The Most Important Thing Illuminated by Howard Marks

I just finished reading my book "The Most Important Thing Illuminated" - by Howard Marks


Below are the summary of the book:

There are 20 important things of Investing highlighted by Howard in his book:

(1) Second-Level Thinking

(2) Understanding Market Efficiency (and Its Limitations)

(3) Value

(4) The Relationship Between Price and Value

(5) Understanding Risk

(6) Recognizing Risk

(7) Controlling Risk

(8) Being Attentive to Cycles

(9) Awareness of the Pendulum

(10) Combating Negative Influences

(11) Contrarianism

(12) Finding Bargains

(13) Patient Opportunism

(14) Knowing What You Don't Know

(15) Having a Sense for Where We Stand

(16) Appreciating the Role of Luck

(17) Investing Defensively

(18) Avoiding Pitfalls

(19) Adding Value

(20) Reasonable Expectations



Summary:

The best foundation for a successful investment - or a successful investment career - is value. You must have a good ideas of what the thing you're considering buying is worth. There are many components to this and many ways to look at it.

To achieve superior investment results, your insight into value has to be superior. Thus you must learn things others don't, see things differently or do a better job of analyzing them - ideally, all three.

Your view of value has to be based on a solid factual and analytical foundation, and it has to be held firmly. Only then will you know when to buy or sell. Only a strong sense of value will give you the discipline needed to take profits on a highly appreciated asset that everyone things will rise nonstop, or the guts to hold and average down in a crisis even as prices to lower every day. Of course, for your efforts in these regards to be profitable, your estimate of value has to be on target.

The relationship between price and value holds the ultimate key to investment success. Buying below value is the most dependable route to profit. Paying above value rarely works out as well.

What causes an asset to sell below its value? Outstanding buying opportunities exist primarily because perception understates reality. Whereas high quality can be readily apparent, it takes keen insight to detect cheapness. For this reason, investors often mistake objective merit for investment opportunity. The superior investor never forgets that the goal is to find good buys, not good assets.

In addition to giving rise to profit potential, buying when price is below value is a key element in limiting risk. Neither paying up for high growth nor participating in a "hot" momentum market can do the same.

The relationship between price and value is influenced by psychology and technicals, forces that can dominate fundamentals in the short run.

Extreme swings in price due to those two factors provide opportunities for big profits or big mistakes. To have it be the former rather than the latter, you must stick with the concept of value and cope with psychology and technicals.

Economies and markets cycle up and down. Whichever direction they're going at the moment, most people come to believe that they'll go that way forever. This thinking is a source of great danger since it poisons the markets, sends valuations to extremes, and ignites bubbles and panics that most investors find hard to resist.

Likewise, the psychology of the investing herd moves in a regular, pendulum-like pattern-from optimism to pessimism; from credulousness to skepticism; from fear of missing opportunity to fear of losing money; and thus from eagerness to buy to urgency to sell. The swing of the pendulum causes the herd to buy at high prices and sell at low prices. Thus, being part of the herd is a formula for disaster, whereas contrarianism at the extremes will help to avert losses and lead eventually to success.

In particular, risk aversion - an appropriate amount of which is the essential ingredient in a rational market - is sometimes in short supply and sometimes excessive. The fluctuation of investor psychology in this regard plays a very important part in the creation of market bubbles and crashes.

Most trends - both bullish and bearish - eventually become overdone, profiting those who recognize them early but penalizing the last to join. That's the reasoning behind my number one investment adage: "What the wise man does in the beginning, the fool does in the end." The ability to resist excesses is rare, but it's an important attribute of the most successful investors.

It's impossible to know when an overheated market will turn down, or when a downturn will cease and appreciation will take its place. But while we never know where we're going, we ought to know where we are. We can infer where markets stand in their cycle, from the behaviors of those around us. When other investors are unworried, we should be cautious; when investors are panicked, we should turn aggressive.

Buying based on strong value, low price relative to value, and depressed general psychology is likely to provide the best results. Even then, however, things can go against us for a long time before turning as we think they should. Underpriced is far from synonymous with going up soon. Thus the importance of my second key adage: "Being too far ahead of your time is indistinguishable from being wrong." It can require patience and fortitude to hold positions long enough to be proved right.

In addition to being able to quantify value and pursue it when it's priced right, successful investors must have a sound approach to the subject of risk. They have to go well beyond the academic' singular definition of risk as volatility and understand that the risk that matters most is the risk of permanent loss. They have to reject increased risk bearing as a surefire formula for investment success and know that riskier investments entail a wider range of possible outcomes and a higher probability of loss. They have to have a sense for the loss potential that's present in each investment and be willing to bear it only when the reward is more than adequate.

Most investors are simplistic, preoccupied with the chance for return. Some gain further insight and learn that it's as important to understand risk as it is return. But it's the rare investor who achieves the sophistication required to appreciate correlation, a key element in controlling the riskiness of an overall portfolio. Because of differences in correlation, individual investments of the same absolute riskiness can be combined in different ways to form portfolios with widely varying total risk levels. Most investors think diversification consists of holding many different things; few understand that diversification is effective only if portfolio holdings can be counted on to respond differently to a given development in the environment.

Oaktree's motto, "If we avoid the losers, the winners will take care of themselves," has served well over the years.

Risk control lies at the core defensive investing. Rather than just trying to do the right thing, the defensive investor places a heavy emphasis on not doing the wrong thing.

Risk control and margin for error should be present in your portfolio at all times. But you must remember that they're "hidden assets." Most years in the markets are good years, but it's only in the bad years - when the tide goes out - that the value of defense becomes evident. Thus, in the good years, defensive investors have to be content with the knowledge that their gains, although perhaps less than maximal, were achieved with risk protection in place...even though it turned out not be needed.

One of the essential requirements for investment success - and thus part of most great investors' psychological equipment - is the realization that we don't know what lies ahead in terms of the macro future. Few people if any know more than the consensus about what's going to happen to the economy, interest rates and market aggregates. Thus, the investor's time is better spent trying to gain a knowledge advantage regarding "the knowable": industries, companies and securities. The more micro your focus, the greater the likelihood you can learn things others don't.

An important pant of getting it right consists of avoiding the pitfalls that are frequently presented by economic fluctuations, companies' travails, the markets' manic swings, and other investors gullibility. There's no surefire way to accomplish this, but awareness of these potential dangers certainly represents the best starting point for an effort to avoid being victimized by them.

Another essential element is having reasonable expectations. Investors often get into trouble by acting on promises returns that are unreasonably high or dependable, and by overlooking the fact that, usually, every increase in return pursued is accompanied by an increase in risk borne. The key is to think long and hard about propositions that may be too good to be true.

Only investors with unusual insight can regularly divine the probability distribution that governs future events and sense when the potential returns compensate for the risks that lurk in the distribution's negative left-hand tail.

Does My Investment Strategy Work for me?

Innotek Q2 result was a disappointment, the bottom line had been declined for 2 consecutive quarters. Thus, it met my Selling Criteria.
I sold all my holding about three months ago as soon after they released their Q2 result.

Two days ago Innotek released Q3 result and to my surprise most of their plans turned out to be quite well. Net profit for 9M has increased to about 7.1mil, Q3 revenue up about 1.3% driven by growth of TV segment and they are on track for their Thailand expansion with completion targetted to be first Half of 2018.

I made my 2nd time purchase of Innotek yesterday at 35.5cts per share as now Innotek meets my Buying Criteria.

I sold my Innotek at 33.5cts per share. Three months after selling, i bought back. Am i in the right track of my Investment Strategy?

I wonder......sometimes i am not very sure of myself too if i am on the right track and if my Investment Strategy works for me. If i keep my Innotek shares until today which i amend my 2nd Selling Criteria a little bit to as long as the revenue does not decline (we are talking abt more than 10% declining), i should give the management longer time like another 2 more Quarters to prove themselves to carry out their business plan or i should just do what i did with Innotek?

In terms of monetary, actually i made much more gain this round with sticking to my current Selling Criteria. I channelled my fund from Innotek to buy Cogent & Ellipsiz. Cogent gave me low five figures profit and Ellipsiz as per current giving me high four figures unrealized profit + realized dividend. And the different between my 2nd time Buying Price to my Selling Price cost me a low four figures.

Honestly i am still puzzled...i guess only time is able to tell me if i need to change my system. Just hope my learning experience will not cost me too much.

While i am still fixing my puzzles, let's continue to learn.........

November 2017 Portfolio Update

The reporting season for 3rd Quarter is finally almost over and all my holding companies have reported:

(1) Sunningdale's Q3 result is good and inline with my expectation. This company is my top favourite company so far and it happens to be my biggest holding too. What i like about this company is the way they operate their business in a predictable manner. The management does not seem to over promise to their shareholders, yet they have shown their confident in putting the best interest of their shareholders. They are careful and full of strategy in executing their business plan. So far i can see this is the only counter i am willing to hold for a very long time for both capital growth & dividend. Unless it is taken offer private, or it meets my Selling Criteria as i have mentioned some time ago in my blog, i am willing to continue holding. However, i will need to monitor their result Q by Q, Y by Y.

(2) Best World's Q3 result is still inline with my expectation. Their Taiwan revenue has dropped in double digits rate, and China revenue has also increased in double digits rate, with a higher profit margin. I am still comfortable with my current holding with Best World, although the market always likes to speculate in this counter. It can be down more than 10% in a single day and it can be up more than 10% in another single day, or it can be down consecutively in a couple of days, and vice versa. Personally, i am not really shaken by the day by day market reaction once i have set up my mind on a certain counter on why i bought them in the first place and why i am still holding them until today. I am looking forward their FY result in February and will decide from there.

(3) 800 Super's Q3 result is also inline with my expectation. A recession free, quite a capital intensive but good in generating cash flow kind of business. Now i am looking forward the commencement of their biomass boiler in the first quarter of 2018 and the completion of the sludge treatment facility. This company is also a long term holding for me, as long as it meets my holding criteria.

(4) Avi-Tech just released their Q1 result yesterday. It is progressing good with increasing top & bottom and about 35% of their current market capitalization in their working capital.

(5) Frencken's Q3 result is good and i am looking forward their FY result in February 2018.

(6) Ellipsiz - Ellipsiz has been turning out to be quite different from their past since they decided to sell off their core business in Probe Card and the retirement of two of their key main management (CEO & CFO) recently. I am looking forward their new business plan and will decide from there.

(7) Cogent - was offered private by Cosco Shipping International about 2 weeks ago at $1.02 per share. I had divested all my Coget shares last week at $1.01 per share and giving me a return of about 28% from my cost of 78.80cts including broker's fee and after minus off the 3.13cts of dividend. I am quite happy to be divested because of their business valuation is higher about 25% from my purchasing valuation at about 390mil. Although the minority shareholders seem trying to push the share price up, and it might end up higher than the current offer price by Cosco, i will still be contented with my selling price at $1.01. I will not pursue for higher price as i think this could be a good offer for Cogent's shareholders to divest their shares.

(8) Trek 2000 International - i made my purchase of Trek 2000 International last Wednesday (a day after they released their Q3 result) at an average price of about 27.50 - 28 cts per share.

The following are in a very brief form why i invested in this company:
(1) My purchase valuation is about 89mil. Their 9 months business has generated net profit of about 7.5mil. I think i am buying with the PE of about 10 or less.

(2) Trek 2000 International has positive working capital of about 68.1mil (net cash & equivalent of about 45.7mil and quoted investments of about 22.4mil).

(3) They are operating in asset-light business model with a low capex. Net cash used in capital expenditures is only about 43.5k for 9M2017, and about 2.1mil for 9M2016.

(4) The bottom line has been increasing YtoY.

(5) They are an innovative company which has invented ThumbDrive, FluCard, & i-Ball, currenly striving into medical technology industry.


Some of the points worth my consideration when purchasing this company:
(1) Trek 2000 International is currently in phase two of a review, conducted by forensic accountant RSM Corporate Advisory about certain transactions between one of its subsidiaries and a customer.

(2) The topline has been declined 33.4% YoY, although Trek mentioned it was as the result of the disposal of Racer Technology Pte Ltd in Q1 this year.

(3) Electronics industry which they are in, is very competitive and cyclical.



* Above are just my thoughts. The accuracy or completeness of the information above cannot be guaranteed. 

What makes a person to excel in everything he or she does?

"Ancora Imparo" are said to be spoken by Michelangelo (the largely self-taught Italian sculptor, painter, architect) on his 87th birthday.

Translated from the Italian, "Ancora Imparo" means "I am always leaning."

I think to be able to excel in our life, we have to always learn and open up our mind to know and learn new things. Things always change, people change, environment changes. The moment we stop learning and think we have enough to do something, we will start to miss out a lot of things.

This applies in our family, work, and society life.

Long Term Investment in Stock Market

Just sharing:
(I am no longer holding the shares now, as i sold in 2014).
I bought UMS shares in 2013 abt 38.5cts.

If let's say i bought 100,000 @38.5cts/share. It had cost me $38,500 (my capital).

UMS issued 2 times bonus shares in 2014 & 2017 every 4 shares to 1 share. So my 100,000 shares would had become 100,000 x 125% x 125% = 156,250 shares.

UMS paid 4 times dividend a year (quarterly) with total of 6cts per year (except 2013, UMS paid 6.5cts). So i should have collected:
2013: 100k x 6.5cts: $6500
2014: 125k x 6cts: $7500
2015: 125k x 6cts: $7500
2016: 125k x 6cts: $7500
= $29,000.
UMS value as per time of writing = 156,250 x $1 = $156,250.
Value + dividend = $185,250.

This is just an example of one stock which such capital/portfolio growth can only be achieved through long term holding in a good company. Of course, we have to continue monitoring the company quarter to quarter, year to year to check if the result is still on track. Should the result out of track and the share price growth is much higher than co's growth rate, we should not hesitate to divest our holding. Or should we found other co with better prospect and lower pe, we should divest and move to others.

For this reason, i strongly believe long term investing is the best.

Just sharing my humble opinion.

Appreciating The Role of Luck - from the book "The Most Important Thing Illuminated" by Howard Marks

1. We should spend our time trying to find value among the knowable- industries, companies and securities - rather than base our decisions on what we expect from the less- knowable macro world of economies and broad market performance.
2. Given that we don't know exactly which future will obtain, we have to get value on our side by having a stronger held, analytically derived opinion of it and buying for less when opportunities to do so present themselves.
3. We have to practice defensive investing, since many of the outcomes are likely to go against us. It's more important to ensure survival under negative outcomes than it is to guarantee maximum returns under favorable ones.
4. To improve our chances of success, we have to emphasize acting contrary to the herd when it's at extremes, being aggresive when the market is low and cautious when it's high.
5. Given the highly indetermine nature of outcomes, we must view strategies and their results- both good and bad - with suspicious until proved out over a large number of trials.

Why i seldom write more about the company i have purchased?

So far I seldom write more about the company i have purchased. The reason being is i am doing my best to focus on building my Investment Strategy into a system. A good system that suits my temperament to sustain me from my journey as an investor. A company valuation can be differ from different point of view and none of them will be the better answer. There will always be argument to thing which is yet to happen.

Instead of focusing on the market reaction, e.g. the shares price has dropped, etc etc, i think it is much better to focus our concentration and energy into studying the system better and implementing it into our investment.

Personally i think making money in shares market is not easy at all. In fact, it is very difficult as it involves many aspects in the whole market: different type of people from all over the world, the economic, the political issues, etc etc. Can we master all of these things? Abolutely the answer is No. In fact, no one is able to predict the market. But in our part, what we can do is to master ourselves, master our strategy, building a sustainable system that is able to survive us either in bull or bear market.

I will continue to deepen my investment knowledge my reading more investment books. I hope i can reach my seven figures portfolio soon which will enable me to generate more passive income from there. Wish me all the best!!!

September 2017 Portfolio Update

I added Ellipsiz @74.5cts per share (my purchased valuation is at $124mil) last month. The reason of my purchase are Ellipsiz proposing dividend of 6.5cts/share for FY2017, sold her probe card business for $88.3mil with cash on hand of $53.7mil and about $1mil of debts. This company is a very interesting company to me, i am excited to grow along with the business development.


My current Portfolio:

(1) Sunningdale

(2) Best World

(3) Frencken

(4) Avi-Tech

(5) Cogent

(6) Ellipsiz

(7) 800 Super


I almost finish my 22nd investment book "Warren Buffet Accounting by Stig Brodersen & Preston Pysh". My next book which i already bought will be: "The Most Important Thing Illuminated by Howard Marks & Paul Johnson". Wish me luck!!!

August 2017 Transaction Update

The reporting season for Q2 has just been over, and i am quite satisfied with all my holding companies, except Innotek.


(1) Sunningdale has been performing very well and giving an Inaugural Interim Dividend of 2.5cts per share for HY2017. This is above my expectation.

(2) Best World has been performing well too and giving Dividend of 1.5cts per share for HY2017. The shares price has been tumbling from about $1.62 to as low as $0.89 and as per today it is closed at $1.18/share. All this happened mostly by the news of a Chinese government regulator said it is cracking down on pyramid schemes.

Am i affected by the fluctuation of Best World shares price?
Share price is only matter to me when i want to make my purchase for a business or when i am considering to sell my holding.

Based of HY2017 result, i am quite satisfied with Best World performance, with both top & bottom lines have been increasing QoQ and YoY, dividend payout is also increasing, management is confident with their business prospect for few years down the road. I think the current valuation is still not high comparing to its growing rate. So far i am not affected much by the volatility of Best World shares price.

(3) 800 Super's FY2017 result is inline with my expectation. It should be performing well for next and following financial years. I might want to accumulate more if the shares price drops.

(4) Avi-Tech's FY2017 result is also inline with my expectation with total dividend of 2.8cts for FY2017 (paid 1ct in HY2017 & 1.8cts have been proposed for FY2017). 

(5) Frencken's HY2017 result is impressive and i am looking forward their next reporting results.

(6) Innotek's Q2 result is quite a disappointment. I would expect the Q2 result to be at least same as Q1 result. Nevertheless, it is not easy for a company to make a turnaround given there are still much efforts and works the management have to put in. I like the honesty of the management to share with the shareholders the current situation of the company and the few steps they are currently taking to embark new challenging ahead. I do hope they can perform better for the next few quarters and given their strong cash holding position, i will consider to reinvest back again when things are showing consistent improvement. Currently i have divested all my shares as it meets my Selling Criteria (to have Significant Lower Profits for 2 Consecutive Quarters). 

(7) I made my 2nd time purchase of Cogent at the price of 81.5cts/share. It is quite high price comparing to today's closing price at 80cts/share. However, looking at this company's business vision and mission, business operation, the intangibles assets they have currently, i am quite confident their business worth much more than current valuation and it is still room to grow their business.

Above are just my thoughts. 

Warren Buffett's Ground Rules

I just finished my 21st book "Warren Buffett's Ground Rules" 2 days ago.

Now i am searching for my next investment book, most probably will get it this weekend.


Below are some key points i learnt from the book and i think it is better for me to list them down to remind myself:

(1) Warren Buffet teaches investors that the power of compounded interest is unmatched by any other factor in the production of wealth through investment. Compounding over a life-long investment program is your best strategy, bar none. The two determining factors of the ultimate result of compounding program are: (1) the annual average rate of gain and (2) time.

(2) Investing requires much of our energy & efforts into it, if we are not interested, unable, or unwilling to dedicate the time and efforts to our investments, we should buy index.

(3) Three type of Investment of Warren Buffet:

(3.1) The General: 

The principle of investing in company are investing largely focused on purchase securities at price less than the intrinsic value as determined by careful analysis, with particular emphasis on purchase of the securities less than their liquidating value.

An appraisal of a company can be derived of either the value of the company: [1] assets & [2] earnings power.

While principles never change, methods can be applied differently depending on given investing environment. 

Basically there are 3 methods used by Warren Buffet during his Partnership era:
      [1] The first method is investing with net-net and ultra-cheap stocks based on quantitative approach.
      [2] The second method is investing in companies which are not statically cheap based on quantitative approach but has a tremendous amount of future earnings power.
      [3] The third method is investing in companies which are able to provide high returns of earning, business which are great, enduring and sustainable business model that enables their earnings to be compounded over the years.

(3.2)  Workout: more commonly known as merger arb or risk arb- which involves bets on the likelihood that an announcement transaction (usually one company buying another) will actually close.

(3.3) Controls: Investment is more intelligent when it is most businesslike and business is most intelligent when it's more investment-like. Buying a stock is like buying a business which either discounted to its intrinsic value or earnings power. The continuing of buying part of the businesses through purchasing of the businesses stock at discounted price until we own a majority of the businesses then we become the majority of the shareholders (Controls).

(4) Investing in stock should be done with Conservatism and not Conventional.

Good results in investing come primarily from a properly calibrated balance of hubris and humility: 

1. Hubris enough to think we can have insights that are superior to the collective wisdom of the market and
2. Humility enough to know the limit of our abilities and to be willing to change course when errors are recognized.

We will have to evaluate facts and circumstances, apply logic and reason to find hypothesis, and then act when the facts line up, irrespective of whether the crowd agrees or disagrees with our conclusions.

(5) Concentrating portfolio within our circle of competence can produce the best result.
Concentrating vs Diversification: Better to be roughly right than precisely wrong.

(6) If we can identify 6 wonderful businesses, that is all the diversification we need. And we will make a lot of money. Going into the 7th business instead of putting more money into the 1st business is going to be a terrible mistake.

(7) " I would rather sustain the penalties resulting from over-conservatism than face the consequences of error, perhaps with permanent capital loss, resulting from the adoption of a "New Era" philosophy where trees really do grow to the sky" - Warren Buffet on February, 1960.

(8) We should be looking for the management with 3 things: intelligence, energy, and integrity. Integrity is what counts first. If someone does not have integrity, we want them to be dumb and lazy.

(9) "So the really big money tends to be made by investors who are right on qualitative decisions but, at least in my opinion, the more sure money tends to be made on the obvious quantitative decision" Warren Buffet, 1967.

The Next Investment Books in My Target List - to be completed by March 2018

Below are the list of my next target Investment Books which i aim to complete them by March 2018:

1. The Most Important Thing Illuminated by Howard Marks & Paul Johnson

2. Poor Charlie's Almanack by Peter Kaufman

3. The Little Book of Common Sense Investing by Jack Bogle

4. The Outsiders by William Thorndike Jr

5. Jack: Straight from the Gut by Jack Welch & John A. Byrne

6. Warren Buffet's Ground Rules by Jeremy C Miller

7. Where Are the Customers' Yachts? by Fred Schwed

8. Warren Buffet Accounting by Stig Brodersen & Preston Pysh

Good luck to me!!!

My Investment Books - Update

Below are the list of my Investment Books i have read/reading:


(1) One Up on Wall Street --by Peter Lynch

(2) The Zulu Principle --by Jim Slater

(3) Intelligent Investor --by Benjamin Graham

(4) Common Stocks & Uncommon Profits --by Philip Fisher

(5) The Essay of Warren Buffet --by Lawrence A. Cunningham

(6) Behind the Berkshire Hathaway Curtain --by Ronald Chan

(7) Value Investing in Growth Company --by Rusmin & Victor Chng

(8) Investlah --by Serjing, Sudhan, Wei Lin

(9) Buffet's Bite -The Essential Investor's Guide to Warren Buffet's Shareholder Letters --by L.J. Rittenhouse

(10) Your First Million - making it from stock --by Dr Michael Leong

(11) The Neatest Little Guide to Stock Market Investing --by Jason Kelly

(12) The Value Investor --by Ronald Chan

(13) Fooled by Randomness --by Nassim Nicholas Taleb (not completed yet)

(14) Security Analysis --by Benjamin Graham (not completed yet)

(15) The Winning Investment Habits of Warren Buffet & George Soros --by Mark Tier

(16) The Buffet Essay Symposium with Warrent Buffet & Charlie Munger --by Lawrence A. Cunningham

(17) Buffettology --by Mary Buffet & David Clark

(18) Simply Brilliant --by William C. Taylor

(19) Long & Short: Confession of a Portfolio Manager (Stock Market Wisdom for Investors) --by Lawrence Creatura

(20) The Little Book That Still Beats The Market --by Joel Greenblatt

My Investment Books - Update

Below are the list of my Investment Books i have read/reading:


(1) One Up on Wall Street --by Peter Lynch

(2) The Zulu Principle --by Jim Slater

(3) Intelligent Investor --by Benjamin Graham

(4) Common Stocks & Uncommon Profits --by Philip Fisher

(5) The Essay of Warren Buffet --by Lawrence A. Cunningham

(6) Behind the Berkshire Hathaway Curtain --by Ronald Chan

(7) Value Investing in Growth Company --by Rusmin & Victor Chng

(8) Investlah --by Serjing, Sudhan, Wei Lin

(9) Buffet's Bite -The Essential Investor's Guide to Warren Buffet's Shareholder Letters --by L.J. Rittenhouse

(10) Your First Million - making it from stock --by Dr Michael Leong

(11) The Neatest Little Guide to Stock Market Investing --by Jason Kelly

(12) The Value Investor --by Ronald Chan

(13) Fooled by Randomness --by Nassim Nicholas Taleb (not completed yet)

(14) Security Analysis --by Benjamin Graham (not completed yet)

(15) The Winning Investment Habits of Warren Buffet & George Soros --by Mark Tier

(16) The Buffet Essay Symposium with Warrent Buffet & Charlie Munger --by Lawrence A. Cunningham

(17) Buffettology --by Mary Buffet & David Clark

(18) Simply Brilliant --by William C. Taylor

(19) Long & Short: Confession of a Portfolio Manager (Stock Market Wisdom for Investors) --by Lawrence Creatura (have purchased online and waiting for the book to arrive)

May 2017 Transaction Update

It has been more than one month since i last updated my blog. I have been quite busy recently: both going through some of reports released early of this month and also with my work.


What i have Bought?


I have browsed through total of 339 reports of different companies for this Quarter. As usual, i eliminated all Blue chips & S chips, property, finance, oil & gas, and commodities counters.

Out of the 339 companies, i selected Frencken which met my buying criteria and i quickly bought 100k shares @39cts per share in the morning of 12th May 2017 after they released their Q1 report the night before. I also had went through about 8 quarters of their reports & Annual Reports.

Below are the preliminary thing i am looking at Frencken before going to their subsequents 8 quarters of report & their Annual Reports:

(1) The company reported an increase of 17.9% revenue YtoY in the same quarter.
(2) Gross profit margin increases to 17.2% from 15.2% YtoY in the same quarter.
(3) PBT (Net profit before tax) increases to 8.4mil from 4.4mil YtoY in the same quarter.

(Revenue increases by 17.9% but net profit before tax increases by 91%),
(4) Disposal of PESB (one of the business unit from IMS division) and boosted their cash level to 60mil & 33.2mil after deducting bank overdraft.

Will elaborate more when i have time to do so.


What i have Sold?


I decided to cash out about 18 - 20% of my equity in this quarter, so in the case the market shocks and i will not easily be shocked too.

I sold all my holding of Global Invacom @16.3cts/share & Taisin Electric @43.5cts/share.


What am i holding now?


(1) Sunningdale

(2) Best World

(3) 800 Super

(4) Avi-Tech

(5) Innotek

(6) Frencken

How important is Business Growing Rate in my investment?

Business Growing Rate in my investment:

(1) The compound growing ratio of the business in a percentage change of variable in a specific time (annually).

(2) They are the growing rate of: Revenue, Gross Profit, Net Profit, Cash, & Dividend.

(3) Personally, i think it is not possible to determine the specific value of a business in a specific time, but it is very important to determine the annual compound growth rate of the business based on several past historical trends together with current business & management's plan.

(4) To compare it with other investment.


So, Business Growing Rate (BGR) is one of the most crucial thing to look at in my investment.

Element 12 - What to Do when the System doesn't work?

What to Do when the System doesn't work?


(1) To re-access the System by referring back to my book “The Winning Investment Strategy of Warrent Buffet & George Soros”, to compare my system with theirs.
(2) To keep reading investment book at least 1 book in every 2 months.
(3) Periodically re-access my system with my new knowledge every now and then.
(4) Think thoroughly about how successful investors' system work and determine the different between my system and their systems.
(5) Open for any input from those people that i think it makes sense in helping me improving my system.
(6) Always be humble and know that i need to keep learning more and more.
(7) Trust & be confident in my system and follow it thoroughly with always feel hungry of business investing knowledge and wisdom of life.

Element 11 - Handling Mistakes?

Handling Mistakes?


(1) To sell off all the wrong company/counter immediately including taking loss.
(2) To take mistake as my learning part, be glad of the mistake but promise to myself that i will never repeat the same mistake again in future.
(3) To think thoroughly about the mistake: why the mistake happens, how it happens, what is the cause of the mistake to happen or happen again in future, the consequences of the mistake to me now and in future, the learning point from the mistake, and the interrelation between the mistake to my investment system/strategy.

Element 10 - Protection against Systematic Shocks as a Market Crashes?

Protection against Systematic Shocks as a Market Crashes?


(1) Keep dividend as war chest.
(2) Keep at least 30% cash from my divested shares.
(3) To have ratio of 18 : 82 ratio of cash : stock in my portfolio.
(4) To add fresh fund periodically.

Element 8 & Element 9 - Portfolio Structure and leverage? & Search Strategy?

Portfolio Structure and leverage?


(1) Maximum 7 counters but preferably 6 counters for easy monitoring.
(2) No leverage.


Search Strategy?


(1) Solely through reading Financial Reports which meets my criteria in Element 1.

Element 7 - When to Sell?

When to Sell?


(1) When the Revenue Drops significantly for 1 to 2 Quarters, will divest all my shares.
(2) When the Profit Drops significantly inline with the Gross Profit Margin & Net Profit Margin.
(3) When the Ratio of Share price growing rate to Business growing rate is too high (<2.4x).
(4) When i have found another company with much better offer with Element 1.

Element 6 - Monitoring Progress of Investment?

Monitoring Progress of Investment?


(1) Read Financial Reports (Quarterly, Half Yearly, Annually, Annual Reports).
(2) Attend AGM.

Element 5 - How much to Buy as a Percentage of Portfolio?

How much to Buy as a Percentage of Portfolio?


(1) First time will buy at least of 20k and maximum of 40k .
(2) Subsequent will add 10k - 20k.
(3) Maximum 20% of Portfolio.

Element 3 & Element 4 - What Price to buy? & How to Buy?

What Price to buy?

Same as item (1) & (2).


How to Buy?

Using cash & Buy Online.

Element 2 - When to Buy?

When to Buy?


(1) Immediately once i got a company meets the above point no (1) criteria.

(2) To add more into my current holding with 2 CONDITIONS:
      1. When the companies reported outstanding result in increasing of revenue & profit above my expectation.
      2. When Mr Market offers a good bargain, like 30% below my initial purchase price.

Element 1 - What to Buy?

What to Buy?


My simple element in Buying Stock (i am working towards this element to be exact):

(1) Small capitalization company with low PE (PE is lower than 8).

(2) Has growing/expansion plans in the near term (less than 2 years).

(3) No debts/low debts with Net Cash.

(4) Good in generating cash flow-in.

(5) Good management and good management comments' connection from one report to another.

(6) Financial report is written using novice languages and easy to understand/interpret.

(7) Gross profit margin >15% and Net profit margin >5% (preferably).

(8) Management is good in allocating/deployment of retained earnings either in organics, in organics growth or giving as dividend to shareholders.

(9) To avoid commodity, property, finance, B-chips, S-chips, and large cap stocks.

12 Critical Elements in Building Succesful Investment Sytem (by Mark Tier)

I just finished reading "The Winning Investment Habits of Warren Buffet & George Soros" by Mark Tier.
(This book is highly recommended for those who are serious want to succeed in investing).

Mark Tier analyze the methods of Warren Buffet and George Soros and see why they are so succesful - both of them use different approaches and their methods are very different, yet Tier show, the keys to their success are amazingly similar.

The author mentioned that each Master Investor's system is built from the same 12 CRITICAL ELEMENTS:

(1) What to buy

(2) When to buy

(3) What price to pay

(4) How to buy

(5) How much to buy as a percentage of portfolio

(6) Monitoring progress of investments

(7) When to sell

(8) Portfolio structure & leverage

(9) Search strategy

(10) Protection against systemic shocks such as market crashes

(11) Handling mistakes

(12) What to do when the system doesn't work


We have to list down our 12 Critical Elements in investing, follow thoroughly the system.

I am listing down my 12 Critical Elements to build a better system for my Investment!

Will i trade for a catalyst play? Why?

If i remember correctly, i made about $5k from trading of Matex International and $17k from SBI Offshore from catalyst play in 2014.

I hold Matex for 3 days only (contra) and SBI Offshore for a couple of weeks. Am i happy now to be able to guess correctly from this trading and make more than $20k in less than a month?

My answer is "No".


Since i started my blog middle of last year, i have promised myself that i will not be doing trading for catalyst play anymore. I want to focus on long term investing, invest in a company that i am comfortable with, based on my findings. If i continue doing trading for catalyst play, i am very sure i will get burned one day in the future. When? I do not know.

When i continue to profit from this kind of trading, i will get addicted and in my subsequent round of trading, i am very sure i will bet higher and higher amount of money comparing to my previous trading. This is bad for a long term investor, and i should keep this kind of mindset far away from me.

Personally i think, the key in successful investing is to find a right strategy that meets our personality & philosophy, and to stick to that strategy (be consistent).


This is solely my personal view for my own personality. I just need to keep reminding myself.

Investment Books

Below are the list of Investment Books i have read/reading:

(1) One Up on Wall Street --by Peter Lynch
(2) The Zulu Principle --by Jim Slater
(3) Intelligent Investor --by Benjamin Graham
(4) Common Stocks & Uncommon Profits --by Philip Fisher
(5) The Essay of Warren Buffet --by Lawrence A. Cunningham
(6) Behind the Berkshire Hathaway Curtain --by Ronald Chan
(7) Value Investing in Growth Company --by Rusmin & Victor Chng
(8) Investlah --by Serjing, Sudhan, Wei Lin
(9) Buffet's Bite -The Essential Investor's Guide to Warren Buffet's Shareholder Letters --by L.J. Rittenhouse
(10) Your First Million - making it from stock --by Dr Michael Leong
(11) The Neatest Little Guide to Stock Market Investing --by Jason Kelly
(12) The Value Investor --by Ronald Chan
(13) Fooled by Randomness --by Nassim Nicholas Taleb (not completed yet)
(14) Security Analysis --by Benjamin Graham (not completed yet)
(15) The Winning Investment Habits of Warren Buffet & George Soros --by Mark Tier (still reading)


It is a short list, i am doing my best to read at least 1 book in 2 months time, so 6 books in a year.

My Portfolio Update as of 12th February 2017

I added some shares of 800 Super last month. 

Below are my latest Portfolio update as per 12th February 2017:

(1) Sunningdale Tech: bought @$1.02/share
(2) Best World: bought @71cts/share (ex-cludes Bonus Share of 4 to 1)
(3) Global Invacom: bought @12cts/share
(4) Avi-Tech: bought @28.85cts/share
(5) 800 Super: bought @84cts/share
(6) Innotek: bought @24.4cts/share
(7) Tai Sin Electric: bought @38cts/share

Actually i feel a little uncomfortable with Global Invacom with their performances so far (not the share price, but the business performance from their reports).

I will wait for their Q12017 in May 2017, then will decide from there if i will divest all my shares in this company. 

The best company to invest in and yet the most challenging task for an Investor is?

Personally, i am doing my best to look for a company that i can hold or i wish to hold in a time frame of indefinitely, meaning hold the company for as long as i can. Why?


This kind of company offers:

(1) A good economic moat,

(2) A discounted price to value (my buying price to the real value of the business),

(3) Business run by reliable and good management who care for the business more than the shareholders,

(4) A good business which most of long term investors are interested to own the shares and keeping them for longer term,

(5) Shares of this kind company which are not usually loved by traders/punters, thus the price of the share will be less volatile.


This is a very challenging task in investing. It is not easy at all, but it is the best type of company to invest in.

What is the interrelation between Wisdom & Long Term Value Investing?

In my opinion, wisdom and long term value investing are interrelated to each other. A person has to be wiser in order to be successful in long term value investing. In other words, investor is forced and trained to be wiser if he/she wants to succeed in long term value investing. And when an investor has made consistent gains from his/her long term investing in a long period of time let's say 10 years and above, it is to be sure that the investor is a wise person or at least is a wiser person.

Below are the characteristics of a successful Long Term Value Investor:

(1) To be proactive learners - the more the investor learn the less he/she knows.
"Stay Hungry, Stay Foolish" - Steve Jobs

(2) Always be humble
Humility is very important. It makes the investor to improve his/herself to be better and be receptive to new ideas/ways.

(3) Always do detailed study and based on data
Always do a detailed study before making a decision. Never decides based on pure assumptions.
“You are right not because you think you are right or people think you are right but because your data is right”. - Warren Buffet.

(4) Be patient and able to control emotion
After doing a detailed study on his/her investment choices, the investor will be patient in waiting for the return to be materialized. The investor should be able to control his/her own emotion from fear or greed (unnecessary feeling based on emotions).

(5) Focus, discipline & persistent
To succeed in long term investing, an investor has to:
- focus on the industry he/she is more familiar with,
- taking one step at a time, persistent and steady,
- continuing focus to his/her long term goal.

(6) Strive for risk

Stock investing involves risk: in any business, there is a possibility that the business plan does not turn out according to what the investor has gained from his/her analysis. 

However, the investor can minimize the risk by studying thoroughly. 

To be successful in investing, investor is required to strive for risk.

"Risk comes from not knowing what you are doing." - Warren Buffett