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Oriental Watch Holdings

If you are in Asia and you consider yourself a value investor, Hong Kong is a great place to find bargain companies at more than fair prices. And that hunt begins in Hang Seng Index. Although the index, a representative of market performance has held its ground at 23700 levels with respect to global indices, our screens have begun to show a number of candidates worth considering. (more…)

Low PB

Swing Media Technology Group : A Potential Value Trap

Swing Media Technology Group I spend my days looking at companies and their annual reports. And what I do on a daily basis is to try and understand the businesses of these companies from these annual reports. The annual reports, the financial statements and the notes to the financial statements can give you an understanding into the operations of the company that one is researching. Amongst my favourite places to search for undervalued securities are stocks which are trading below book value. (more…)

Case Study

This Is One Of The Reasons Why Chinese Billionaires Are Buying US Companies

Chinese billionaires have been on a buying binge in the US. This is partly due to slower economic growth in China and a perception that the RMB will continue to devalue.

Looking at the USD/RMB chart here, the strengthening of the  USD to RMB can be seen to have begun from 2014 or so. And so the acquisition of US companies began. Some of the acquisitions that have occurred so far are:

  • ChemChina's acquisition of Syngenta
  • HNA Group buys Ingram Micro for $6 bill
  • Blackstone to sell Strategic Hotels & Resort for $6.5 billion

and more...

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Behavioural Finance

Do Not Buy Chip Eng Seng Just Yet

There has been a lot of talk in the media regarding Chip Eng Seng of late. I know. The story sounds good. Before I go any further, let me start off with a brief introduction of Chip Eng Seng's business. It's main business segment is construction where it operates as a contractor. Also over the last decade or so, it has also ventured into the property development business, hospitality and property investment businesses. Its construction and property development business makes up more than 90% of its revenue. On the whole, I think that management is forward looking and industrious.That is also the reason why Chip Eng Seng has branched into hotel ownership and property development. The  operations of a hotel business do provide a recurrent revenue base which would act to bolster returns. But even so, the hotel business is a cyclical one. So is the property and construction business. As investors, we should take note of that fact.

Let us get back to the numbers, the after tax reported earnings of Chip Eng Seng.

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Behavioural Finance

Glamour Stocks Vs The Ugliest Of The Ugly

"All that glisters is not gold; Often have you heard that told: Many a man his life has sold But my outside to behold: Gilded tombs do worms enfold Had you been as wise as bold, Your in limbs, in judgment old, Your answer had not been in'scroll'd Fare you well: your suit is cold.' Cold, indeed, and labour lost: Then, farewell, heat and welcome, frost!"

-William Shakespeare

I had to do this.

A quote from William Shakespeare. About how all that glitters is not gold. Or what seems to be gold on the outside may not be gold on the inside and what seems to be gold on the inside may not be readily apparent to others on the outside. The depth of this man's wisdom is timeless and such is William Shakespeare, a man remembered for his profound literary works.

This idea that not all glitters is gold can also be applied to sensible investing. The glamour stocks of today will be the down trodden of tomorrow due to the reversion to mean, a mental model borrowed from statistics.

I would have to say that in a small subset of glamour stocks, the above may not hold true. Some glamour stocks continue to be glamour stocks because of the strong moat which they posess. And this is the realm of Warren Buffet and Charles Munger. From my experience, it is very difficult to spot such opportunities. And even when you find a company that is moat-worthy , how does one determine the price to pay for such a company? That is absolutely the reason why Warren Buffet mentioned that to be successful in investing, one need only find 20 such companies in a single lifetime and sit on it. Personally, i have not reached that utopian situation. I am still working on it. But I have developed my own mental models to deal with this issue but that is beyond the scope of this article for now.

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