The later part the interview where Hersh Cohen summarised his investment rules is very educational.
1. Always keep a record of your investment mistakes. That reminds me of another great comment on investment: "Investing is not an art, it is a trial and error."
2. Only buy what you can understand. The company must pass the "smell test".
3. Appreciate the expectation factered in the price. Be contrarian. The time to sell is when you feel good at yourself and the time to buy is when you are scared to death. Learn to manage the emotions. I think Hersh's degree in psychology certainly helps him greatly in this respect.
4. Emphasis on Fundamental analysis and only buy high quality business.
Sunday, August 1, 2010
Sunday, July 11, 2010
TED Talk - Chip Conley: Measuring what makes life worthwhile
Inspiring talk about the value of intangibles and the new application of Maslow's motivation theory!
Wednesday, June 30, 2010
Li Lu talk in Columbia
Li Lu is one of the candidates to succeed Warren Buffett as CIO of Berkshire. He is also a friend of Charlie Munger and reviewed the first Chinese edition of Charlie's Almanack. His experience as value investor is very illuminating and educational.
Saturday, May 22, 2010
Clive Peeters
Clive Peeters recently fell victim to the soft consumer demand for big-ticket electrical appliances and called in voluntary administration. In the spirit of learning from vicarious experience, I prepared a quick post-mortem analysis in the following.
The company was floated in Sep 2005 issuing 40million shares at $1. The underwriter was Austock. Initial market cap was $127million. Raised capital was used to acquire Rick Hart Group in WA and the Michael King Store in Melbourne (total $10m), retiring existing debt and pay a dividend to existing shareholders (total $11m); remaining funds was used for further expansion. The company expected to make around $13million in FY2006 and had earning per share of 10cents.
Before listing, the business enjoyed 25.5% compound sales growth from 1993 to 2005 through expansion in Victoria. The business had only one store in 1993, located in Ringwood, Victoria.
As in the nature of things, the failure of a once successful enterprise is generally attributed to multiple factors:
1. Aggressive acquisition based growth results in poor operational integration and additional leverage. The number of stores grew from 23 in 2005 to 48 in 2008 (doubled in less than three years). The company reported a trading loss in 2009 and started to shut down stores.
2. The business’s expansion in a new geographic territory (NSW) failed to turn a profit. It is hard and takes time to build a national brand name. The NSW operation generated a trading loss of $6.5million in FY2007; $4.4million in FY2008. Turnaround of retail operation is extremely hard, as noticed by many investors.
3. A $20million embezzlement occurred by a senior accountant.
4. Loss of sales in high growth, high margin home entertainment and technology category, probably due to the expansion of category killer JB HiFi. The company’s traditional mix of sales (58% whitegoods and cooking, 42% home entertainment and technology in FY08) shifted to 64% and 36% in FY09.
5. Tough retail environment and global financial turmoil.
The share price of Clive Peeters had a fantastic run since listing and touched $3.50 in early 2007 (more than three-fold increase) after the company kicked start the acquisition program. After the problem of the NSW operation occurred, the share price dropped sharply then rebounded briefly (dead cat’s rebound) in late 2007 and resumed the relentless decline. The market basically priced in the bankruptcy after the share price dropped below 50c.
In my opinion, two key lessons can be learned from Clive Peeters’ five-years public market history:
1. Be aware of aggressive growth strategy of newly listed small cap companies. There are many cased of small businesses listed with the intention to consolidate and most is doomed to fail. Only a tiny number can grow big and dominate their respective industries. It is important to monitor closely and make a careful judgment whether the inflextion point has been reached.
2. Retail is a tough business and debt should only be used sparingly.
The company was floated in Sep 2005 issuing 40million shares at $1. The underwriter was Austock. Initial market cap was $127million. Raised capital was used to acquire Rick Hart Group in WA and the Michael King Store in Melbourne (total $10m), retiring existing debt and pay a dividend to existing shareholders (total $11m); remaining funds was used for further expansion. The company expected to make around $13million in FY2006 and had earning per share of 10cents.
Before listing, the business enjoyed 25.5% compound sales growth from 1993 to 2005 through expansion in Victoria. The business had only one store in 1993, located in Ringwood, Victoria.
As in the nature of things, the failure of a once successful enterprise is generally attributed to multiple factors:
1. Aggressive acquisition based growth results in poor operational integration and additional leverage. The number of stores grew from 23 in 2005 to 48 in 2008 (doubled in less than three years). The company reported a trading loss in 2009 and started to shut down stores.
2. The business’s expansion in a new geographic territory (NSW) failed to turn a profit. It is hard and takes time to build a national brand name. The NSW operation generated a trading loss of $6.5million in FY2007; $4.4million in FY2008. Turnaround of retail operation is extremely hard, as noticed by many investors.
3. A $20million embezzlement occurred by a senior accountant.
4. Loss of sales in high growth, high margin home entertainment and technology category, probably due to the expansion of category killer JB HiFi. The company’s traditional mix of sales (58% whitegoods and cooking, 42% home entertainment and technology in FY08) shifted to 64% and 36% in FY09.
5. Tough retail environment and global financial turmoil.
The share price of Clive Peeters had a fantastic run since listing and touched $3.50 in early 2007 (more than three-fold increase) after the company kicked start the acquisition program. After the problem of the NSW operation occurred, the share price dropped sharply then rebounded briefly (dead cat’s rebound) in late 2007 and resumed the relentless decline. The market basically priced in the bankruptcy after the share price dropped below 50c.
In my opinion, two key lessons can be learned from Clive Peeters’ five-years public market history:
1. Be aware of aggressive growth strategy of newly listed small cap companies. There are many cased of small businesses listed with the intention to consolidate and most is doomed to fail. Only a tiny number can grow big and dominate their respective industries. It is important to monitor closely and make a careful judgment whether the inflextion point has been reached.
2. Retail is a tough business and debt should only be used sparingly.
Friday, May 14, 2010
Wednesday, May 12, 2010
Tuesday, April 27, 2010
Advice from Brian G. Dyson
Imagine life as a game in which you are juggling some five balls in the air. You name them – work, family, health, friends and spirit … and you’re keeping all of these in the air.
You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls – family, health, friends and spirit – are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged or evenshattered. They will never be the same. You must understand that and strive for Balance in your life.
How?
Don’t undermine your worth by comparing yourself with others. It is because we are different that each of us is special.
Don’t set your goals by what other people deem important. Only you know what is best for you.
Don’t take for granted the things closest to your heart. Cling to them as you would your life, for without them, life is meaningless.
Don’t let your life slip through your fingers by living in the past or for the future. By living your life one day at a time, you live all the days of your life.
Don’t give up when you still have something to give. Nothing is really over until the moment you stop trying.
Don’t be afraid to admit that you are less than perfect. It is this fragile thread that binds us to each together.
Don’t be afraid to encounter risks. It is by taking chances that we learn how to be pave.
Don’t shut love out of your life by saying it’s impossible to find time. The quickest way to receive love is to give; the fastest way to lose love is to hold it too tightly; and the best way to keep love is to give it wings!
Don’t run through life so fast that you forget not only where you’ve been, but also where you are going.
Don’t forget, a person’s greatest emotional need is to feel appreciated.
Don’t be afraid to learn. Knowledge is weightless, a treasure you can always carry easily.
Don’t use time or words carelessly. Neither can be retrieved. Life is not a race, but a journey to be savoured each step of the way…
–Brian G. Dyson
President and CEO, Coca-Cola Enterprises during his speech at the Georgia Tech 172nd Commencement Address Sept. 6, 1996
You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls – family, health, friends and spirit – are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged or evenshattered. They will never be the same. You must understand that and strive for Balance in your life.
How?
Don’t undermine your worth by comparing yourself with others. It is because we are different that each of us is special.
Don’t set your goals by what other people deem important. Only you know what is best for you.
Don’t take for granted the things closest to your heart. Cling to them as you would your life, for without them, life is meaningless.
Don’t let your life slip through your fingers by living in the past or for the future. By living your life one day at a time, you live all the days of your life.
Don’t give up when you still have something to give. Nothing is really over until the moment you stop trying.
Don’t be afraid to admit that you are less than perfect. It is this fragile thread that binds us to each together.
Don’t be afraid to encounter risks. It is by taking chances that we learn how to be pave.
Don’t shut love out of your life by saying it’s impossible to find time. The quickest way to receive love is to give; the fastest way to lose love is to hold it too tightly; and the best way to keep love is to give it wings!
Don’t run through life so fast that you forget not only where you’ve been, but also where you are going.
Don’t forget, a person’s greatest emotional need is to feel appreciated.
Don’t be afraid to learn. Knowledge is weightless, a treasure you can always carry easily.
Don’t use time or words carelessly. Neither can be retrieved. Life is not a race, but a journey to be savoured each step of the way…
–Brian G. Dyson
President and CEO, Coca-Cola Enterprises during his speech at the Georgia Tech 172nd Commencement Address Sept. 6, 1996
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