Investment Firm with Value Investing

Some investment firms that do value investing:

1. Berkshire Hathaway
2. Third Avenue Value Fund
3. Kahn Brothers
4. Neuberger Berman

Firms that are in for the long haul (but may not necessarily be value investing based):

1. Capital Group
2. Temasek Holdings
3. GIC

Value Funds

1. Dodge & Cox Stock. Holdings here. Symbol = DODGX
2. American Century Equity Income. Holdings here. Symbol = TWEIX
3. Torray. Symbol = TORYX
4. Third Avenue Value 

Interesting Firms

1. Sanford Bernstein 

Companies potentially affected by Dubai

From Straits Times, 28 Nov 2009.

Dubai government investment firm Dubai World is asking for a 6 months delay in repaying a S$81b debt.

Potential maximum exposure:

1. HSBC - US$17b
2. Stanchart - US$7.8b
3. Barclays - US$3.6b
4. Mitsubishi UFJ Financial & Sumitomo Mitsui - US$xxx million (hundreds of millions)

Singapore companies potentially affected:

1. DBS (south beach project) - Total cost of South Beach project was reported to be S$2.5b
2. UOB (south beach project)
3. OCBC (south beach project)
4. SMRT (partnership with Nakheel) - 6 year contract worth S$120m
5. Labroy Marine - ?
6. Pan-United Marine - ?

US Stock Seasonality Site

Came across this site that does some seasonality analysis on US stocks (only). Added it to the list of useful sites on the right panel.

http://www.customeradmin.net/scharts/chartDisplaySeasonal.jsp

Seasonality may play a part for some companies, due to seasonal earnings report (eg. christmas period for retailers), or due to dividend policies. Of course, do validate if these reasons for the seasonality factors are still relevant prior to taking position in the stock.

Analyzing Companies

Just to drop some mental notes for reference.

When to use Price-Earnings (PE) ratio and when to use Price-Book (PB) ratio

Typically, use PB for banks, capital intensive, violatile, and cyclical industries. The rest PE will be more relevant. Of course, no harm looking at both, but need to know which is more relevant for the particular company.

Valuation

For conglomerates, use sum-of-the-parts valuation to get the fair value for the company.

Using the right tools

For range markets, use range tools like stochastic oscillator, RSI, bollinger bands.
For trend markets, use trending tools like MACD, moving averages, trendlines.

Indicators

VIX index to observe the volativity of the market.
M2 $ supply to observe the liquidity of the market.
Yield curve to observe the steepness of the curve (gradient) to observe the volativity of the market.

Stop Loss

Stop loss level should be adjusted only at significant price movements, else will end up activating the stop loss prematurely.

Other things to look out for

1. Insider trading transactions. Typically, if the management is buying in themselves, they are trying to signal that they are confident and bullish about their company.
2. Volume of the transactions. A low transaction stock could result in a liquity trap, whereby if you need to get back your $ fast, you will end up selling at a much lower price just to get a buyer.
3. Owners of the company. Find out about their style, whether they are here for the long haul (eg. GIC, Temasek, Capital Group), or out to make a quick buck.
4. Seasonality of the company stock. Some company stock tend to go up during certain months of the year. Most of the time it is the cyclical effect of their earnings, or the dividends.

Subtle stuff from Annual Reports

Some items from Annual Reports that are often passed over, but warrants some scrutiny.

1) Amount of tax that the company pays as a percentage of their earnings before tax
If the percentage is less than those typically levied by the country, do not be too happy and think that the company is good at managing their taxes! On the contrary, this could (not always, but could) be a tell-tale sign that the earnings reported in the Income Statement is overstated. Thus actual tax paid to the taxman is lesser. This info can be found in the Income Statement and Cashflow Statement.

2) Depreciation Policy
Look at how lax or conservative their depreciation policy is. For example, a conservative company may depreciate their plants over say, 10 years. While another company may depreciate it over 30 years. The one that depreciate over a longer period, may be able to report a higher earnings figures since the depreciation expenses are lower (spreaded over a longer period), even though both may have the same revenue and other cost expenses. This information can be found under the Financial Notes section of the Annual Report.

3) Financial Commitments and Obligations
These may include items like operating leases. For account purposes, if an event is deemed likely to happen, it will have to be accounted in the Balance Sheet. If an event is deemed 50%-50% of happening, then it will be reflected under the Financial Notes section of the Annual Report. However, sometimes a event that is bound to happen, such as a commitment for a long term lease which is not paid up yet, ends up in the financial notes. Such commitment has to be paid for eventually, and may rank in situ with a interest-free debt.