Recommended Books

These books were recommended to me from someone in the finance industry. I had added in a few others that I think are worthwell reading. Those in red are my personal recommendations.

Value Investing

• The Essays of Warren Buffett, Lawrence Cunningham
• Buffett, Roger Lowenstein
• The Intelligent Investor, Graham and Dodd (this I had read)
• Security Analysis, Graham (this I had read)
• Pilgrimage to Warren Buffett's Omaha, Jeff Matthews (this I had read)
• The Snowball, Alice Schroeder
• Applied Portfolio Management, Catherine Shenoy / Kent McCarthy
• Common Stocks and Uncommon Profits, Philip Fisher (this I had read)
• Dear Mr Buffett, Janet M. Tavakoli (this I had read)
• Invest like a fox not like a hedgehog, Robert C. Carlson (this I had read)
  
   

Psychology

• Animal Spirits, George A Akerlof, Robert J Shiller (this I had read)
• More than You Know, Michael Mauboussin (this I had read)
• Your Money and Your Brain, Jason Zweig (this I had read)
  
  

Bonds

• A Guide to Asian High Yield Bonds, Schmidt / Harper

Trading

• Way of the Turtle, Curtis Faith (this i had read)
• Trading for a Living, Alexander Elder
• Come into my Trading Room, Alexander Elder
• Mastering The Trade, John Carter
• Market Wizards & The New Market Wizards, Jack. D. Schwager
• Volatile Markets Made Easy, Guy Cohen
• Technical Analysis of the Financial Markets, John J. Murphy
• Trading In The Zone, Mark Douglas

General

• How to Make Money in Stocks, William O’Neill
• Secrets of Millionaire Investors, Adam Khoo / Conrad Alvin Lim (this i had read)
• Profit from Panic, Adam Khoo / Conrad Alvin Lim (this i had read)
• A Primer on money, banking and gold, Peter L. Bernstein (this i had read)
• Momentum
• Reminiscence of a Stock Operator, Edward Lefevre (this I had read)
• Trend Following, Michael Covel
• Money Masters series, John Train
• Inside the House of Money, Steven Drobny 
• This Time Is Different: Eight Centuries of Financial Folly, Carmen Reinhart & Kenneth Rogoff (this I had read)

Non-Finance

• What the dogs saw, Malcolm Gladwell (this I had read)
• Blink, Malcolm Galdwell (this I had read)
• Outliers, Malcolm Galdwell (this I had read)
• Superfreakonomics, Steven Levitt (this I had read)

Watchlist

• The next 100 years, George Friedman
• Predictably Irrational
• The Ascent of Money: A Financial History of the World, Niall Ferguson
• The Partnership: The Making of Goldman Sachs, Charles Ellis
• The Big Short: Inside the Doomsday Machine, Michael Lewis
• Liar's Poker, Michael Lewis
• Against the Gods: The Remarkable Story of Risk, Peter Bernstain
• Capital: The Story of Long-term Investment Excellence, Charles Ellis
• Too Big to Fail, Andrew Sorkin
• Lords of Finance, Liaquat Ahmed  

Non-Financial

• Say it like a CEO

Brand Values

According to the latest annual rankings from Interbrand, these are the worth of the top few companies (i have also extracted the current market cap for comparison):

Counter = Brand Value vs Market Cap
===========================
Coca-Cola = $68.7b vs $122b at $58 per share
Microsoft = $56.6b vs $230b at $25.8 per share
General Electric = $47.8b vs $178b at $16.75 per share
Nokia = $34.9b vs $56b at $15.14 per share
McDonald = $32.3b vs $61b at $55.78 per share
Google = $32.0b vs $157b at $495 per share
Toyota = $31.3b vs $129b at $82 per share
Intel = $30.6b vs $109b at $19.5 per share
Disney = $28.4b vs $52b at $27.85 per share

Is the brand value too conservative, or the market is too optimistic. You decide.

Temasek Holdings Portfolio

Check out their fortfolio profile here.

By Geography:
http://www.temasekholdings.com.sg/our_portfolio_portfolio_highlights_geography.htm

By Sector:
http://www.temasekholdings.com.sg/our_portfolio_portfolio_highlights_sector.htm

Their Major Investments:
http://www.temasekholdings.com.sg/our_portfolio_portfolio_highlights_major_investments.htm

I quite like their portfolio. Will find time to elaborate on this. Check it out yourself for the time being.

US Companies involved in financial statement misrepresentations

Saw this from this book "Financial Accounting" by Libby/Libby/Short, McGraw-Hill.

Sampling of firms involved in financial statement misrepresentations:

• Enron
• Worldcom
• Adelphia
• Global Crossing
• Computer Associates
• Tyco
• HealthSouth
• McKesson
• Xerox
• Rite-Aid
• Aurora Foods
• Halliburton
• Parmalat
• Nortel
• Goodyear
• Cardinal Health
• Homestore.com
• Dynergy
• Fannie Mae
• Freddie Mac
• Qwest Communications
• Gerber Scientific
• Stanley Works
• AIG

I think most of them are quite old news already.
Generally, I'll avoid stocks with such negative news unless I have a good understanding of their management to discern if it is a once-off event or there's more to it.

Dash Board

Do check out the right panel.

I'm trying to build a dash board to get a one-look feel of the overall economy through some indicators.

Credit to sources:

1. finance.yahoo.com
2. www.investmenttools.com

Olam International by Kim Eng Research

Kim Eng Research issued a buy call on Olam international on 3rd Sep. Target price is $2.98 which is based on 25x 2010F PE.

How analyst come out with XX 2010F PE is generally not publicly available unless we are their customers, which then they might send us the detailed report.

But, when I looked at the recommendation, the 25x looks high to me. It means that if the company choose to pay out ALL its earnings (which no companies do), it will take 25 years to get back my capital.

Unless the commodity industry generally is priced at 25x PE...

A separate report was published by CIMB-GK. Their target price is $2.75, based on 22x 2010F PE. Reason being that 22x PE is the historical mean since 2005. At least there is more basis for this estimation.

Jurong Tech Case

From today's news, Jurong Tech is involved in a suspected fraud:

1. Inflating inventory by S$50m
2. Inflating sales revenue by $60m

As a retail investor, how would you know that the company that you are investing in did not cook up their books.

To avoid getting into such undesirable situations, you MUST read their annual reports. At least. A few things you can look out for:

1. Comparing across current year and previous year, are the increasing revenue (look at the Income Statement) accompanied by increased cashflow from operations (look at the Statement of Cash Flow). If it is not, and you see a corresponding increase in Account Receivables (look at the Balance Sheet), then it smells fishy. This is a hugh tell-tale sign.
2. Increasing Inventory is typically bad, unless they had plans for expansion.
3. Increasing Accounts Receivable is typically bad, and they may have to make provisions for bad debts at some point.
4. Negative operating cash flow is typically bad, and fishy if they claim to make a profit. Where did the profit go to would be a key question you need to satisfy yourself.
5. Always check the auditor's report for irregularities.

Of course, I'm generalising here.
In this case, looking at Jurong Tech 2007 Annual Report (their 2008 report is no longer meaningful as they are insolvent):

1. Audit report highlighted a suspicious revenue recognition behaviour
2. Made a profit but got negative operating cash flow, due to increasing inventory, increasing account receivable and decreasing account payable.

These 2 observations would probably have turned me off.

Bottom-line: Do not invest blindly into any company without going thru their books and understand any increases in their balance sheet, income statement, and cash flow statements.

Introduction

Importance of Financial Intelligence

Like many people, I was enticed to stock markets, thinking that I am smart enough to beat the millions of people out there and make tons of money for myself.

How wrong were I.

I traded stocks without understanding their business, with each counter just a number without content to me. Basing my judgement on information FREELY available in forums, rumors, hearsay, newspaper reports, etc.

When the dot com burst, lost $.

When 9/11 happened, lost more $.

Then I started to wonder what is wrong. Am I not smarter? Or am I doing the wrong things.

Started to read more books on investing and trading. Realised the importance of Financial Integellience. Without which, we are merely gamblers. Buy stock, check if it goes up or down. No difference from betting big or small on dices.


My Inclinations

Value Investing. Folks like Warren Buffett are my model.

From value investing, comes conservativeness. I tend to be conservative in my analysis, often taking a pessimistic view to derive the valuation. I'll touch on this in other articles as this blog evolves.

Trading is not my cup of tea, as I don't fit the risk profile of a trader, and I have little time to watch the market.

I'm inclined towards long shot equity, in any markets (not restricting to STI).


Objective of this Blog

In order of most importance to least importance:

1. To learn from other people, need not be like-minded, as I believe in looking from different perspective.
2. To share some of my views pertaining to companies and stocks, highlighting certain concepts important to an investor.
3. To attempt to differentiate between market hype (eg. Stock Analyst Recommendations) and reality.
4. To see if advert $ is possible. As the amount is likely going to be small even if it is possible, this is not really a key motivator for this blog.

Disclaimer

1. I'm not from the financial industry, so the information I have may be limited and may not be entirely correct. Please do not base your decision solely on the basis of the information posted here. If you need to use the info here, do double check.
2. My views are my own, and I could have taken positions in the stocks that I may mentioned in any article. So caveat emptor. I will not be responsible for any gains (yep, I don't demand that you give me a treat or anything) or losses.

About Me

As mentioned, I'm not in the financial sector. My interest in stock is to work towards financial freedom. I am currently doing a MBA course to learn more about the finance sector (among other stuff).