, you are typically calm and relaxed - making others feel secure.

Openness to experience:

Your openness to new experiences is medium.

You are generally broad minded when it come to new things.

But if something crosses a moral line, there's no way you'll approve of it.

You are suspicious of anything too wacky, though you do still consider creativity a virtue.

You Are a Great Listener

You are the perfect person to talk to.

You are patient, empathetic, and encouraging.

You provide subtle, but important, feedback.

You let people say everything that needs to be said before you weigh in.

Your Dominant Thinking Style: Modifying

Super logical and rational, you consider every fact available to you.

You don't make rash decisions and are rarely moved by emotion.

You prefer what's known and proven - to the new and untested.

You tend to ground those around you and add stability.

So how? Do I have the characteristics of a good investor or a good trader? You might want to try some of these surveys yourself too. Takes less than 2 mins each, but for fun, of course :)

Friday, June 20, 2008

Reflections on my book reflections

This year, I’ve read a total of 28 books (excluding those that I didn’t read from cover to cover). After reading so many, I realized that those selections which interest me are getting lesser and lesser. I used to go to any library and grab a book – chances are that it’ll be interesting enough to carry on reading till the end. But as more of such books had been read by me, I have to be a little more selective.

I recently stopped reading two of Ken Fisher’s books that I borrowed - the most recent one being his famous “Three questions that count”. After reading the first chapter, I already felt bored by his philosophy. The singularity point comes when I did one-third of the book and I decided to stop taking the nonsense I’m reading. Don’t get me wrong, it’s not a bad book seriously, I think it’s just not for me. Some deeper level of conflicts between his ideas and mine prevented me from finishing his books. In a way, Ken Fisher already ‘predicted’ that as he mentioned that even if people are to read his books and predictions, they won’t believe in enough to act on it. Oh well.

These days I go by author. I love Pat Dorsey and Nassim Taleb. I’ll gladly devour any books written by them. I was wowed by Nassim Taleb’s Fooled by Randomness – a salad mix of philosophical, logical, mathematical and statistical story telling. I learned from these authors that stories stay when big ideas are forgotten – a very useful thing to remember in my line of work. Never tell facts – tell stories that wove the facts.

I’m already salivating over his new book – The Black Swan – which is sitting right here on my desk.

Another ‘genre’ of books that I like are those very old books with their ancient fonts and archaic sentence structure. The authors are irritatingly polite and have this circular kind of reasoning, which is all-so-common in that era. However, reading such books still give me a rustic kind of charm, which I liked very much. Don’t be mislead by their ancient-ness, the advice espoused are very much applicable in today’s new era. I suppose there are a few truisms when investing and those that can stand the test of time and hold strong in the face of the vicissitudes and whims of Mr.Market truly deserve to be called ‘truism’.

Am I now a more learned person because of the books I’ve read? It’s hard to say. From a personality test that I took in the past, I’m a fact curator – someone who collects facts and recalls them well. This brings me to another important point. Does reading make one stupid because the thinking had been done for you? Am I getting stupider yet thinking I’m smarter because I’m so educated and read so many books? If the latter is true, it’ll be the most ironic thing – to be intellectually trapped by books. I guess the balance point lies in being open minded.

And I’ve just shown myself to be close-minded by rejecting Ken Fisher’s book :)

Thursday, June 19, 2008

The Bull Hunter – Dan Denning

This book is very meaningful to me. I remember in 2006, me and a friend just went over to DBS building there to just open a DBS Vickers account together (but not joint). After some time, my friend bought this same book and passed it to me for reading. I browsed a bit and realized that this book is not ‘locally contexted’ and hence dismissed it, saying that it’s not suitable for Singapore.

Who would have guessed that years later, in 2008, I was actually looking around in library for this book? I read and found out big my folly is. The book was written back in 2004 but the prediction and forecast are uncannily accurate. It detailed, among other things:

1. The dollar crisis of America
2. Sub prime crisis
3. Rise of China and India (esp China)
4. Rise in commodities like oil, gold, metals, soyabean, corns

I found it amusingly when the guy predicted that oil will one day rise to USD 100 per barrel. You can guess how much the price of oil overshot this forecast by now.

That was back in 2006, when I’m still new and ready to stand in front of a bear charging at me and thought it was a bull. Atlas, even if I had read that book back then, I doubt I would have the maturity and experience in me to really treat this book as it is. That’s life – cest la vie. But life is to be lived forward and understood backwards, so there’s no point regretting not reading the book when fate had thrown it to me earlier.

I particularly liked his insights into China and India. His general rule when investing in emerging markets will be this: Buy the biggest financial, energy/resource, telecommunications companies in these areas and you pretty much had the biggest growth area. I totally agree with him. Looking at china mobile, singtel looks a tad insignificant. M1 or Starhub must be like how Singapore looks like when one is looking at the world map of telecommunications.

The author recommended ETF as a cost efficient and safe way to invest, though he also mentioned that if one is savvy enough, individual stock picking can also be done. The key point here is that bull markets occur somewhere, one just have to open one’s eyes for opportunities. Just like when one place is daylight, another place falls into darkness, bull and bear market will chase each other till kingdom come. The important question when facing a bear market is this – are you investing in the right asset class?

An excellent book, this one is for me. It had truly come one full circle back in the days when I first came to know of the book in 2006.

Sunday, June 15, 2008



Singtel had significant operations in Singapore and Australia, through a wholly owned subsidiary of Singtel Optus. They are the second largest satellite operator in Asia pacific, with international network providing direct connections from Singapore to more than 100 countries. Singtel had major investment in telecommunications industry in Thailand, India, Philippines, Bangladesh, Indonesia and Pakistan, forming the largest multi-market mobile customer base in Asia outside of China.

This is about the first time I saw a local company earnings billions in revenue and net profit after tax – truly an eye opener.

Singtel is the leading mobile operator in Singapore in 2006 and 2007 (I’m sure they are too in the past). Besides being the market leader locally, they are also named asian mobile operator of the year in 2006 – a true testament to its market leadership status. Their red colours are splashed everywhere in the local newspaper and media; it’s hard not to recognize their branding.

Growth prospects

With number portability implemented, there is bound to be a war to win market share. It’s stated in ST that singtel will do all it can to retain its market leader position. I believe with their market clout, they can do that. Regardless of the results, their expenses is bound to rise up as I expected more advertising dollars will be spent to create a perceived difference in the services and plans by the 3 local telcos. If the price war that is bound to happen lasted for a few years (as did Hong kong when they implemented number portability), then all 3 telcos will suffer in profitability.

That being said, singtel having the most diversified operations out of the three telcos, they should be able to weather out this small bump in the local telecommunications scene.


Singtel has growing turnover since 1996. Even during the worst sars period, their turnover increased (though their profit dropped). I suppose that is the good thing about telecommunications industry – everyone needs to use their products regardless of what happens.

CAGR over 11 yrs is 11.4%, CAGR over last 5 years is 12.6% and CAGR over last 3 years is 3.1%. I suppose their heyday of growing turnover in excess of 10% is well over, at least in the local scene. Based on just Singapore’s business segment, a turnover increment of around 1-3% seems reasonable for Singtel in the future – anymore than that, every one of us might have to hold 2-3 handphones by Singtel.

Average operating margins over 7 years is around 38%, with net margins at a very good 28.6%. ROE flunctuates, especially during the hard FY2003, but is around 17% on average. Current ratio of 1.4 on average and a total debt/equity of 0.9 – I think the figures are peculiar to the telecommunications industry with all the high initial capital cost. I need to check these set of figures with Starhub and M1.

Dividends had been increasing, except for the difficult years in 2003-2003. Payout ratio is around 45%, with the latest FY07 having a payout ratio of 50.8%.


Again, I’m just fooling around with numbers. My usual EPS model with zero terminal value, with EPS growth ranging from 10% to 15% and discount rates ranging from 4% to 6%, gives me this table:

I do not know which values to take as an estimate for Singtel, though I know that at last closing of $3.59, it does not seem to have a margin of safety sufficient to guarantee safety of principle and an adequate return. I do not have the price range for Singtel in the troubled periods of 2001-2003. It’ll be interesting to see what the PE ratio during that time. Historically, Singtel trades at a low PE of 8.4x and a high PE of 17.9 times.

Based on last year’s EPS of $0.23 and last closing of $3.59, PE of Singtel is at 15.5x – a tad too high. Dividend yield (based on FY07’s dividend) is 3.8%. It’s too unattractive at the moment. Perhaps when the price drops way below $3, then it’ll be more attractive in terms of dividend. Again, I could be grossly underestimating the potential of Singtel given its branding, since I did not do a more in-depth study of its business model. My feeling is that a sum-of-parts valuation seems more appropriate.

Tuesday, June 10, 2008

HSBC / Citi chart

Monday, June 09, 2008



Vicom is Singapore’s leading provider in technical testing and inspection services. Listed in 1995, they have 4 business segments: Vehicle inspection business, vehicle assessment, commercial/industrial testing and other services. Vicom group consists of VICOM and JIC inspection centres, VICOM assessment centre (VAC) and SETSCO services. VICOM and JIC centre is a one stop inspection service provider. VAC provides a one-stop, post-accident service solution like towing, car rentals, assistance in accident reporting, claims filing, repairs and safety check through its IDAC. SETSCO is the non-vehicular and testing arm dealing with a range of industry.

% of revenue-----------------------------04-----------05------------06------------07
Vehicle inspection---------------------25.7----------29.6----------30.1----------31.3
Vehicle assessment--------------------13.9-----------8.9-----------5.2-----------4.0
Test/inspection services--------------51.4----------54.8----------56.5----------57.9

% of segment results to revenue-----04-----------05------------06------------07
Vehicle inspection---------------------19.2----------29.8---------33.8----------34.8
Vehicle assessment--------------------17.1-----------2.0---------(3.5)----------(0.2)
Test/inspection services--------------18.9----------28.8---------28.6----------28.2

% of market share in vehicle inspection market in Singapore
FY07--------not sure

We can see from the breakdown of margins and revenue by their business segments that their vehicle assessment is not doing too well. Their main business would be from SETSCO and VICOM centres. Their vehicle assessment centre drops after FY05 because of a new ruling that makes it no longer compulsory for motorists to make accident reports at their IDAC (talk about removing monopoly status). But their vehicle inspection business seems to be monopolistic in nature, owning around 75% of market share in Singapore.

Growth prospects

Their vehicle inspection business depended on the price of COE. When COE prices drop, more new vehicles will be on the road, so needing less inspection. Conversely, when COE prices increases, their vehicle inspection revenue usually increases. There is another development with regards to the decline in motor insurance underwriting profits. VAC will play a leading part in this new development, so they say.

Test/inspection services segment might be better in FY08 as the demand for non-vehicular testing and inspection is expected to increase with the construction of the IR and the two cracker plants at Jurong Island and Pulau Bukom. Marine/offshore/oil/gas sector can lead to higher demand too.


I'm skimming through the annual reports, so I admit I didn't pay close attention. Just important numbers to give me a sense of their business.

Revenue grew at a CAGR of 11.4%, with the most recent FY06 to FY07 change of 13.7%. Profit after tax and minority interest (PATMI) grew at CAGR of 20.7%. Vicom has good cash holdings, generates good flow of cash from its operations and has rather low debts. It pays a healthy dividend (not to mention fat) too.

Take a look at their ratios.

* Take note that the 17.5% figure to the right of ROE is not the CAGR. It's the simple average of all the years. My bad.

Gross margins is rather stable at around 22 to 26% and PATMI margins around 16 to 20%. Unless Vicom's vehicle inspection segment improves in revenue growth, I wouldn't expect the margins to improve much. That being said, the profit margin is at a good level. I'll be happy if they maintain this level of margin ad infinitum.

ROE seems to be improving from 14.5% in FY04 to the present 23.2% in FY07, averaging around 17.5%. EPS is growing at a rather slow rate if we discount FY07 results. Since their payout ratio of over 90% makes their retained earnings low, their book value per share also increases slowly. Not sure if they can continue paying such high payout ratios of nearly 98% in FY06 and FY07. Maybe they really don't have any use of their money since they generate such a healthy cash flow.

No signs of insolvency at all, with current ratio around 1.3 levels on average. Their balance sheet is strong, with debt to equity of around 30% to 70%. Coupled with a strong cash flow, this company can easily survive leaner times.


I did a ten year projection of earnings after minority interest and tax, with no perpetuity value, and using a range of discount rate and earnings growth. Personally, I think an earnings growth of 10% and discount rate of 4% sounds pretty reasonable.

Playing around with various discount rates and earnings growth gave me a range between 1.97 to 3.08. Using a earnings growth of 10%, I get a 10 year EPS projection of $0.41 in 2017. Looking at the historical PE ratios between a low of 6.8x to a high of 12.1x, we get a price in 2017 between $2.79 to $4.96.

I'm quite comfortable with a value between $2.21 to $2.79 in ten years investment horizon.

At last close of $1.92, here's snapshot of current market valuation based on FY07:

PE = 12x
Dividend yield = 7.8%
Price to book = 2.7x

To get 15% returns over 10 yrs, I need to enter around a price of 0.50 to 0.60 cts - erm...possible? But that's capital gains. The dividends given out here is the real draw of this investment. Doing a 10 yrs dividend per share projection with no perpetual value using different discount rates and dividend growth rate, here's what I got:

Historical CAGR of dividends growth rate is 50%, with the recent FY06 to FY07 increase in dividends per share of 28.8%. I think with a dividends growth of just 10% at 4% discount rate, we'll get back $2.07 worth of dividends in ten years, which is more than the price per share paid at $1.92 last close. If I still want 15% yield on dividends, I need to purchase at $1.00. If I want 10% yield on dividends, I need to purchase at $1.50.

Note: Comfort Delgro owns 69.68% of Vicom. Only around 27% of the shares are floating around the market, which makes this highly illiquid. The bid spread is very wide as a result, with last trading day spread of 1.880/1.920, with no volume transacted.


Doesn't look like much of a bargain here until it drops to 1.50 or below. Given the liquidity (or lack of) of Vicom shares, I think this is a keep-in-view case. Perhaps I'm overly bearish in the valuation.

Saturday, June 07, 2008

Blood, blood, gallons of that stuff

With Dow dropping a whopping 394 points last night on the fact that oil rises to record level of 138 per barrel, I think we can safely assume there'll be a bloodbath come Monday.

Well, I'll say bring it on!

Do you homework during the weekends and get ready for some serious shopping!

Thursday, June 05, 2008

H&S pattern for PAH

Just to practise a little on my charting :) Here's the chart I for Pac Andes, Hongguo and HSBC.

Wednesday, June 04, 2008

Bully the Bear 1st half FY08 results

Dear shareholders,

I am pleased to announce the half year results of Bullythebear for the financial year ending 31st December, 2008.

It was an exciting half year for Bullythebear, with the many changes to serve our shareholders better. There is a major change in the theme of the website, from the older blue/green background to the present black/red outlook. If the new look irked some shareholders, I will take personal responsibility for it. The reason for the change was outlined in previous announcement, but perhaps it’s a good idea to re-iterate the points here again.

Bullythebear was incorporated in December 2006. The newest change to the black/red theme is the latest change to serve our shareholders better as Bullythebear had outgrown the older template. This is very much in line with the change in business direction as Bullythebear transits from technical analysis to fundamental analysis. No longer is bullythebear concerned about daily market movement and a cursory reading of the posts made in first half of FY08 confirms that.

Here are the results so far for Bullythebear:

In January FY08, Bullythebear hit an all time page views of 13,957, meaning 465 per day. I remembered that when it was first started in Dec 2006, there are only 15 page views if I'm lucky. We have gone a long way since then. Going forward, we do not expect bullythebear to have any breakthrough in page views, but it shall remain consistent around 10,000 page views, with around 6000 unique visitors per month.


Bullythebear used to have advertlets and google, but had since dropped it. It is now a member of Nuffnang's Glitterati club. From the time bullythebear had advertisement till now, it had finally earned enough advertisement dollars to cash out the money! The management hopes that the advertising revenue will flow in at a consistent rate of $10 per month. If it does happen, the management will do certain improvements over the cbox, which is now the central feature of bullythebear. Till then, please support bullythebear by clicking on the advertisement if you find it interesting as it will encourage the chairman to keep doing the good work here :)

That being said, bullythebear will remain a haven for everyone - chartist and fundamentalist alike.


Bullythebear owns a partial interest in several companies. These are listed for all shareholders to see. These are:

1. Pac andes (-21%)
2. Swiber (87.5%)
3. Yongnam (-45%)
4. Yongnam warrants (70%)
5. Singpost (-9%)
6. China milk (-17%)
7. Hongguo (-6%)
8. HSBC (HK listed) (-2% exclusive of foreign exchange)

* the % bracket after each company is the returns exclusive of dividends. It is calculated by dividing the returns if the shares are sold today over the cost of purchasing the shares (inclusive of brokerage of both buy and sell). It is regrettable that the chairman still do not have a good way to calculate portfolio returns but promises shareholder that this inadequacy will be corrected soon.

Up to date, there is a losing shorting trade of yanzijiang early in January, which the chairman vows never to do it again. There is also a divestment in interest in CSC in April and May for reasons already stated in previous announcements. While money has/had been lost, the confidence of the chairman has positive divergence with the amount lost. From a height of 30k losses in the aftermath of the Aug crash of FY07, the portfolio losses had been reduced to 8k to date. This is on a total capital of 56k, meaning a loss of 14% up to date. The portfolio runs on zero debts and has high cash to equity ratios, so it will definitely survive troubled times ahead.

Shareholders meeting

Shareholders meeting are subjected to availability. As the chairman is busy juggling a second life outside of this current one, there are often clashes in schedules. So far, the chairman had met skyalps, jeng, charlesming, casanovakid and dream.

We would like to thank all shareholders for continuing to believe in bullythebear and to actively participate in the comments and cbox daily. For those who are new, the cbox has a life of its own everyday around 11pm - 2am, where many of the regulars will gather to convene on the interests of the day.

May all shareholder grab find their own dividends after reading the posts and the cbox! :)

La Papillion


Monday, June 02, 2008

The Intelligent Investor Review

I've finally finished reading The intelligent investor by Benjamin Graham, though I bought the book last year. Well, it's going to be the first of my reading. I expect myself to re-read certain chapters again and again.

Actually I thought I'll never be able to finish. I don't really fancy his rather arcane way of writing - a little to rigid for me, though his content is as interesting in the past as in the present. To force myself to finish reading, I actually borrowed the same book from the library. Having a dateline of 3 weeks to finish the book before my book is due makes it an extra incentive to finish it.

To be frank, not all chapters are interesting. It's good that Jason Zweig's commentary after each chapter makes the dry bit a little more bearable. But past 1/4 mark, I think the stuff becomes more of a page turner, especially the infamous chapter 8 and chapter 20. May I add one more chapter too? It's under Appendixes, pg 537 - The Superinvestors of Graham-and-Doddsville by Warren Buffett. I think that chapter should be my guiding light when the market grows dim and the wind blew those candlesticks off - it's pretty inspiring.

Let me share my thoughts on this book:

1. First of all, I am puzzled by my definition of margin of safety. You know the usual drill...find the intrinsic value, slap in a margin of safety of say 40%, and you'll get a magic price where you know the company is 'cheap'. Nowhere in the book (i might be wrong) did I see Benjamin Graham (I shall call him Ben from now) mention that, and I truly wonder wherefore did I ever had that idea ingrained into me.

On page 515, it was stated in the footnotes that Ben gave a lecture in 1972. He mentioned that 'The margin of safety is the difference between the percentage rate of the earnings of the stock (also called earnings yield) at the price you pay for it and the rate of interest on bonds, and that margin of safety is the difference which would absorb unsatisfactory developments".

I see this written in Buffettology book too. That's one big realisation for me. Let's say the long term bond rate is 5%. We need to get an earnings yield of at least 5%, which translate to a PE of 20x. Anything more than 20x PE wouldn't have that margin of safety. I'm thinking 10% earnings yield will give me a good margin of safety, so a PE of 10 or less is more like it.

2. Another thing that I carried away with me after reading this classic is the idea of the hot sector. Never fling money at Mr.Market's latest, craziest fashions and remind oneself with quiet confidence that, "This, too, shall pass away".

3. I understand what is meant by an aggressive and defensive investor. It's not whether one can take risk. It's how much work one is willing to spend that determines which type of investor one belongs too. I am thus, by definition, an aggressive investor.

I wouldn't recommend this book to anyone without a true passion in investing. Firstly, it's very thick - and that alone is sure to repel casual readers away. Secondly, one needs to have at least a cursory knowledge of accountings. Without that, the book is an alien tome of indecipherable jargons. There are some chapters which deal with philosophy though, so perhaps I'm exaggerating a little here.

But for those who do want to read this classic, hear this from me. The investing world is dividend into two kinds of people - those who had read The Intelligent Investor and those who have not read it.