Often people always ask me whats the difference between gambling and investing and I gave up explaining to people with thick ear wax in their ears. Financial ignorance.
Never ever equate intelligent investing to smart bets. Investing blindly without personal through understanding of the business is near gambling.
That's why i always emphasize to my friends that if they ever invest in stocks, always have a clear investment philosophy to follow through.
What better way to explain than to quote the words from the The Sage Of Ohama:
I like businesses that I can understand. Let's start with that. That narrows it down by 90%. There are all types of things I don't understand, but fortunately, there is enough I do understand. You have this big wide world out there and almost every company is publicly owned. So you have all American business practically available to you. So it makes sense to go with things you can understand.
I can understand this, anyone can understand this (Buffett holds up a bottle of Coca- Cola). Since 1886, it is a simple business, but it is not an easy business-I don't want an easy business for competitors. I want a business with a moat around it. I want a very valuable castle in the middle and then I want the Duke who is in charge of that castle to be very honest and hard working and able. Then I want a moat around that castle. The moat can be various things: The moat around our auto insurance business, Geico, is low cost.
People have to buy auto insurance so everyone is going to have one auto insurance policy per car basically. I can't sell them 20, but they have to buy one. I can sell them 1. What are they going to buy it on? (based on what criteria?) They (customers) will buy based on service and cost. Most people will assume the service is identical among companies or close enough. So they will do it on cost. So I have to be a low cost producer--that is my moat. To the extent that my costs are further below the other guy, I have thrown a couple of sharks into the moat. All the time you have this wonderful castle, there are people out there who are going to attack it and try to take it away from you. I want a castle I can understand, but I want a castle with a moat around it.
30 years ago, Eastman Kodak's moat was just as wide as Coca-Cola's moat. I mean if you were going to take a picture of your six-month old baby and you want to look at that picture 20 years from now or 50 years from now. And you are never going to get a chance-you are not a professional photographer-so you can evaluate what is going to look good 20 or 50 years ago. What is in your mind about that photography company (Share of Mind) is what counts. Because they are promising you that the picture you take today is going to be terrific 20 to 50 years from now about something that is very important to you. Well, Kodak had that in spades 30 years ago, they owned that. They had what I call share of mind. Forget about share of market, share of mind. They had something-that little yellow box-that said Kodak is the best. That is priceless. They have lost some of that. They haven't lost it all.
It is not due to George Fisher. George is doing a great job, but they let that moat narrow. They let Fuji come and start narrowing the moat in various ways. They let them get into the Olympics and take away that special aspect that only Kodak was fit to photograph the Olympics. So Fuji gets there and immediately in people's minds, Fuji becomes more into parity with Kodak.
You haven't seen that with Coke; Coke's moat is wider now than it was 30 years ago. You can't see the moat day by day but every time the infrastructure that gets built in some country that isn't yet profitable for Coke that will be 20 years from now. The moat is widening a little bit. Things are, all the time, changing a little in one direction or the other. Ten years from now, you will see the difference. Our managers of the businesses we run, I have one message to them, and we want to widen the moat. We want to throw crocs, sharks and gators-I guess-into the moat to keep away competitors. That comes about through service, through quality of product, it comes about through cost, some times through patents, and/or real estate location. So that is the business I am looking for.
Now what kind of businesses am I going to find like that? Well, I am going to find them in simple products because I am not going to be able to figure what the moat is going to look like for Oracle, Lotus or Microsoft, ten years from now. Gates is the best businessman I have ever run into and they have a hell of a position, but I really don't know what that business is going to look like ten years from now. I certainly don't know what his competitors will look like ten years from now. I know what the chewing business will look like ten years from now. The Internet is not going to change how we chew gum and nothing much else is going to change how we chew gum. There will lots of new products. Is Spearmint or Juicy Fruit going to evaporate? It isn't going to happen. You give me a billion dollars and tell me to go into the chewing gum business and try to make a real dent in Wrigley's. I can't do it. That is how I think about businesses. I say to myself, give me a billion dollars and how much can I hurt the guy? Give me $10 billion dollars and how much can I hurt Coca-Cola around the world? I can't do it. Those are good businesses.
Now give me some money and tell me to hurt somebody in some other fields, and I can figure out how to do it.
So I want a simple business, easy to understand, great economics now, honest and able management, and then I can see about in a general way where they will be ten (10) years from now. If I can't see where they will be ten years from now, I don't want to buy it. Basically, I don't want to buy any stock where if they close the NYSE tomorrow for five years, I won't be happy owning it. I buy a farm and I don't get a quote on it for five years and I am happy if the farm does OK. I buy an apartment house and don't get a quote on it for five years, I am happy if the apartment house produces the returns that I expect. People buy a stock and they look at the price next morning and they decide to see if they are doing well or not doing well. It is crazy. They are buying a piece of the business. That is what Graham-the most fundamental part of what he taught me. You are not buying a stock, you are buying part ownership in a business. You will do well if the business does well, if you didn't pay a totally silly price. That is what it is all about. You ought to buy businesses you understand. Just like if you buy farms, you ought to buy farms you understand. It is not complicated.
Incidentally, by the way, in calling this Graham-Buffett, this is pure Graham. I was very fortunate. I picked up his book (The Intelligent Investor) when I was nineteen; I got interested in stocks when I was 6 or 7. I bought my first stock when I was eleven. But I was playing around with all this stuff-I had charts and volume and I was making all types of technical calculations and everything. Then I picked up a little book that said you are not just buying some little ticker symbol, that bounces around every day, you are buying part of a business. Soon as I started thinking about it that way, everything else followed. It is very simple. So we buy businesses we think we can understand. There is no one here who can't understand Coke.
If I was teaching a class at business school, on the final exam I would pass out the information on an Internet company and ask each student to value it. Anybody that gave me an answer, I'd flunk.
I don't know how to do it. But people do it all the time; it is more exciting. If you look at it like you are going to the races--that is a different thing--but if you are investing¡. Investing is putting out money to be sure of getting more back later at an appropriate rate. And to do that you have to understand what you are doing at any time. You have to understand the business. You can understand some businesses but not all businesses.
Understanding the Business
Delaying your planning
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
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.
Cup and Handle Formation
A pattern on bar charts resembling a cup with a handle. The cup is in the shape of a "U" and the handle has a slight downward drift. The right-hand side of the pattern has low trading volume. It can be as short as seven weeks and as long as 65 weeks.
As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for four days to four weeks... then it takes off. Below is an example of a cup and handle chart pattern:
CELESTIAL NUTRIFOODS
OSIM INTERNATIONAL
A couple points on trying to detect cup and handles: Length - Generally, cups with longer and more "U" shaped bottoms, the stronger the signal. Avoid cups with a sharp "V" bottoms. Depth - Ideally, the cup should not be too deep. Also, avoid handles which are too deep since the handles should form in the top half of the cup pattern. Volume - Volume should dry up on the decline and remain lower than average in the base of the bowl. It should then increase when the stock finally starts to make its move back up to test the old high. Retest (of old high) - doesn't have touch or come within a few ticks of old high. However, the further the top of the handle is away from the highs, the more significant the breakout needs to be.
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.
Opportunity
Seize the day! It's easy to forget that time and life is limited amidst the golden rays each sunshine floods us in. The reality is our lifespan and opportunities are limited.
Niversphere
Waiting for a Rabbit under the Tree
There was a farmer who lived during the Song period. While working in the field one day ..... A rabbit rammed into the tree and died. The farmer got a free lunch without working at all. The next day, the farmer sat under the same tree and waited for the whole day. No rabbit appeared. He decided to try again the following day. Many days passed without any sign of a rabbit. The farmer's crops withered a little each day and his field is wasted away. It's an elusive dream to hope to gain without working hard.
"Nothing replaces hardwork and only hardwork can lead me to my Goals" -- Niversphere
"Dreams are illusions but success is made of toil and labour." -- Lu Sheng
Wealth Plans
Using the wealth planner assuming no initial savings and $2M Sing as a initial target of wealth.
Average Monthly Savings Required
S$ 4,778
You can also achieve your goal by progressively increasing your savings to match the expected inflation indicated by you (3%). In that case, your monthly savings requirement in Year 1 would be:
S$ 3,892
From Year 2 onwards, you would need to increase this amount by 3% per year (as per the expected inflation indicated by you).
Based on the information you have input:
Wealth Target (today's prices) (S$) 2,000,000
Wealth Target (adjusted for inflation) (S$) 3,612,222
Time allowed to reach wealth target, (years) 20
Expected rate of return from investments (% per annum) 10
Amount already saved towards your wealth target (S$) 0
The figures above are really just figures to me. Wealth creation goes deeper than this and takes a lot of discipline , good luck and good health.
Retirement Plans
Using the retirement calculator. With a monthly retirement expenses of $3000 assuming no savings.
Average Monthly Savings Required
S$ 1,217
You can also achieve your goal by progressively increasing your savings to match the expected inflation indicated by you (3%). In that case, your monthly savings requirement in Year 1 would be:
S$ 1,025
From Year 2 onwards, you would need to increase this amount by 3% per year (as per the expected inflation indicated by you).
Based on the information you have input:
Retirement Amount per month (today's prices) (S$) 3,000
Retirement Amount (adjusted for inflation) (S$) 4,814
Time allowed to achieve retirement amount, (years) 16
Expected rate of return from investments (% per annum) 10
Amount already saved towards your retirement (S$) 0
"Stop Dreaming. Take ACTION. " -- Niversphere
Ethical Investing.
The following is a piece of news that delights me. The richest man in Asia is an ethical investor same as me.
HONG KONG (XFN-ASIA) - Hong Kong businessman Li Ka-shing may sell his stake in Suntec Singapore International Convention and Exhibition Center if the company's plan to participate in a bid for the casino-resort project in Singapore proceeds, The Standard said, citing sources close to Li.
Suntec Singapore has signed an agreement with the joint venture between Harah's Entertainment and Keppel Land to develop the casino-resort project, the report said.
Li, chairman of Hong Kong's largest property developer Cheung Kong (Holdings), will sell "over 10 pct stake" in Suntec Singapore as he does not want to be linked to any gambling business, the sources said.
leonora.walet@xfn.com
lw/net MMMM
Mobius record...
MARK MOBIUS: GLOBAL PIONEER
Some international investors make a few trips a year to far-flung countries in search of new ideas. Then there's Mark Mobius. With a corporate Gulfstream IV jet as his personal vehicle, Mobius spends 300 days annually shuttling from one exotic locale to another in search of emerging-market values. But lately, investors might be wondering if Mobius, a Massachusetts Institute of Technology economics and political science PhD who manages about $14 billion, has lost his touch.
An aggressive, bottom-up value manager, Mobius was blindsided by Asia's collapse. He started an offshore Thai fund on June 20, just 12 days before the country's currency devaluation triggered Asia's financial crisis. By Mar. 31, the fund was down 53%. His Indian and Japanese offshore funds have each lost 27% since their launch last June. And a Korean fund introduced in '96 had fallen 67% by the first quarter's end. ''It has been rough,'' he says.
But nobody's writing Mobius off yet. Declaring that Asia offers ''once-in-a-generation bargains,'' he's moving back into Thailand, Malaysia, and Hong Kong--as well as Mexico, Argentina, and Brazil, which have drifted this year. Indeed, over the long term, Mobius' perennial optimism about emerging markets has paid off. His flagship $285 million Templeton Emerging Markets Fund, one of the few funds of its kind with a long-term record, has produced a 23.4% annual return for the 10 years ended on Feb. 28, despite losing 12.4% in the past six months.
Mobius buys stocks with the idea of holding them for five years. He says investors in emerging-market funds should adopt the same time horizon. ''Mobius is one of the best, because he has been in emerging markets longer than everyone else,'' says Kevin McDevitt, a Morningstar analyst.
Perhaps Mobius' long-term success has contributed in part to his recent comedown. As emerging-market investing gained respectability, assets in Mobius' funds exploded. That prevents him from taking meaningful positions in small-cap stocks that may have the greatest hidden values. Instead, he is forced to buy big caps. For example, a quarter of his China Fund's assets are in five Hong Kong blue chips, including HSBC Holdings, parent of Hongkong & Shanghai Bank. As Asian flu has swept Hong Kong, the offshore China Fund has ended up losing 25% of its value since its 1994 debut.
PROXY FIGHT. Franklin's drive to expand its global empire has also pushed Mobius to start several single-country funds that so far have been washouts. Take the New York Stock Exchange-listed Vietnam Opportunities Fund. Angered that the closed-end fund did not invest in Vietnam as promised, shareholders have sued Mobius and Templeton in U.S. District Court in Florida. Mobius says the suit is without merit and the company will ''vigorously contest'' it. He says the problem arose because Vietnam failed to open a stock market as expected. Mobius beat a proxy fight to liquidate the fund, and shareholders approved a change in the fund's mandate to include Southeast Asian stocks. The fund is down 34% for the year ended Mar. 31, making it the worst performing of the four Vietnam funds in existence.
Mobius is snapping up Thai stocks, including a chunk of Thai Farmers Bank, in hopes of a turnaround in the sector. He also placed a big bet on a beaten-down Thai telecom provider, Advanced Information Service. His Emerging Markets Fund has taken large Malaysian positions recently, including power producer YTL and Malaysian Airline System. And recently, Mobius' old friend Philip Tose, co-founder and former chairman of bankrupt Hong Kong-based Peregrine Investments Holdings, joined Templeton to help expand its Asian business.
Mobius' record suggests he has a good chance of restoring his luster. In emerging markets today, ''the opportunities are there--amazing, incredible opportunities beyond anyone's reckoning,'' says Mobius. But will his investors have the patience to wait for these opportunities to pay off?
By Mark Clifford, with Toddi Gutner
EDITED BY AMY DUNKIN
My Investment Philosophy
All investors should have an investment philosophy and here are mine as follows :
1. A concentrated portfolio of no more than 5 holdings at anytime.
2. Business must be highly scalable. This simply means that the company must offer me good growth in its own core business.
3. Management must be ambitious and capable to lead the healm to bring the company to greater heights. Setting up a business and growing the company are completely different issues and challenges to me.
4. Set high barriers to entry. Having high barriers to entry to me is not that important as it's probably pertained to the industry that the company is in. Ability to set up high barriers to entry is of greater importance to me.
5. Company must have its own R&D team. Needless to say, when we buy into a company, we buy into its future and not its past. R&D is a must to stay ahead of competition.
6. Business should be concentrated on its core business. Speaks for itself.
7. Good mix of products with a ready new line of products coming up.
8. Potential to be a multi-bagger.
9. Company must have a positive cashflow and preferrably free cashflow.
10.A market leader in its own industry.
11.Ethical investing. No livestocks, gambling or moral degrading companies.