I have been following the core principles and methodologies of investing propagated by the true super investors in the United States in the link below.
http://klse.i3investor.com/blogs/kcchongnz/88007.jsp
These core principles and methodologies are summarised as below:
- Investing in a stock should be viewed as investing in a part business.
- Focus on return on capitals
- Have estimates of the value of a company, and hence the intrinsic value of its stock using a variety of methods and compare with its price
- Buy at a wide margin of safety
- Cash flows, and especially free cash flows is king
- Buy good companies with high return on invested capital at cheap price as measured by high earnings yield (Ebit/Enterprise value) of the Magic Formula.
- Focus on the downside and let the upside takes care of itself. Invert, always invert.
- Be a second-level thinker. If something is easy to compute and understand, it is extremely unlikely that the market will misinterpret it. Therefore, such information will not, by itself, provide evidence of mispricing.
The chart above shows Warren Buffett has an annual excess return of about 13%, or an absolute annual return of about 25% over a 55 years’ periods, while Joel Greenblatt of the Magic Formula Investing fame has an annual excess return of about 30%, or an annual absolute return of about 42% over a period of more than 20 years.
I knew these core principles and methodologies of fundamental investing would work for me investing in Bursa. As the new year approaches, it is time to review how well they have worked for me in this mid-term horizon.
This also serves a purpose that I am not bullshitting, that I have established records to show, not necessary implying I have made tons of money, or trying to mislead anybody in this largest investment forum for Bursa, but merely to prove that those core principles and methodologies work not only in the US and around the world, but also work very well in Bursa. Hopeful critic like the one below can be enlightened.
[Posted by koonthebest > Oct 20, 2015 01:48 PM | Report Abuse
empty tong PONG PONG PONG! where your bursa statement! PONG PONG PONG response got lah!
please post the bursa statement past 3-5 years.unless proven to be real, his writing and analysis can be justified rubbish.]
So far, Tan Kian Wei, one of the major contributors in i3investor has put up two official portfolios of mine in i3investor in 2013 which have reasonably long duration, one in January 2013 as “GE 13 Watch – kcchongnz”, and the other on August 1 2013 named “Stock Pick Challenge 2013 2H – kcchongnz”. They can be viewed from these links below.
http://klse.i3investor.com/servlets/pfs/13147.jsp
http://klse.i3investor.com/servlets/pfs/19386.jsp
At that time, there were only 2 i3investor forumers participated in these two “challenges”; myself and Ooi Teik Bee, who uses technical analysis in his stock selection.
I have provided detail analysis on the stocks chosen and their investment thesis in i3investor following the links above. I always feel sharing the process of the stocks selection is more meaningful, rather than telling how much I have made after the share prices have gone up.
The link below shows the outcome of my usage of the core principles and methodology of fundamental investing which I have described about.
http://klse.i3investor.com/blogs/kcchongnz/78390.jsp
GE13 Watch
Table 1 in the Appendix shows the performance of the stocks and the portfolio for the 2 years and 11 months’ investment period for “GE13 Watch” as at to date.
During this period, the broad market has gained 5.7%. All 10 stocks in the portfolio have positive total returns which varies from 0% for Pantech to 517% for Prestariang. There is not a single stock which loses money, absolutely none. Pantech is the only stock which under-performed the market, by just a small margin. The average return of the portfolio is 134%, beating the broad market by a whopping 128%!
The total return is equivalent to a compounded annual growth rate (CAGR) of 34%. RM100000 invested less than three years ago has grown to RM233500, compared to just RM105700 if invested in the broad market.
Four out of the ten stocks have triple digits return; Prestariang at 517%, SKP Resources at 339%, Pintaras at 203%, and NTPM 106%.
Investing following the core principles and methodologies of the super fundamental investors for the above portfolio has shown that it has yielded superb return, and with very low risk as evidenced from the lack of a single loss making stock.
Is the superb return of this portfolio using those core principles and methodologies of fundamental value investing an exception?
Stock Pick Challenge 2013 2H
Table 2 in the Appendix shows the performance of the stocks and the portfolio for the 2 years and 5 months’ investment period for “Stock Pick Challenge 2013 2H”.
During this period, the broad market is practically flat as shown. However, eight out of eleven stocks, or 73% of the stocks in the portfolio have positive total returns which varies from a minimum of 20% for Tienwah to 565% for Datasonic. The average return of the portfolio is a whopping triple digit of 120%, beating the broad market by the same magnitude.
There are only two stocks which under-performed the market; Daiman at -6.9% and Kumpulan Fima, by just a small margin of 2.2%.
The total return is equivalent to a CAGR of 38%. RM100000 invested two years and five months ago has grown to RM220500, while the amount of money invested in the broad market remains unchanged.
Three out of the eleven stocks have triple digits return; Datasonic at 565%, Homeritz at 424%, and Fibon at 117%.
Again it has demonstrated that investing following the core principles and methodologies of the super fundamental investors has yielded superb return, and more importantly, with very low risk as again evidenced from the minimal losses of just a couple of losers.
Is the superb return of this second portfolio using these core principles and methodologies another exception together with the first one?
Stocks selected throughout 2014
I have another portfolio which is not officially published in i3investor but the stock selections were shared in i3investor which you can search from the link below:
http://klse.i3investor.com/blogs/kcchongnz/
The stock selection also come with detail analysis as published in i3investor. I like to share the principles and methodologies in investing, which I think it is a better sharing, rather than telling others what stocks to buy without any thesis. I have compiled them into what I call “My Third Portfolio”.
How has this “My Third Portfolio performed in the short period of less than two years?
Table 3 in the Appendix shows the performance of the stocks and the portfolio for “My Third Portfolio”. Here I have omitted a couple of company warrants which were shared as educational purpose on the usage of financial risk management using options. Nevertheless, the effect on the total return of the portfolio is not that significant.
During this period when the portfolio was formed, the broad market was almost at its peak with KLCI at 1844. Since then, it has dropped by 8.2% due to the various problems at home and abroad. However, the portfolio of stocks has performed very well too.
Eight out of thirteen stocks, or 62% of the stocks in the portfolio have positive total returns which varies from 5.1% for Kuchai to 188% for Latitude Tree. The average return of the portfolio is 46.3%, beating the broad market by another wide margin of 54%.
The three stocks which under-performed the market are Plenitude at -35.4%, Perak Corporation at -28.3% and Tong Herr at -14.2%. This time, the loss is relatively larger than before. However, I believe it is just a temporary setback as I reviewed my investment thesis, there is no serious concern about those companies, in my personal opinion.
RM100000 invested less than two years ago in “My Third Portfolio” has grown to RM146000, while RM100000 invested in the broad market has diminished in value by RM8200 to RM91800.
Again there are three stocks with triple digit return, even in this short-term investment horizon; Latitude at 188%, Prestariang at 146.7% and Magni-Tech at 143.3%.
Again it has demonstrated that investing following the core principles and methodologies of the super fundamental value investors has yielded superb return, but with relatively low risk.
This return on “My Third Portfolio” demonstrated that one of the principle of fundamental value investing of diversification is important for ordinary investors.
Is there other proof that investing basing on the core principles and methodologies of the super investor yield good results and with little risks. Yes, of course.
Stock picks by my online course participants
I have posted an article with the stock picked by my previous course participants here:
http://klse.i3investor.com/blogs/kcchongnz/88314.jsp
Many of my previous course participants have become very good fundamental investors. In fact, I have been relying more of their recommendations and information for my investment.
Here is the summary of the stocks selected within the last one year and the return of the portfolio as on 17th December 2015.
- The seven stocks shared return an average of 33.5% within an average of six months’ period, compared to the loss of the broad market of 8.6% during the same period.
- The excess return, or alpha is a commendable 42.1%.
- The median return is even higher at 42.1%.
- There is only one loser and under-performer (14%), APM at a loss of 11%. The negative alpha is minimal at just 2.4%.
- The risks of those stocks selected were generally low as most of them are with steady earnings and cash flows and healthy balance sheets.
Conclusions
It has shown in the above that, all the four portfolios of stocks in Bursa selected using the core principles and methodologies of the fundamental value super investors, three from me, and one from my course participants, outperformed the broad market by a very wide margin. The consistency in the superb performances implies they are unlikely as a result of luck. This is also in consistent with the good performances and proven records of the fundamental value super investors.
Hence following the core principles and methodologies of sound investment has a higher probability of building long-term wealth in the stock market. Don’t you agree?
So, what are you waiting for? Don’t you also like to learn and acquire these proven core principles and methodologies of investing for your investment to build long-term wealth surely and safely by your own? Please contact me for an online investment course which will start soon for a small fee.
ckc14training2@gmail.com
Tis goeth down to a fundamental aspect that “An investment in knowledge pays the best interest” - Benjamin FranklinThis course will start with stock picks for the new year 2016 as a new fundamental value portfolio.
K C Chong
Appendix
Table 1: GE13 Watch Performance
Table 2: “Stock Pick Challenge 2013 2H” Performance
Table 3: My Third Portfolio Performance
Table 4: Stock pick by course participants
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