Book review - The Intelligent Investor by Benjamin Graham (Part I)

I started my stock investing journey on April 2011, and one of the first books I read on the topic is "The Intelligent Investor" by Benjamin Graham. At that time, I felt the need to learn from the best and Warren Buffett being an obvious choice, I read up on his investing philosophy (value investing) and got to know about Benjamin Graham.

After two years into my investing journey, I decided to re-read the book. And I find that I have a greater appreciation of the book after having real life, hands on experience in studying companies, choosing stocks, and buying/selling. Nothing beats trading with your hard earned $.

"The Intelligent Investor" is a classic investment book and I am sure that many people will agree with me that it is a must read for people who are intending to or who are already into stocks as an investment medium.

I have re-read about a quarter of the book and so far I have highlighted the following five points for sharing:-


1. To invest successfully over a lifetime does not require a high IQ, unusual business insights or inside information - what is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. By developing your discipline and courage, you can refuse to let other people's mood swings govern your financial destiny. It means being patient, disciplined and eager to learn, you must also be able to harness your emotions and think for yourself.

- Agree. Emotions are a no-no in investment. You must develop your own investment philosophy which is unique and tailored according to your risk appetite, your commitments and your temperament.


2. A stock is not just a ticker symbol - it is an ownership interest in an actual business, with an underlying value that does not depend on its share price. The market swings between unsustainable optimism (making stocks too expensive) and unjustified pessimism (making stocks too cheap). An intelligent investor is one who sells to optimists and buys from pessimists.  

- Agree. Always look for value or bargains in businesses, while considering the broad economic climate, before buying a stock. You must be happy to be part of the business, and do not mind holding on to it (in case market trends downwards).


3. Future value of every investment is a function of its present price - higher the price, lower the returns. Benjamin Graham emphasizes on Margin of Safety - never overpaying, no matter how exciting an investment seems to be. This is because the chance of being wrong is always there (never know how Mr. Market behaves the next minute). 

- Somewhat agree. It's a cross between buying at a bargain and riding the wave. I do agree on the margin of safety - it is important to avoid overpaying for a stock, as I know from my early stock buys in 2011 (such as ECS, Keppel Land, NOL...). Always know what you are buying.


4. The intelligent investor realizes that stocks become more risky as their prices rise, and less risky as their prices fall. He dreads a bulls market which makes stocks more costly to buy, and welcomes a bear market since it puts stocks back on sale. Even though investors know they are supposed to buy low and sell high, in practice they often end up getting it backwards.

- Agree. The best moment to buy is when market starts to turn around. Prices of stocks look high now.


5. The art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries. The search for a stock to buy is not worth the investor's efforts unless he could hope to add 5% before tax to the average annual return from the stock portion of his portfolio. It is important to measure your investing success by how much you keep after inflation and not just by what you make.  

- In theory yes, but difficult to put into practice. I need to work on the 5% increase to portfolio stocks, and not spend too much time on those 1-2% ones.

You can read the reviews from others and/or get the book from Amazon here:-
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)

Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Sold my Global Premium Hotels, for Croesus Retail Trust IPO

The stock market has been in a nice run the last few months. I made use of the chance to take profit on some of my stocks. Notably, I have sold my Global Premium Hotel, as its last quarter results were not very good + no dividend + high gearing ratio (increased borrowing costs). Price movement was hovering about 0.255-0.26. Hence, instead of tying up my funds in the counter, I decided to take profit, and divest my $ into another counter - Croesus Retail Trust.

Croesus Retail Trust IPO is now open for subscription, and will be closed on 8 May 2013 at noon. Results of the balloting will be known on 9 May 2013, and the stock will be listed on 10 May 2013. Basically, I am attracted to this IPO because of its potentially high dividend yield (8% for 2014), and the 100% occupancy rates for the 4 shopping malls in its portfolio + long term leases of > 10 years. I also believe that the current PM and government are taking concrete steps to lift the Japanese economy i.e. the worst should be over, and things can only improve from now onwards. Even though there is risk that the yen will continue to depreciate (in order to boost JP economy by making it more competitive), thereby affecting DPU, on the flip side, an improving JP economy means that people have more money, and therefore increased spending power.

Even though it is a business trust i.e. not mandated by law to provide dividends, I think that in the first few quarters at least, there management will provide attractive dividends at least for maintaining or even boosting its share price. At this low bank interest rate and high inflation times, investment in business trusts with promise of dividends, a high one at that, does not sound bad at all.

Now, the problem is just, how many lots I can get.

Update 12 May 2013: Wow, I didn't expect demand for the IPO to be so hot. I bid for 12 lots, and got nil. SIGH!

Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Lum Chang coverage in The Edge on 29 April 2013

Excerpts from coverage in The Edge on 29 April 2013:-
(source: The Edge Singapore)

Family-controlled Lum Chang Holdings does not attract much attention in the market. Yet, the decades-old contractor is an interesting play on Singapore’s property and infrastructure boom. And, its dividend of two cents per share provides investors with a steady dividend yield of about 6%. Its market value of just $123.8 million is currently a 28% discount to its book value of $173.2 million. The company also has a liquid balance sheet, with a net cash position of $33 million as at end-2012.

Much like other contractors, Lum Chang has taken stakes in property development projects. For instance, it has a 30% stake in Twin Fountains, an executive condominium (EC) development in Woodlands. The remaining stake is held by Frasers Centrepoint. The project was sold out swiftly earlier this month. The company also has a 20% stake in another joint venture with Frasers Centrepoint to develop Esparina Residences, an EC located in Sengkang that is due to receive its temporary occupation permit (TOP) at end-2013.

..... Lum Chang’s construction order book stood at about $600 million as at Dec 31. Its ongoing property development-related construction work comprises six projects. Two of these projects are for Ascendas: Nucleos in Biopolis Road and a business park development in Science Park Drive. Lum Chang is also building The Metropolis for Ho Bee Investment at Biopolis, Ripple Bay Condominium forMCL Land in Pasir Ris, and Esparina Residences.

...

Lum Chang also has a foothold in Malaysia, where it develops property.


... In February, it said it had bought property located at 42-60 Kensington High Street, London for £40.19 million ($76.8 million). “Our income will be mainly from the ground floor, achieving rental income from shops such as Zara, Topshop and Miss Sixty. The leases there are very long, 10-year leases and these will provide a good steady income,” Fong says.

The yield of the London property works out to 4.5%, giving an annual income of $3.4 million, according to a report by UOB Kay Hian. That is about 15% of the company’s earnings for FY2012. 

Lum Chang has paid a dividend of two cents per share for the last three financial years ...

Lum Chang does not have much of a following among analysts, though. However, UOB Kay Hian notes that the stock appears to be inexpensive. “Trading at 0.8 times price to book looks reasonable when compared with peers’ average of one time,” the brokerage states in a report. “Since FY2010, Lum Chang has maintained a net cash position. Its stock price is underpinned by cash reserves of $77 million as at Dec 31, which accounts for 62% of its market cap.”

Amid the hunt for yield, Lum Chang seems a good alternative to real estate investment trusts and consumer-oriented stocks that have run up sharply over the last couple of years.

If you are reading this, you may also be interested in:-

• Lum Chang - Analyst Coverage in April 2013
• Lum Chang - A hidden gem?

Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Lum Chang - Analyst Coverage

After I blogged about Lum Chang a few days ago, there is analyst coverage of the same by UOB KH. Great minds think alike??

Here is an excerpt from their analyst report:-

Lum Chang Holdings (LCH) is trading at 4.9x FY12 PE and 0.8x P/B.

Potential share price catalysts include new contract wins and an attractive forecast dividend yield of 6% in FY13. 

Investment Highlights
Good track record.  
As a  BCA grade ranked A1 contractor,  Lum Chang Holdings has an impressive portfolio of past projects, which included Changi Water Reclamation Plant, UOB Plaza I and National University of Singapore. LCH’s established record in civil engineering projects is also evident, being the only local contractor to clinch a MRT Downtown Line project (contract 912 worth over S$450m) on its own. LCH’s recognised construction quality and established track record make it a serious contender for upcoming public construction projects, such as the MRT Thomson Line.

Consistently attractive dividend yield.  
LCH has been paying a consistent dividend of 2 cents for the past three years, which translates to an attractive dividend yield of 6.0%. The dividend of 2 cents equates to a payout of 35.6% in FY12. In FY12, LCH generated a free cash flow (FCF)/share of 2.4 cents and a FCF yield of 7.3%.

Steady rental income.
LCH’s recent acquisition of a  freehold mixed-use property at 42-60 Kensington High Street in London  provides a steady recurring income for the group. Kensington High Street is identified in the London Plan as one of the 35 major centres in London. The prime location of the property allows it to enjoy a 100% occupancy rate and an annual rental income of £1.8m (S$3.4m), that translates to a rental yield of 4.5%. The S$3.4m rental income is about 15% of its FY12 net profit.

Strong balance sheet.
Trading at  0.8x P/B, valuation looks reasonable when compared with peers’ average of 1x P/B. Since FY10, LCH has maintained a net cash position. Its stock price is underpinned by cash reserves of S$77m (as at 31 Dec 12) that represents 62% of its market cap.

Future plans.  
With a  strong construction orderbook of S$600m  and its new executive condominium project at Woodlands (a JV with Fraser Centrepoint) to be launched in Apr 13, LCH’s construction arm is likely to be kept busy till 2016. For its property development business, LCH is looking forward to continue developing its two residential projects in Malaysia where only 50% has been launched todate. LCH is also on the lookout for promising property investment in Asia and London to create additional steady recurring income. Associate LC Development’s hotel operation in London is likely to help LCH in optimising its selection of property investment in the London market.


If you are reading this, you may also be interested in:-

• Lum Chang coverage in The Edge Singapore on 29 April 2013
• Lum Chang - A Hidden Gem?

Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Lum Chang - a hidden gem?

Vested with a few lots of Lum Chang today.... after discovering it yesterday night.

Lum Chang's construction portfolio dates back to the 70s, and include buildings like National Library, Circle Line Stage 1, AMK Hub, Causeway Point, Paragon, Audi Terminal etc etc. It has branched into property development and investment, and holds buildings in Singapore and Malaysia for rents.

Tried to do some research on the stock, but apparently it is like a submarine stock.. hardly any news may be found for it. Which is a good thing for me, cos this means that I get to buy it at a good price without all the hype!

Here are the things I found...

1. At its last closing price of $0.34, it is trading at about 22% discount to its NAV of $0.4368.

2. It has been consistently giving dividends for the past years (my records date back to 2006).

3. Yield for last 3 years about 6% (based on $0.34).

4. Compared to its peers, Swee Hong (PB ratio 1.87 and PE ratio 18.7) and Yongnam (PB ratio 1.15 and PE ratio 8.7), its ratios of PB ratio 0.78 and PE ratio 6.0 seem much more attractive.

Hence the reason I bought today.


If you are reading this, you may also be interested in:-

• Lum Chang - Analyst coverage April 2013
• Lum Chang coverage in The Edge Singapore on 29 April 2013

Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Book Review: How to Make Money in Stocks by William J. O'Neil

William O'Neil's philosophy revolves around the following

C Current Quarterly Earnings per Share: The Higher, the Better 

A Annual Earnings Increases: Look for Significant Growth 

N New Products, New Management, New Highs: Buying at the Right Time 

S Supply and Demand: Shares Outstanding Plus Big Volume Demand 

L Leader or Laggard: Which Is Your Stock? 

I Institutional Sponsorship: Follow the Leaders 

M Market Direction: How to Determine It

The goal of the strategy is to discover leading stocks before they make major price advances. The system matches fundamental and technical analysis, and identifies companies with strong fundamentals, . It encourages buying their stock when they emerge from price consolidation periods and before they advance dramatically in price.

What To Do:-
1) You should buy stocks when they’re on the way up in price, not on the way down. And when you buy more, you do it only after the stock has risen from your purchase price, not after it has fallen below it.
(I agree. Even though a stock may look cheap, the fall may not have ended. Don't catch a falling knife!)

2) You buy stocks when they’re nearer to their highs for the year, not when they’ve sunk so low that they look cheap. You buy higher-priced stocks rather than the lowest-priced stocks.
(This bit would be the technical analysis portion, where volume and price action comes into play.)

3) You pay far less attention to a company’s book value, dividends, or PE ratio—which for the last 100 years have had little predictive value in spotting America’s most successful companies—and focus instead on more important proven factors such as profit growth, price and volume action, and whether the company is the number one profit leader in its field with a superior product.
(Same as Point 2) above. It's relevant if you are trading based on price and volume action.)

4) You learn to always sell stocks quickly when you have a small loss rather than waiting and hoping they’ll come back.
(True for all cases. Ok, maybe not for the hard core value investor. Learn the 8% cut loss rule, especially when you are on CFD.)

5) You also have to acquaint yourself with charts—an invaluable tool most professionals wouldn’t do without but amateurs tend to dismiss as complicated or irrelevant.

(This (TA) I've got to learn. It seems so so hard.)


6) Today it’s not enough for you to just work and earn a salary. To do the things you want to do, go the places you want to go, and have the things you want to have in your life, you absolutely must save and invest intelligently.
(I agree. Start early!)

7) It is the unique combination of your finding stocks with big increases in sales, earnings and return on equity plus strong chart patterns revealing institutional buying that together will materially improve your stock selection and timing.
(Very true.)

8) A stock’s chart must always be checked to determine whether the stock is in a proper position to buy, or whether it is the stock of a sound, leading company but is too far extended in price above a solid basing area and thus should temporarily be avoided.

What NOT To Do:
1) You don’t subscribe to a bunch of market newsletters or advisory services, and you don’t let yourself be influenced by recommendations from analysts, who, after all, are just expressing personal opinions that can frequently be wrong.
(I agree. Always do your known research. Analysts may have their own hidden agenda!)

This book has 4 stars based on 228 reviews on Amazon.

You can read the reviews from others and/or get the book from Amazon here:-

How to Make Money in Stocks by William J. O'Neil

Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Book Review: Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School by Andrew Hallam

I read the book Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School by Andrew Hallam a couple of months ago.

It was a rather interesting read, sentiments shared by 92 other customers on the Amazon website, with an average rating of 4.5 stars.

You can build financial security by using the nine rules outlined in this book: 

1. Spend like a millionaire (or less) if you want to become rich. 

(I agree. Many books/websites on financial management advocate spending within your means, or delayed gratification i.e. to use the money on income generation, instead of shopping or buying a flashy new car for example.) 

2. Start investing as early as possible—after paying off credit card debt and any other high-interest loans. 

(I agree. Rules of compounding work miracles. The earlier you start, the better it is, cos it allows more time for $ to grow.) 

3. Invest in low-cost index funds instead of actively managed funds. Nobody can consistently pick “winning” actively managed funds ahead of time. 

(Hmm, this one I am not sure as I do not have experience in buying funds. However, if you are a 'lazy, busy or risk adverse' investor, you should look at exchange traded funds instead of doing your own stock picking, since studies have shown that exchange traded funds grow despite downturns or market fluctuations, given a sufficient timeframe of 5-10 years.)

4. Understand stock market history and psychology so you don’t fall victim to the craziness that infects every investing generation (often more than once). 

(I agree. Read as widely and as much as you can. Do research into the companies that you are investing in - know what you are buying and not jump into the next (over)hyped stock.)

5. Learn to build a complete, balanced portfolio with stock and bond index funds that will easily beat most of the pros. 

(I agree. It is important to know your investment philosophy and your appetite for risk. I have a mix of insurance, REITs and growth stocks, and depending on the market conditions, I balance my portfolio accordingly. I am interested to know more about bonds and gold/silver investment. Still learning though.) 

6. Create indexed accounts no matter where you live. 

(I am not too sure what this means. Need to find out more.)

7. Learn to fight an adviser’s sales rhetoric. 

(I agree. You need to be responsible for your $ and do your own thorough research, instead of relying on another person's advice.)

8. Avoid investment schemes and scams that tickle your greed button. 

(Same as Point 7 above. If something looks too good to be true, it probably is.)

9. If you must buy common stocks, do it with a small percentage of your portfolio and pick a mentor such as Warren Buffett.

(I think that value investing knowledge armed with some technical analysis works best. Value investing to know if the company is doing well, and technical analysis to know the best entry points.)

You can read the reviews from others and/or get the book from Amazon here:-
Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School

Kindle version is also available: Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School

Disclaimer: The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.