Benjamin Graham

Hong Leong Asia Ltd – Notes From My Investing Journey

Hong Leong Asia  On the 27th of November 2016, I noted an entry into my investing journal. My modus operandi is to create a master folder of companies that I am interested in. And within these folders contain the information with which I do my research. The folder may also contains annual reports, links to news articles in the media and any filings related to the company. Within 1 of these master folders contained a company called Hong Leong Asia Ltd, a holding company of various subsidiaries operating in diverse industries. It has a total of 5 core business segments. They are: (more…)

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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Case Study

AEI Corporation : Attractive Risk And Reward

AEI CORPORATION 

AEI Corporation is not new to me. In fact, since my days in university, this did pop up on the screen then. And that was more than a decade back. Incorporated since 1983, the company's operations include the import and export of aluminium products used within the electronics industry and also in the buildings and infrastructure segment. As you can guess, it should be considered a cyclical, moving and ebbing with the flow of economic activity. However an operational history of more than 30 years tells an inferential story of management doing an at least okay job at keeping the business alive through 1997 crisis, the dotcom bubble and the subprime crisis of 2008.  

The price to book value currently stands at a paltry 0.35 at the time of this writing. Since then, it has moved lower to 0.27.  This is not going to be an in depth analysis. Neither is it going to be a recommendation to buy or  sell. I suppose what I am trying to drive at is that bargains are beginning to appear and this could be a possible bargain since the advent of the decline in oil prices. The market is always forward looking and of course, not to mention a manic depressive, which should work to the smart investor's advantage. That being said of course, it is up to investor to recognize opportunities around them.  The recognition of potential opportunities, putting them on watchlist, studying them and waiting for the right entry price which represents a margin of safety is what all investors ought to do. But many don't.

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