So what factors to look out for before buying a stock? I put my hands up in an attempt to get my own attention.
Simple, i said to myself, the business must be 1)understandable, 2)the Return of Capital (ROE) must be 15% or high amount its competitors, 3)consistent history of strong cash flow, revenue and net profit, 4) the price i pay must be 50-60% discount to my intrinsic valued i calculated whether using discount cash flow model or dividend discount model or below its NAV per share, 5) management must be seen as buying or holding on to more lots of the company, 6) the company also cannot be always spending huge expenditures without a significant increase in revenue for the following year, 7) the share holdings cannot increase too much, 8) Price to book value cannot be too high like 3-4times etc etc etc.
When i ask some of my other friends who invest, some say that factors that depicts their buying would be to look at BT( Business Times) under analyst recommendation , if its a strong buy then buy lor, some like me also apply measures like ROE and PE ratio must be high and low respectively before they buy, some say their portfolio manager will help them pick, some people just invest in blue chips or mid caps that have dropped the most in value like Cosco and Golden Agri , some, look at the companies' transparency and place their money in accordance to TA (Technical Analysis) etc. Soo many methods, views, opinions and techniques.
So! How do i know which advise to follow? Who was the one who taught me how to think this way or rather apply these measures before i start buying a stock? They are none other then my investing mentors i refer them as my investment lighthouse keepers , their words, articles,blog,books and stories inspire and guide me thru the maelstrom of noises in the investment world. Each take their turn to make sure my lighthouse shines in the right direction ( I hope), for ships carrying wealth,income,dividends and cash into my shores (my bank la!)
4 of them to be exact, and they are..(drums roll please*)
1) Warrent Buffett
2) Ms Teh Hooi Ling
3) MusicWhiz
4) Adam Koo
Warrent Buffett~ The main man
OKok , i know what some of you all might be thinking, "Aiya, Warrent Buffett again?! , who don't know? Everyone keeps saying Warrent Buffett this Buffett that, Buffett Buffett make gives me comfort, we know already move on! "
Which i will.. nothing much can be said also , its just that he was the first one, whose books really gave me a general feel of what value investing actually is, his principals, methods and application to investment inspires and guide me through the many noises produced by the media and the market. Buffett the main man who is incharge of my investment lighthouse.
Some Lessons learnt from him in general
-Invest when fear is the greatest
-Investing in a stock is exactly like investing in a company
-Admit your mistake fast and move on
-Research, understand and justify your buying
-Margin of safety
Ms Teh Hooi Ling ~ The Brillant scientist
(Who is she arh?)
She is a Singaporean (chey!),
who holds a NUS BBA(so?)
and she is a CFA achiever (wow!)
Yes, with soo many academic accrediting on her belt, it is no surprise that her research not only impresses me but it brings a whole new light to things or factors that i wouldn't have guessed possible to do research on. Research that involved stock market timing via Bond yields, equations that involve finding relationship between interest rates and the stock market, deriving whether individual investors can beat professionals by doing this and that, a great fan of low Price to Book stocks, testing out the reliability of cash flow model, creating different themed portfolios to see which ones are the best etc etc. I bought all four of her books and constantly on a look out for her writ tern work on the business times. Exciting and enlightening, she is in charge of the the density of the light coming out from the lighthouse.
MusicWhiz~ The Detailed one
Yes! He is a real person. A devoted and strong believer in Warrent Buffett's value investing principals and methods. Why then is he consider one of my mentors since Buffett has already more then enough? Simple, because Buffett is an American, and most of the books written by him or other writers are about American stocks and how to pick them. I needed to find someone who is well rooted to Buffetts' teachings and yet have an Asian Flare to it. And that's where Musicwhiz comes in, his blog contains excellent examples of how to analyst companies, like example: where did this operational cash flow come from? What implications and possible outcomes will happen because this figure say this, this data recommends this, what is the current state and health of this company is in now? His reports on certain companies and how he picked them are soo detailed that it puts many analyst reports to shame (that's if they even do proper research), his blog is in my opinion one of the best I've ever come across, the essences of diligent fundamental analysis, i believe starts there. His blog is accessible via this link http://sgmusicwhiz.blogspot.com/. Best of all i have direct contact with him via a certain blog website. He is my Asian lighthouse keeper, helps Buffett direct my investment lighthouse while he is sleeping lol..
Adam Koo~The Inspiring One
Hopefully you have seen his books in popular or Kino , titles like "How to become a millionaire investor", "Secrets of self made millionaire" are dotted everywhere in the financial or self improvement section, reading his books actually first inspires me to think differently, to create different sources of income, to become value added in the job i take in the future and most importantly to invest like a millionaire , which is again no surprise- similar to Buffett's teachings. Whenever i feel kind of tired ,after doing soo much research on companies, his books, when i re look at them, re-engergizes me. In fact, the first valuation model belongs to him, then as time goes by i did up my own and modified it to become more applicable and useful to my own liking , which then again its all thanks to him. Adam Koo is therefore in charge of changing the light bulbs when it goes dim.
Therefore, these are the people, whose teachings ,advise ,books and comments , form the very foundations of reasoning behind purchasing a certain stock at that certain price. Their brilliance, and the intention of me following their ways will determine the success of my portfolio in time to come. Yet despite my many praises for them, i do not guaranteed 100% success if anyone should follow their teachings and advise, some people follow Peter Flich's advise, some are pure believers of Technical Analysts which i do not despise at all, i practice market timing as well. So the point of writing this article is actually to find out, who are the people who directs your investment lighthouse? What methods or combination of views do they teach you? Care to share? Thanks :)
