Ignorance In Investing - It is funny how people never ever learn from their mistakes. This is something I see over and over and over again. While fools say that they learn from experience, the wise say that they'd rather learn from the experience of others. To that, I say Amen! I would rather learn vicariously through the eyes of another. As a value investor, my vulnerable persona and esteem takes a royal drubbing whenever I lose money. And I can tell you, losing money is not something that I can smile at. And I believe that this is the same for many investors out there. But unlike many investors out there, I believe that I am well aware of my limitations as an investor. Coupled with some real world experience, this gives me an edge over others. This is not meant to be a self inflating article but sincerely, I hope to impart some these lessons that I have learnt with as much candour as I can possibly muster.
Beat The Herd Mentality To Improve Investment Results Beating the markets is beating the herd mentality.T he intelligent investor is a great book to start reading for amateur investors. The book is rich in quantitative data but readers may find it hard to swallow as the language is written with a terse archaic style. But what the book does not touch on is how to be an emotionally intelligent investor and beat the herd mentality. While numbers are easy to handle, one's emotions can prove to be an inconquerable mountain like Everest. And for most of us, this may very well be the final obstacle to being an investor great. Descendants Of The Herd (more…)
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.
"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!"
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.