One of the biggest allies of a good financial plan is time. The more you plan ahead, the more time you'll have to accumulate savings, the more time those savings will have to bask in the glow of compounded growth, and the more risk you can take with those savings since longer time horizons can compensate for investment volatility.
But procrastination squanders time, putting your plan, and future, at a disadvantage. Let's look at the classic example of people saving for retirement. Investors A, B, C, and D (who, it might be guessed, are quadruplets that come from a family of low imagination) each invest $5,000 a year for 10 years. The only difference is the age at which each began. Here are the hypothetical-just-for-illustration-don't-sue-me-if-this-doesn't-happen-to-you results:
Age Began Amount
Investor Investing By Age 65
A 25 $787,176
B 35 $346,615
C 45 $168,887
D 55 $83,227
*Illustration assumes 11% annual growth and does not account for taxes.
Even though each person invested the same amount of money, they have monstrously different amounts at retirement. Investor A began when she was 25 years old, and stopped when she was 35. And her nest egg dwarfs those of her siblings (which makes her both popular and unpopular at family gatherings).
A portion of the article from
http://www.fool.com/news/commentary/2003/commentary030611rb.htm
Delaying your planning
Freshen Up Your Day
Something to share with you, freshen up your day.
The article below is not written by me.
** For those non Singaporeans, i have included the translations for the
local terms used below
enjoy =P
41 signs to tell you're Singaporean
1. Thanks to SMS, you have an extra large thumb.
2. Tks 2 SMS, u oso dun no how 2 spel n e mor.
3. You pat MRT and bus seats to cool them before you sit down.
4. At lunch, you start discussing what to eat for dinner.
5. When speaking to foreigners, you somehow feel a need to adopt an accent. (If you're a DJ, this happens even when you're not speaking to foreigners.)
6. You won't raise your voice to protest policies, but you'll raise your fists to whack someone over Hello Kitty.
7. You're forever talking about businesses you want to set up but will probably never get around to starting.
8. You don't know ¾ of the people attending your wedding.
9 You marry for the real estate breaks.
10 You have kids for the tax advantages.
12. You move to where you want your child to go to school.
13. You feel you can't walk around naked in your own flat.
14. You force your children to take Speech & Drama classes, but pray they won't wind up in Arts later on.
15. You suddenly realise you're very interested in biotech. Before that it was e-commerce, engineering, and before that, medicine and law.
16. You think being an entrepreneur is setting up a bubble tea, Portuguese egg tart, a chestnut stall - right next to an existing bubble tea,Portuguese egg tart or chestnut shop.
17. You think people are inconsiderate when they don't leave their table immediately after eating at the food court but think you have every right to take your own sweet time with your ice kachang.
18. If you're a guy meeting other guys, you invariably trade army stories.
19. If you're a girl with other girls, you must talk about your 'stupid' guy friends who're forever trading army stories.
20. You somehow feel that food tastes better when eaten next to a longkang(drain).
21. It actually makes a difference to you being called an 'NSMan' rather than a 'Reservist'.
22. You've eaten more times at the Esplanade than you've actually seen shows there.
23. You need campaigns to tell you how to be courteous, to flush toilets,have sex,etc.
24. You feel the urge to add the suffix '-polis' to everything, viz.Biopolis, Airtropolis, Fusionopolis, Entrepolis, etc.
25. You meet in hotels a lot.
26. Your children have a rudimentary knowledge of Tagalog or Bahasa Indonesia.
27. You work at McDonald's when you're old rather than young.
28. You'll gladly spend $50,000 on a car, but will go to great lengths to save a few bucks on ERP charges or even a few cents on a parking coupon.
29. If you're pregnant, you have the magic to make people on the MRT fall asleep instantly.
30. You've started referring to foreign employees as 'talent' instead of 'expatriates'.
31. You copy down number plates of cars involved in accidents.
32. You think your boyfriend doesn't really love you unless he gives you part of his liver.
32. You pronounce the letter 'R' as 'ah-rer' and the letter 'H' as 'haytch'.
34. You believe that you can generate 'creativity' through rules and committees.
35. You 'chope' a seat by placing a packet of tissues on the chair.
36. You're very forthright with your criticisms of the Gahmen, unless
there's a chance they might actually hear you.
37. Your mother probably can't speak your 'mother tongue'.
38. You secretly find that the best part of the Speak Good English Movement is hearing the Singlish bits in their ads.
39. You think we're living in a modern, sophisticated country even when our leaders still insist on wearing white school uniforms.
40. You wish your constituency is in a walkover, otherwise it's damn 'leceh'.
41. During elections, you decide that there is no credible opposition even though you don't know the name of the opposition candidate in your constituency.
Translations
(3) MRT : Mass Rapid Transit Public Transportation Service (ie train)
(17) Ice Kachang : Local Asian Desert of sweetened crushed ice with toppings
(35) Chope: Reserve
(40) Leceh : troublesome
(21) NSMan : A term used for a guy that has fulfilled his National Service
(ie conscription) obligation
(21) Reservist : a term used for a guy that has fulfilled his National
Service training term but yet to fulfil his National Service obligation, ie
he is held in reserve in case of training/emergencies where he will be
called up to serve the country therefore Reservist
Received this from an email, sorry I can't give due credits to the author as I cant find the original author. But this is really funny.
If I were to add point 42, I would add
42. You hesitate to buy or sell a counter over just half a cent for the whole day.
Cheers
Niversphere
Tat Hong Holdings - My Singapore portfolio
Tat Hong was set up in Singapore in the 70s as a supplier of cranes and heavy equipment. Over the years, the company has grown and progressed to become one of the biggest companies in the region supplying cranes and heavy equipments for the industry. The group is principally involved in the rental and sales of cranes and the sale of spare parts for cranes. Apart from cranes, the group is also involved in the rental and sale of other ancillary heavy equipments such as evacuators, bulldozers, earth-moving equipment, pilling rigs and generators.Tat Hong has exclusive distributorship agreements for cranes and other heavy equipment (such as excavators, compaction equipment, wheel-loaders, skid-loaders, graders, etc.)
with Hitachi-Sumitomo, Mustang, Yanmar, Kawasaki, Bomag, Mitsubishi, Kato. Tat Hong is on track to achieve their 3-Year target (FY2006 – FY2008)- net profit growth averaging 25% p.a.
Over the past three decades, Tat Hong had expanded their operations to Malaysia, Hong Kong, Thailand, Indonesia, China, Japan, Vietnam and Australia, allowing them to bring their services closer and more effectively to our customers.In the annual survey conducted by UK-based publisher 'International Cranes.' Tat Hong was ranked the world's ninth largest crawler cranes company in the years 2003 and 2004. In Asia, its ranked second largest in 2003 and 2004. Tat Hong is currently number one player in the world in terms of crawler cranes, and ranked eighth in the world in terms of tonnage, said cheif executive officer Roland Ng.
It's projects have included, among others, projects for the Bugis, Yew Tee, and Marina Bay MRT stations, the Singapore-Malaysia second link, the NorthBridge Tunnel in Sydney, projects for Mass Transit Railway in Hong Kong, and Sanat Kita power plant in Philippines. Tat Hong continues to benefit from the industry's healthy long-term prospects. It is estimated that non-Japan Asia has the world's fastest growing construction industry over the long term, while infrastructure investment requirements for East Asia are expected to rise to around US$12 billion annually over the next five years.
The growth in the number of new infrastructure and oil and gas projects in the Asia Pacific region, coupled with the continuing tight supply of cranes globally, should keep demand buoyant and drive further increases in rental rates, utilization rates and the prices of both new and used equipment. Given their regional presence and available stock, Tat Hong is in a prime position to participate in the continued development of new infrastructure and oil and gas projects in the Asia Pacific region.
In Australia, the ongoing infrastructure and project growth is also expected to continue in coming years. Following our recent acquisition of Kingston Industries, Tat Hong will benefit from a larger equipment rental fleet and wider customer base. As such, we believe Australia will continue to contribute significantly to the Group's performance. Two structured mining equipment rental contracts in Indonesia are expected to turn in increased contributions to the Group's bottom line from the current financial year.
The recent listing of Tat Hong's Australian business Tutt Bryant on the Austrialian Stock Exchange has a positive effect on its operations. Post-ipo Tat Hong will still control 70 percent of Tutt Bryant. The money raised from the IPO will help Tat Hong reduce its debt ratio, free it from future obligations to fund the Australian operations and increase the chances of giving out special dividends to shareholders.Tutt Brayants’s share price performed well on its debut , closing at A$1.23 or 23.0% above its issue price, with a high volume of 4.5 million shares traded. The highest traded price for the day is A$1.25. Tutt Bryant closing price as of 13/01/2006 was AU$1.290 from its ipo price of AU$1.00.
Extracted from their announcements, financial facts and figures below.
http://www.listedcompany.com/ir/tathong/newsroom/Presentation141105.pdf
Healthy Financial Ratios with increasing ROE. 
Price reached recent new highs. 
12 years Group Revenue - Recovering from construction inactivity.
Quoting a recent news article .
Title : Construction sector seen picking up, firms urged to expand overseas
By : Jeana Wong, Channel NewsAsia
Date : 12 Jan 2006 1823 hrs (GMT + 8hrs)
SINGAPORE : Singapore's construction industry is cautiously optimistic about its outlook, even if the sector has just given its best showing in five years.
At an industry seminar on Thursday, industry players said there is no doubt that the sector is picking up.
But they added that local firms must tap overseas markets such as India and the Middle East for growth.
Singapore's construction sector expects to win up to S$13.5 billion worth of contracts this year.
That is about 20 percent more than last year.
It will put the industry on track for another good year, but that is still only about half of the value reached during the peak in 1997.
With the sector's contribution to national GDP stagnant at around 5 percent, industry leaders are urging local players to expand overseas.
William Tan, Business Development Director, Building and Construction Authority, said, "Although our local market (has) so-called recovered slightly, it's still far away from our peak year of say, 1997, where we saw $24 billion type of value...It is important for our firms to venture overseas so that they can supplement the limited domestic market."
And they see the need for Singapore companies to hurry.
Mr Tan said, "We're already late in the Middle Eastern market. However, there are countries that are also playing catch-up in the Middle East like Qatar and Abu-Dhabi. So timing wise in that aspect, it'll be just nice. And our firms of course have to work harder and to catch up and make our presence felt by the people there."
Industry players say local firms can play to Singapore's proven track record in township planning, environmental technologies and mechanical and electrical services.
The Building and Construction Authority highlighted India as one potential market.
It says there is growing demand in India's middle class for better housing and infrastructure, and that recent policy changes there have created a ready mortgage market.
Koh Lin Ji, International Operations Director, Building and Construction Authority, said, "Interest (rates) have fallen to about 9-11 percent and the other reason is that government (is) encouraging home ownership. For houses smaller than 1,500 square feet, the government actually provide rebates on interest paid on mortgage...For the Indian market, they have very large contractors and a lot of smaller contractors so they have a gap. And this gap will be filled up by our large contractor firms."
Other markets seen as key to the industry include China and Southeast Asia. - CNA/ms
Tighter demand-supply imbalance will further raise prices
and crane rental rates of Tat Hong’s fleet of cranes,
continuing to fuel a positive operating environment for Tat
Hong. Numerous infrastructure projects and tight supply of
cranes will continue to push up
• Utilisation rates
• Rental rates
• Prices of both new and used equipment
Upcoming major infrastructure projects in Singapore:
- Two IR projects (approx. S$5 billion)
- Circle Line (approx. S$6.7 billion)
- Sports Hub (approx. S$650 million)
- New Finance Center
• Spending on construction projects in Australia estimated at
US$168.4 billion for 2006 - 2008 (Source: Global Insight Inc.)
• Spending on construction projects in Thailand estimated to be
US$16b – US$18b over next 5 years, with average 5.8% GDP
growth over next 3 years (Source: Asian Development Outlook,
2005)
• Average 8.5% GDP growth for Vietnam over next 3 years, with
estimated S$13.3 billion investment in infrastructure projects in
2005 alone (Source: BCI Asia)
Assuming that Tat Hong achieves 25% growth with a 5% discount (US Treasury rates) and zero terminal value. I used last years figures and not prediction forecast.
Using DCF discount model. 
Today's share price of 0.705 is approximately 56% undervalued from the rough estimate of intrinsic business value.
Please read the prospectus and perform your analysis before making any investment decision. The above does not constitute a recommendation to apply for this company. I will not be liable for any losses incurred by anyone who invests based solely on the above-mentioned information.
Noble Group - My First Blue Chip
As you all might already have known , Noble Group is a STI component that makes the STI index. It's a blue blue chip. Noble Group is the first blue chip that makes it into my holding portfolio.
Noble Group is a market leader in managing the global supply chain of agricutural, industrial and energy products. With a network of over 70 offices in 35 countries serving more than 3500 customers. Noble Group adds value at every link in the supply chain. With 2004 revenue of US$8.6 billion.
In 2005, Noble Group was assigned ratings from Moody's Investors Service and Standard & Poor's Ratings Agency and joined the benchmark Straits Times Index and MSCI Index in Singapore. During this period, the Group was also recognized by Hewitt Associates as one of Hong Kong’s Best Employers, The Asset for its excellence in Corporate Governance while topping the annual Forbes 2000 list of best stock performers over the past five years. In 2004, the Group’s Board of Directors was awarded the Listed Company (Main Board) Board Award from The Hong Kong Institute of Directors and ranked first on the Billion-dollar club of the Singapore Stock Exchange for Total Shareholder Returns over a 3 and 5 year period.
Let me show you my buy decision making for Noble Group.
On 8th September 2005,
Noble group subsidiary Noble Energy expanded into the Global Carbon Market. Lead by a experienced team.
On 1 January 2005, the EU established a new carbon market through the implementation of the EU ETS. The EU ETS resulted in approximately 7,300 companies being exposed to greenhouse gas emission compliance requirements. Through legislation enacted by the local governments of the 25 EU member states, the affected companies have imposed upon them tight carbon emission restrictions. The first compliance period under the EU ETS is 2005-07 which precedes the first Kyoto Protocol compliance period which starts in 2008. Under the EU ETS, many companies, and especially those in the power industry, received substantial under-allocations of emission allowances and will have to obtain credits from the market to meet their compliance requirements. Non-compliance with EU ETS requirements has significant adverse financial consequences as penalties for non-compliance in the first EU ETS compliance period are € 40 per tonne of excess emissions plus the requirement that the entity still obtain the necessary emission credits (currently market priced at approximately € 20 per tonne) to be compliant. The second emissions compliance phase in the EU runs from 2008-12 (parallel with the first Kyoto Protocol compliance period) and will bring even tighter emission allocations and higher penalties (€ 100 per tonne) for non-compliance.
The ratification of the Kyoto Protocol by Russia and its coming into effect on 16 February 2005 has created from 2008 onwards a worldwide emissions compliance market with many interesting opportunities. For example, countries such as Japan and Canada are expected to be “short” in
respect of emission rights and accordingly such market players will have to source additional credits from the world market.
The existing combination of Noble’s coal and raw material portfolio, its excellent global contacts and positioning in the fast growing Asian markets, in conjunction with the new carbon credit team’s skills and market access, will allow the Group to pursue many promising emission market opportunities in the future.
The new carbon activities of Noble will operate from its Dublin subsidiary, Noble Carbon Credits Ltd. and supported by two offices in Frankfurt and Amsterdam. Leveraging off its current businesses and industry contacts, Noble plans to quickly expand this business worldwide
and sees itself as the first player with a global sourcing, marketing and portfolio management approach to this new market.
The activities of the new carbon team will initially focus on the global sourcing of CERs from Kyoto’s “Clean Development Mechanism” projects in developing countries and the sourcing of EU Allowances. Subsequently, Noble plans to become directly involved, through investment and otherwise, with greenhouse gas abatement projects.
Noble Energy expands into India
Noble Group, has hired Mr Ajay Mishra to expand its Carbon business in India and the Asia Pacific Region. Mr Mishra was most recently with TATA International. Mr Mishra has broad experience in the full range of carbon products (Coking Coal, Coke, Anthracite and PCI). Mr Mishra will be joined by other experienced personnel in forming the new Kolkatta operation of Noble Energy. This team will allow Noble Energy to capture geographic and product group synergies with the formation of this new office.
"Ajay and the team will be key in expanding Noble Energy role within the carbon market in India. It is a very exciting time in the Indian steel market and to be supported by the most experience team in the market place allows us a solid base to expand business going forward. This team will also support Noble Group’s other strategic relationships in India” said Mr William Randall, Director, Noble Energy Inc.
Quoting an article from BusinessWeek.
In Asia, A Hot Market For Carbon; The Market For Carbon Credits Is Cutting Pollution
In Developing Countries
BusinessWeek
19 December 2005
by Frederik Balfour
On the outskirts of Bangkok, generators fueled by methane from swine manure make electricity. In China's Inner Mongolia, wind farms are sprouting up along the breezy steppes. In India's Andhra Pradesh state, villagers power their tractors with a cleaner-burning diesel substitute pressed from seeds of the mighty honge tree.
What do these far-flung projects have in common? They're all the direct result of the 1997 Kyoto Protocol, a sprawling global initiative
to reduce emissions of greenhouse gases linked to global warming. The U.S. and a handful of other nations spurned this treaty, in part because it exempted emerging nations from making their own cuts. But the innovative financial systems that Kyoto inspired have made it relatively easy for developing countries to hop on board.
Under the Kyoto treaty, developed countries are required to cut emissions by an average of 6% from 1990 levels by 2012. Each
country is permitted to emit a certain number of tons annually of carbon dioxide or its equivalent. Governments then issue emission "allowances'' to polluters within their borders, and these can be bought and sold by companies worldwide.
Through this carbon trading system, big polluters in developed countries can pay companies in developing nations to cut emissions in their stead. Since many factories in developing countries use dirty, inefficient processes, it's often cheaper to clean them up than to replace the more modern equipment used in wealthy nations.
The system is helping foster green investments in countries that are home to some of the world's biggest polluters. In August, a Japanese consortium led by engineering outfit JGC Corp. and Marubeni Corp. joined up with a chemical maker in China's Zhejiang Province to recover gases released in making refrigerants. The deal will result in a reduction of the equivalent of 40 million tons of
CO2 -- creating credits worth about $200 million.
Sumitomo Corp. and Rabo Bank of the Netherlands have a similar contract with Gujarat Fluorochemicals in India for 3 million tons of carbon credits. And Paris-based chemical maker Rhodia is cutting nitrous oxide emissions at its plants in South Korea and Brazil.
Rhodia will likely sell those credits, equivalent to as much as 13 million tons of CO2.
Worldwide, developing countries are promising sweeping action, from cleaning up concrete plants, to sowing new forests that absorb carbon dioxide, to harnessing methane from landfills to generate power. So far, 39 projects have been registered with the U.N., and hundreds more are in the pipeline. Ultimately, the scheme could net as much as $12.5 billion for developing countries by 2012, the World Bank says. "There is a lot of appetite for these credits," says Edu Hassing, a project specialist with the Asian Development Bank in Manila.
Since the Kyoto accord took effect on Feb. 16, the market for emission allowances has soared. Most of the action is on the Amsterdam-based European Climate Exchange, or ECX. In the exchange's first month, 1 million tons of CO2 credits were traded. Next year, it's expected to be 700 million tons -- roughly 2 million tons a day -- and volume is expected to grow to some 4.8 billion tons in 2008. "It's a large baby for its age,'' says Sara Stahl, an ECX economist. The baby is getting richer, too.
Since the beginning of the year, prices have more than doubled, to $26 per ton of carbon dioxide.
So far, credit purchases from developing countries are relatively rare, and more often than not they're funded by public institutions
rather than private companies. For example, several European governments have pledged to buy up to $1.1 billion worth of credits through the World Bank, which is acting as matchmaker for companies in the developing world that want help funding cleanup efforts.
Recent examples include wind turbines with capacity of 26 megawatts in a remote part of the Philippines and a project to capture and harness methane gas released from coal mining in China's Shanxi Province that will cut emissions by 4 million tons annually. But as 2012 approaches and companies in the West realize it's cheaper to buy credits than to clean up at home, purchases of credits from developing countries are expected to soar.
There's little doubt that India and China will be big sources of credits. Both are industrializing at a breakneck pace with little regard for the environmental consequences, so there's no shortage of areas where pollution can be reined in. India has already negotiated dozens of carbon credit sales in projects ranging from hydro stations to harnessing methane gas released by decomposing garbage.
China, on the other hand, has been a relative laggard, with just three such deals so far. But many others are in the works. "China has
a huge potential to become one of the largest markets'' for pollution credits, says Kishan Khoday, team leader for energy and the environment at the U.N. Development Program in Beijing.
Some projects are clear winners. Gases released from making refrigerants, for instance, have 11,700 times the global warming potential of carbon dioxide. So capturing even small amounts can add up to huge numbers of carbon credits. Methane, meanwhile, does 21 times the damage of pure carbon dioxide, and it's a fuel in its own right, so harnessing it can offer a big payoff. Such projects are rarely undertaken without carbon trading, but with it they can be highly profitable, offering returns of as much as 30% per year, says Zhao Jianping, an energy specialist at the World Bank.
Other potential projects, though, will be harder to pull off financially. For example, in China it costs about 6.2 cents to produce a
kilowatt-hour of electricity using wind power, compared with 3.7 cents for coal. Current prices for carbon credits translate into a subsidy of roughly 0.6 cents per kilowatt hour, though funding initiatives planned by Beijing may make wind power more attractive.
How valuable will carbon credits become? Currently, credits cost up to 70% less than allowances because if a project falls through
and the developing-country partner doesn't clean up its act, the company that bought the credits is held responsible. "We must do
a hell of a lot of due diligence,'' says Thorsten Ansorg, director of Noble Carbon Credits Ltd., a subsidiary of Hong Kong trading firm Noble Group that has bought millions of tons of credits from developing countries. "We have no desire to buy something that never materializes.'' But as the market gets more efficient at separating smart projects from wishful thinking -- and as companies in the West struggle to meet their Kyoto targets -- prices are likely to rise. "As the deadline gets near,'' says Andres Liebenthal, an environment specialist at the World Bank in Beijing, "there is going to be a scramble'' for credits.
Clean & Green
Carbon credits are helping developing countries clean up their industry
COUNTRY PROJECT VALUE CARBON
(MILLIONS CREDITS OF (MILLIONS DOLLARS) OF TONS)
China Generating power using methane recovered from coal mining $17 4
India Recovery of gases released in making refrigerants $15* 3
Indonesia Capture of pollutants from cement production $11 2*
Guatemala 43-megawatt hydro plant to replace coal facility $5 2
Philippines 25-megawatt wind farm to generate clean electricity
$2.4 0.6
* BusinessWeek estimate Data: World Bank
Nuclear energy
“Noble seems well-positioned to prosper from Chinese growth,” said BusinessWeek. “With Beijing planning to build 30-plus nuclear reactors by 2020 to meet the country’s energy needs, Elman wants to get into the business of importing, transporting, and processing uranium for China.” The magazine also took note of Noble’s plans to participate in the global market for carbon credits, which the company sees as an emerging lucrative business as a result of emission-control laws.
Please read the prospectus and perform your analysis before making any investment decision. The above does not constitute a recommendation to apply for this company. I will not be liable for any losses incurred by anyone who invests based solely on the above-mentioned information.
Indian Wisdom
' To free oneself of knowledge is to die, thus one lives. '
~ Krishnamurti
'Like the silkworm you have built a cocoon around yourself. Who will save you ?
Burst your cocoon and come out as the beautiful butterfly, as the free soul.'
~ Swami Vivekanada
'Man falls from the pursuit of the ideal of plain living and high thinking the moment he wants to multiply his daily wants.
Man's happiness really lies in contentment.'
~ Mahatma Gandhi
'Fear is one of the greatest problems in life. A mind that is caught in fear lives in confusion, in conflict, and therefore must be violent, distorted and aggressive.'
~ Krishnamurti
'Very few people in this world can reason normally, there is a terrible tendency to accept all that is said, all that is read, and to accept it without question. Only he who is really to question, to think for himself, will find the truth! To understand the currents of a river, he who wishes to know the truth must enter the water.'
~ Nisargadatta
Don't Buy A Stock Just Because It Is Cheap
Excerpted from Warren Buffet's 1989 letter to Berkshire shareholders
Let's take a quick look at the past 25 years. My first mistake, of course was in buying control of Berkshire. Though I knew its business textile manufacturing to be unpromising, I was enticed to buy because the price looked cheap.
I called this the "cigar butt" approach to investing. A cigar butt found on the street that has only one puff left may be not offer much of a smoke, but the "bargain purchase" will make that puff all profit.
Unless you are a liquidator, that kind of approach to buying businesses is foolish.
First, the original "bargain" price probably will not turn out to be such a steal after all. In a difficult business, no sooner is one problem solved than another surfaces - never is there just one cockcroach in the kitchen. Second, any initial adavantage will be eroded quickly by the low return the business earns.
Time is the friend of the wonderful business, the enemy of the mediocre.
You might think this principle is obvious, but I had learn it the hard way - infact, I had to learn it several times over.
Shortly after purchasing Berkshire, I acquired a Baltimore department store, Hochschild Kohn. I bought it at a substantial discount to its book value, the people were first-class, and the deal included some extras. Three years later, I was lucky to sell the business for what I had paid.
After ending our corporate marriage to Hochschild Kohn, I had memories like those of the husband in the country song, My Wife Ran Away With My Best Friend And I Still Miss Him A Lot.
I could give you other personal examples of "bargain-purchase" folly, but I am sure you get the picture: It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
I was a slow learner. But now, when buying companies or common stocks, we look for first-class businesses accompanied by first-class management.
Next Book Review - Common Stocks and Uncommon Profits.
This book is a must read for all investors. Die die must read this book.
Philip Arthur Fisher (1907 – March 11, 2004) is the author of Common stocks and uncommon profits, a guide to investing that has remained in print ever since it was first published in 1958. Perhaps the most well-known of Fisher's followers is Warren Buffett.
Fisher suggested using 15 questions to evaluate a company:
1. Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
2. Does the management have a determination to continue to develop products or processes that will further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
3. How effective are the company's research and development efforts in relation to its size?
4. Does the company have an above-average sales organization?
5. Does the company have a worthwhile profit margin?
6. What is the company doing to maintain or improve profit margins?
7. Does the company have outstanding labor and personnel relations?
8. Does the company have outstanding executive relations?
9. Does the company have depth to its management?
10.How good are the company's cost analysis and accounting controls?
11.Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
12.Does the company have a short-range or long-range outlook in regard to profits?
13.In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholder's benefit from this anticipated growth?
14.Does the management talk freely to investors about its affairs when things are going well but "clam up" when troubles and disappointments occur?
15.Does the company have a management of unquestionable integrity?
According to Phil Fisher these questions should be posed to suppliers, competitors, and consumers.
Five Don'ts for Investors
1. Don't buy into promotional companies.
2. Don't ignore a good stock just because it is traded "over-the-counter."
3. Don't buy a stock just because you like the "tone" of its annual report.
4. Don't assume that the high price at which a stock may be selling in relation to its earnings is necessarily an indication that further growth in those earnings has largely been already discounted in the price.
5. Don't quibble over eighths and quarters.
Fisher's most famous investment was his purchase of Motorola, a company he bought in 1955 when it was a radio manufacturer and held until his death in March, 2004 at the age of 96.
Book Review - How to Make Money in Stocks By William J.O'Neil
This is a wonderful book to start investing with and I am fortunate to read it. Below is a summary of the CANSLIM criteria.
CANSLIM
1. C = Current Quarterly Earnings Per Share
- Earnings must be at least 18-20%
2. A - Annual Earnings Per Share
- These figures should show meaningful growth for the last 5 years.
3.N = New Things
- Buy companies with new products, new management , or significant new changes in the industry conditions. Most importantly, buy stocks when they start to hit new highs prices. Forget chearp stocks they are there for a reason.
4. S = Shares Outstanding
- This should be a small and reasonable number. CANSLIM investors are not looking for older companies with large capitalization.
5.L = Leaders
- Buy market leaders, avoid laggards.
6. I = Institutional Sponsorship
- Buy stocks with at least a few institutional sponsors who have better than average recent performance record.
7.M = General Market
- The market will determine whether you win or lose so learn how to discern the market's overall direction, and interpret the general market indexes ( price and volume changes and action of the individual market leaders.