28 September 2016

Different between CEO and Chairman

So what's the difference? And why is it important to know?

CEO (Chief Executive Officer) as the name implies; is a company top decision maker and all other executives report to him or her. CEO/President usually delegates most of the tactical tasks to other managers, so that he/she can focus on adopting strategies for company i.e which competition to take on, when and which markets should they target, should they go for M&A (merger and acquisition) or partnerships with other companies etc. All CEO are accountable to the BOD (Board of Directors) for the company performance.

Chairman is the head of its BOD of a company. The board is elected by shareholders and their main duty us to protect investors' interests; such as the company's stability as well as profitability. Chairman usually meets BOD multiple times per year to set long-term objectives, evaluate performance of keys managers, review financial results and vote on essential strategic decision proposed by CEO. Directors that are appointed can also fire key managers such as the CEO and president. Chairman normally has substantial power in setting the board's agenda and determine the outcome of votes. The main thing is that Chairman does not necessarily play an active role in everyday management.

The chairman of the board is technically a CEO's superior as the CEO can't make major moves without the board's consensus and his/her job security will depends on their satisfaction. In another word, chairman is the ultimate boss of the whole company's structure. CEO can also affect the composition of the BOD through his/her selection of senior executives, many of them are confirmed board seats by company bylaws.

After reading through, now you know the main differences between CEO and Chairman. Its important to know because if you had purchased any shares of a listed company and you are one of the substantial shareholders, you might be able to determine the fate of the BOD.

21 September 2016

Book Value or Earning?

The value of a company lie in their power to generate consistent good revenue rather than book value in my personal opinion.

Though some of the companies may go private despite having losses for consecutive quarters, however because their share price was so low that sometimes it make sense for them to privatize rather than remain listed if they have enough "financial muscle" to do so.

There are some possible reason why company choose to go private rather than remain listed especially during recession times. Below are some of the possible reasons:

1) Founder / Substantial shareholders of the company has the financial means to do so.
2) Founder / Substantial shareholders  of the company no longer wants to go through the hassle of holding AGM or getting approval from shareholders when certain tasks (i.e. issue right, perpetual securities, bonds etc) need to be carried out.
3) Founder / Substantial shareholders  can now have a bigger pie of his /her company's earnings.
4) Market price of the share is way below its intrinsic value

Above mentioned are not exclusive though, there are also other various reasons why a listed company will go listed.

Do comments or share your personal experiences.

20 September 2016

Does dividends matter?

Yes definitely it does matter.

According to online research, it says that dividends account for about 40% of your returns.

And according to personal experience and strategy, most of the time if I don't need the money (dividends) that I collected, I will look for others undervalued stocks or reinvest it.

The reason of doing it is because of compounding effect.

As simple as that!

Do let me know your point of views why or why not dividends does matter.

18 September 2016

Accept the offer!

During the so call "Recession" period, some of the listed companies have chosen to privatize instead of remain listed in the stock exchange.

According to my experience, most companies will offer price above their book value, minority will offer price below their book value, however almost all would offer more than 10% above their current trading market price.

So as a minority shareholder, what should we do?

My personal opinion is to accept the offer. In most situation, once the listed company has acquired above 90% of their shares, it would turn from conditional offer to unconditional offer, so by the time it turned into unconditional offer, what can a minority shareholder do if the company turned into a private company?

My personal answer is NOTHING! Just imagine you are the minority shareholder of a private limited company, what can you do?

Therefore personal suggestion will be accept the offer and move on to invest in other great companies.

Have you ever been the minority shareholders of a listed companies? What did you do when the listed company goes private? What experience did you learn out from it? Do share my post and comments if you have any other suggestion or would like to share your personal experiences.