3 Methods For Idea Sourcing

3 Methods For Idea Sourcing

How do we search for ideas? I believe this is the million dollar question everyone frets about when first starting out investing. How do we find potential investments to research on? How do we know if this is a good enough idea? And the list goes on. In the search, we adopt the same attitude one might find appropriate in looking for a spouse:  It pays to be active, interested and open-minded, but it does not pay to be in a hurry. Warren Buffett We all prefer some characteristics we wish to see…

Enterprise versus Equity Multiples

Enterprise versus Equity Multiples

There are two basic types of multiple that an investor has at his disposal – enterprise and equity multiples. Definitions From the UBS Warburg report: Enterprise multiples express the value of an entire enterprise. That is the value of all claims on a business – relative to a statistic that relates to the entire enterprise, such as sales or EBIT. Equity multiples, express the value of shareholders’ claims on the assets and cash flow of the business. An equity multiple therefore expresses the value of this claim relative to a statistic…

Operating Defensiveness versus Capital Defensiveness in Stocks

Operating Defensiveness versus Capital Defensiveness in Stocks

Defensive stocks are known to be non-cyclical in nature, whose performance is relatively resilient to the economic cycle. Such stocks are often seen as attractive investments during a recession and people are generally quick in pointing out whether a stock is defensiveness or not. My view is that there are 2 aspects of defensiveness for a stock – operating and capital – which have to be considered. What is Operating Defensiveness? A stock is operating defensive if its product or service sales are unaffected by the larger economic cycle. I…

Ronald Chan: The Making of a Value Investor

Ronald Chan: The Making of a Value Investor

Ronald Chan on what it means, and what it takes, to be a value investor. These observations were based on the 12 successful investors featured in his book, The Value Investors: Lessons from the World’s Top Fund Managers, which is an interesting read. A Humble Portfolio Construction Humility allows investor to remain down to earth and be aware that they can be wrong at times. It not only encourages investors to look for a margin of safety, but it also equips them with an open mind. Knowing that the world…

The Role of Luck in Investing

The Role of Luck in Investing

Have we ever considered the role of luck in our portfolio returns? Have we been outperforming the markets because of successful stock picking or just riding the luck of a market rally? Similarly, have we been underperforming the markets due to poor stock decisions or just plain bad luck? Truth be told, it is hard to tell. If we were to define luck, it is essentially something that is out of our control. If there is some aspect of controlling luck, we would call that skill. Looking at the professional…

Market Timing: Does It Make A Difference?

Market Timing: Does It Make A Difference?

Two concepts widely debated on would regarding market timing. Essentially, the former refers to individuals entering and exiting the market at crucial moments to effectively maximize their returns. While the latter just refers to individuals entering the market and holding on till the stock has reached its fair value. Despite being a value investor, even I have constantly questioned myself regarding this issue. Hence, the question we aim to answer today would be with regards to market timing, does it truly make a difference in our returns? What if I sold King Wan Corp….