It is not meant to be an offense to value investors in the first place despite of the topic. If you happen to be an value investor then perhaps you may agree on my point after reading my post later on.
Although I am not a fan of value investing but as I mentioned in my earlier post that I do like some of the concepts advocated by value investing. One of the them is that (be greedy) to buy when the public is in fear. It is also because of this concept that I came up the subject of this post. Usually when people faces catastrophe then they will fall in fear. For investors to be in fear there must be something really bad happened. It could be a super natural disaster just like when tsunami hit Japan in 2011 or a financial catastrophe like the subprime mortgage incident in 2008. SARS outbreak in Hong Kong in 2003 is still an unforgettable scene. Naturally large scale terrorist attack like the 9.11 in 2001 also brought fear to the public. Let alone if there is trace of military confrontation between nuclear nations.
No matter what the nature of the incidents are, be it political, financial or natural, all these incidents brought huge damage to the people affected. The damages could be big economic losses or even a long death toll. However, this is the moment that the public is in fear and this is the moment that gives value investors a very good chance to buy in stocks, at price well below intrinsic value. So this is exactly the moment value investors are waiting, if not longing, for.
Maybe most of the value investors are peace-loving guys. However, on the other hand they know well that the golden chance that they can buy stocks at well below intrinsic value is the moment when the market is in panic which leads to irrational sell off. They may argue that their golden chance is just the outcome of someone's mistake to sell stocks at wrong price and in wrong timing. They should buy instead of selling. Their argument sounds perfectly reasonable. True is it value investors do not press the panic sellers to do irrational sell off. They just grab the chance when it arises. Nor do they cause the catastrophe that drives the public panic as well. They are just patiently waiting for catastrophe and expecting someones to make mistake. However, let's be frank value investors, while you guys are waiting didn't you ever have the thought that how nice it will be if there is a chance to let me buy my favourite stocks at price below their intrinsic value? Have you never thought that what makes that moment to come? Come on, you know well what it means when you can successfully achieve your target. Yet, you are expecting that moment. So ain't you deserve the description of the title of this post?
Don't worry, I am not blaming you. I am with you. We are just two of a kind!
2018年11月19日 星期一
2018年11月8日 星期四
Be a little compassionate to Chinese corrupted officials
Not long ago there came a news about the death of a Chinese official whom committed suicide in Xinjiang, China. This was the second one within these couple of weeks following the case of the chief in the China Liaison Office in Macao. it is widely believed they were under investigation on corruption. These two men were not junior officials so their death were made known in the news. However there should have been some more cases in the lower ranking ones without our knowledge. Being government officials in China is a rather risky business.
Apart from having to end their own lives, the danger of being government officials was that there were even more Chinese government officials put behind bars due to the crimes of corruption or the related ones especially after Xi came into power. While the public welcome the crack down on the corrupted official gangs, this move became a nightmare of the officials within the opposition camp against Xi. They are under the risk of being eradicated from their current positions in the name of anti-corruption campaign. After all, the accusation is literally applicable to everyone in the government. Which official dares to say he/she is free from such practice through his/her way up in the ranking promotion? Higher the ranking greater the engagement would be, actively or passively.
When it is a norm that everyone must comply in order to survive in the muddy water. Who can escape anyway? This was fine when the power balance was in equilibrium state that everybody knows whom used to has some dirty business so nobody would uncover it for the sake of mutual safety. However storm began when one side gained the dominance in power and decided to eradicate the opposition. No more calm days since then.
People usually blame how evil the corrupted officials are when their cases were brought to the court hearing. Naturally people think these corrupted officials deserve their sentences. True is it that they have committed crime in the first place so they deserve penalty. However, considering that corruption is indeed institutional and a connate flaw due to the nature of mono-party ruling. As Lord Acton puts it "power corrupts and absolute power corrupts absolutely". Are theses officials really the ones to be blamed?
Just imagine when the officials were still in small potatoes, giving bribe is the only way to get promoted as that is the norm if they want to survive. When they get to the middle level ranking, naturally bribe will find its way to these officials when the junior follow these middle ranking's foot step while the latter also need money to buy their further way up. On the other hand, a probity officials is deemed to be a threat by those whom are not. Bad money drives out good. It developed into a vicious cycle that no one in the ruling party can be exempted.
What makes the cycle more severe is that due to the ferocious power struggle within the party, the officials do not know how much longer they can remain in office even if they are in power today. Perhaps next morning when they wake up they will find that people from the central investigation bureau is knocking their doors. These guys are really on edge and that prompts them to extort as much money as they can while they are still in power. It is because when the judgment day comes, they will not only lose their office but perhaps their lives as well. Their suicides are for the sake of closing the file to avoid expanded investigation on their families and the other officials. They are indeed engaging in a dangerous game that could cost them their lives. In the human resources field there is a term "compensation" used to describe it as the total package that one can get for performing a job. So isn't fair enough for the Chinese officials be "a little" greedy on the compensation for the danger in their jobs?
Please show a little mercy to the Chinese corrupted officials. After all they will probably pay the price with their lives. Amen.
Apart from having to end their own lives, the danger of being government officials was that there were even more Chinese government officials put behind bars due to the crimes of corruption or the related ones especially after Xi came into power. While the public welcome the crack down on the corrupted official gangs, this move became a nightmare of the officials within the opposition camp against Xi. They are under the risk of being eradicated from their current positions in the name of anti-corruption campaign. After all, the accusation is literally applicable to everyone in the government. Which official dares to say he/she is free from such practice through his/her way up in the ranking promotion? Higher the ranking greater the engagement would be, actively or passively.
When it is a norm that everyone must comply in order to survive in the muddy water. Who can escape anyway? This was fine when the power balance was in equilibrium state that everybody knows whom used to has some dirty business so nobody would uncover it for the sake of mutual safety. However storm began when one side gained the dominance in power and decided to eradicate the opposition. No more calm days since then.
People usually blame how evil the corrupted officials are when their cases were brought to the court hearing. Naturally people think these corrupted officials deserve their sentences. True is it that they have committed crime in the first place so they deserve penalty. However, considering that corruption is indeed institutional and a connate flaw due to the nature of mono-party ruling. As Lord Acton puts it "power corrupts and absolute power corrupts absolutely". Are theses officials really the ones to be blamed?
Just imagine when the officials were still in small potatoes, giving bribe is the only way to get promoted as that is the norm if they want to survive. When they get to the middle level ranking, naturally bribe will find its way to these officials when the junior follow these middle ranking's foot step while the latter also need money to buy their further way up. On the other hand, a probity officials is deemed to be a threat by those whom are not. Bad money drives out good. It developed into a vicious cycle that no one in the ruling party can be exempted.
What makes the cycle more severe is that due to the ferocious power struggle within the party, the officials do not know how much longer they can remain in office even if they are in power today. Perhaps next morning when they wake up they will find that people from the central investigation bureau is knocking their doors. These guys are really on edge and that prompts them to extort as much money as they can while they are still in power. It is because when the judgment day comes, they will not only lose their office but perhaps their lives as well. Their suicides are for the sake of closing the file to avoid expanded investigation on their families and the other officials. They are indeed engaging in a dangerous game that could cost them their lives. In the human resources field there is a term "compensation" used to describe it as the total package that one can get for performing a job. So isn't fair enough for the Chinese officials be "a little" greedy on the compensation for the danger in their jobs?
Please show a little mercy to the Chinese corrupted officials. After all they will probably pay the price with their lives. Amen.
2018年11月1日 星期四
Stock picking made easy
The HSI has fallen more than 10% in last Oct and despite today it has risen 400+ points but it is still far from the bottom yet because there is no blood in the street. One very good indicator I use very often is to listen to the radio programmes featured with stock commentators. When there are still many housewives like or old aunties like audiences phoning in asking if it is good timing to buy then the bottom is most likely yet to come.
Despite I am not a fan of value investing but I do like the idea of margin of safety and to buy when the general masses is panic. Apparently this is not the timing to buy yet when considering these two criteria. Perhaps it is good time to do homework now. Homework on what to buy when the right timing comes.
Apart from the above two ideas, in fact I also like the fundamental analysis of value investing like economic franchise and economic moat. However, the key point lies on that in reality not many stocks in the world truly meet all the traits that described by these criteria. On the other hand, it is also very time consuming to scrutinize each and every stock with these criteria considering we are not professional stock analysts whom are paid to do such job. So a faster yet effective way in stock picking is sought after especially for amateurs.
Before I move on further on the stock picking make easy, perhaps making clear what sort of stocks I am looking for is crucial because the targeted type of stock could has an impact on the way to pick stocks. I am in particular obsession in income type of stocks because they provide income stream that gives me bread and butter. So primarily my ideal stocks have to be with relative high dividend yield like above 5%. This is the primary criteria of stocks to be shortlisted in the radar. Having said 5% dividend yield is the primary criteria means this is not the essential requirement of my ideal stocks but this is the least only.
Having screened a pool of candidates but there is still a lot of work if they are to be scrutinized according to the fundamental analysis criteria so this is the time my made easy version of stock picking comes in play. Actually this made easy methodology is just the reversion of the normal screening process. In traditional screening process, candidate stocks are filtered through sets of criteria then see which ones meet the requirements layer by layer and at the end of the day narrows down to a few winners that fully meet the requirements. So the reversion is that I do not start from a pool of candidates but just set up my two must-meet requirements then to see which stocks can match with them.
Apart from the 5% dividend yield, one thing I do request is that the stock price maintains a steady growth over a long period, say at least 15 years. The remaining requirement is that the absolute amount of dividend paid out also exhibits a steady growth along the period. The rationale behind is that I assume a stock that with a steady price growth and with the ability to give out a steady growing dividend at the same time over a very long extended period is actually the manifestation of the fulfillment of the requirements of being a good stock that laid down by economic franchise and economic moat. When we require a stock with economic franchise, economic moat, ROE, honest and capable management....etc are actually the means only. The end is what we really want and the bottom line is while we can gain from price appreciation and also be benefited from the dividend income. This is the end we are looking for. People spend much time on the screening process but at the end of day they are just looking for stocks with these two attributes. So just make it simple, stupid. Just start from the end to look for our beauties and why waste time on doing the back-breaking and time consuming screening process?
I also hold the believe that it is easy for a stock to pretend to be performing for two three years, or even five years but it is literally impossible to cheat over 15, 20 or even more years consecutively. When the stock price grew steadily and consecutively over 20 years, it is the recognition from Mr. Market whom could be wrong in a given time period but he is always right in the long run. While giving out growing dividend steadily and consistently over 20 years is the prove that the company has been doing its business very well thus it is in financial good shape to reward its shareholders continuously. Having said so constant review on such stocks is still needed to ensure they are moving on the right track as what they did.
My idea is that buying such stocks resembles buying a rental property. At one end you want the property price goes up and on the other other hand you also want the rental income can increase every year. It is just as simple as this. It is not scientific nor serious enough but it is just good enough.
Simple, stupid but works.
Despite I am not a fan of value investing but I do like the idea of margin of safety and to buy when the general masses is panic. Apparently this is not the timing to buy yet when considering these two criteria. Perhaps it is good time to do homework now. Homework on what to buy when the right timing comes.
Apart from the above two ideas, in fact I also like the fundamental analysis of value investing like economic franchise and economic moat. However, the key point lies on that in reality not many stocks in the world truly meet all the traits that described by these criteria. On the other hand, it is also very time consuming to scrutinize each and every stock with these criteria considering we are not professional stock analysts whom are paid to do such job. So a faster yet effective way in stock picking is sought after especially for amateurs.
Before I move on further on the stock picking make easy, perhaps making clear what sort of stocks I am looking for is crucial because the targeted type of stock could has an impact on the way to pick stocks. I am in particular obsession in income type of stocks because they provide income stream that gives me bread and butter. So primarily my ideal stocks have to be with relative high dividend yield like above 5%. This is the primary criteria of stocks to be shortlisted in the radar. Having said 5% dividend yield is the primary criteria means this is not the essential requirement of my ideal stocks but this is the least only.
Having screened a pool of candidates but there is still a lot of work if they are to be scrutinized according to the fundamental analysis criteria so this is the time my made easy version of stock picking comes in play. Actually this made easy methodology is just the reversion of the normal screening process. In traditional screening process, candidate stocks are filtered through sets of criteria then see which ones meet the requirements layer by layer and at the end of the day narrows down to a few winners that fully meet the requirements. So the reversion is that I do not start from a pool of candidates but just set up my two must-meet requirements then to see which stocks can match with them.
Apart from the 5% dividend yield, one thing I do request is that the stock price maintains a steady growth over a long period, say at least 15 years. The remaining requirement is that the absolute amount of dividend paid out also exhibits a steady growth along the period. The rationale behind is that I assume a stock that with a steady price growth and with the ability to give out a steady growing dividend at the same time over a very long extended period is actually the manifestation of the fulfillment of the requirements of being a good stock that laid down by economic franchise and economic moat. When we require a stock with economic franchise, economic moat, ROE, honest and capable management....etc are actually the means only. The end is what we really want and the bottom line is while we can gain from price appreciation and also be benefited from the dividend income. This is the end we are looking for. People spend much time on the screening process but at the end of day they are just looking for stocks with these two attributes. So just make it simple, stupid. Just start from the end to look for our beauties and why waste time on doing the back-breaking and time consuming screening process?
I also hold the believe that it is easy for a stock to pretend to be performing for two three years, or even five years but it is literally impossible to cheat over 15, 20 or even more years consecutively. When the stock price grew steadily and consecutively over 20 years, it is the recognition from Mr. Market whom could be wrong in a given time period but he is always right in the long run. While giving out growing dividend steadily and consistently over 20 years is the prove that the company has been doing its business very well thus it is in financial good shape to reward its shareholders continuously. Having said so constant review on such stocks is still needed to ensure they are moving on the right track as what they did.
My idea is that buying such stocks resembles buying a rental property. At one end you want the property price goes up and on the other other hand you also want the rental income can increase every year. It is just as simple as this. It is not scientific nor serious enough but it is just good enough.
Simple, stupid but works.
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