Thursday, 19 April 2012

News - Breadtalk

SGX source
From 9.61 % To 7.00 %
Sell through an open market transaction by Keywise Greater China Opportunities Master Fund.

Keywise Capital Management (HK) Ltd is the fund manager of Keywise Greater China Opportunities Master Fund, which holds shares in BreadTalk Group Limited.

Fang Zheng is the sole shareholder of Keywise Capital Management (HK) Ltd.


The above fund have been selling breadtalk share since year till now. Why do they keep selling? Do they know something which we retail investor don't know?

I am not guess and don't need to guess because current price is not the price which I will enter.

Sunday, 8 April 2012

Traits of Good Companies

 "Stocks do well or poorly in the future because the businesses behind them do well or poorly - nothing more, and nothing less."
[Some famous investor said this phrase, you know who? I hope you know :)]
  • Cheap Valuation - P/B, P/E, discount to NAV etc
  • Business Economic Moats - high barrier to entry, unique product(s) or service(s) such that the company will always be needed and still be around for decades
  • Growth - sustainable consistent growth
  • Profitability -  ROE, ROA, increasing FCF NOT net profit only, net profit margin
  • Financial Health (net cash or little debt, unless company got high earning powers to offset)- see gearing, debt to equity, quick/current ratio, interest coverage ratio
  • Dividend - 2-3% p.a. with <40% dividend payout ratio. History of increasing dividend payout ratio over the years as business grow
  • Risks - think of negative aspects of business
  • Management assessment - compensation(executive pay is linked to company performances), character, experience
Extracted and updated the above bullet points from my ex-page. If you manage to find good companies, please feel free to share :)

Sunday, 1 April 2012

FA Valuation?

In FA, there are many ways to value a stock. P/B, P/E, cash return, DCF etc. Some investors also look at things like net debt/net cash, free cash flow, ROE, ROA, dividend payout ratio, EPS growth rate etc for the financial health of the company and the total return of money to investors. Some also look at economic moats of the companies business, managers, CEOs of the companies for the qualitative aspects. Personally, I kept one excel sheet to keep my calculation of these terms simpler. I am lazy to press calculator everytime. Haha!

Regardless of which method you use, its important to understand the meaning of these terms and acknowledge the fact that these are "tools" to help you and they are not the "holy grail" to investment success.  Personally,  I believe emotion is the hardest to manage.

Let me introduce some of these terms:

 P/B ratio, I guess many have heard of this ratio before. Anyway, this is one way of valuation of stock to see if you are paying a premium to its book value.

 What is price to book ratio?

A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. Book value is basically net tangible asset value which is total assets - intangible assets - total liabilities. This ratio also gives some idea of whether you're paying too much for what would be left if the company went bankrupt immediately.

Good read below:
 Enterprise value
A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. Think of enterprise value as the theoretical takeover price. In the event of a buyout, an acquirer would have to take on the company's debt, but would pocket its cash. 

Some use FCF/enterprise value to see if the companies are generating good FCF from its enterprise value. 
FCF = free cashflow = net cashflow from operations - capex 

(Credits to investopedia for the definition of these terms)