13 October 2016

In Memories of Ronald Read

Who is Ronald Read?

A Janitor who I respected most, Ronald Read. He is a man who lived very frugally and worked as a maintenance and janitor at J.C. Penny. He is known as a man who lived modestly as he at times used safety pins to hold his coat together and sometimes in order to avoid having to pay the parking meter, he would park his 2007 Toyota Yaris far away and chose to walk a long distance
He would save a penny if he could. What I respected most about this old man is not how stingily he lived himself for his entire life, but it is his generosity he left most of his estate to his library and the hospital.
 When Mr Read died at the age of 92, he left behind his 5-inches thick stack of stock certificates in a safe deposit box which worth approximately $8 millions in his portfolio. He owns about 95 stocks at the time of his death which many of them he had held for many years.
For those who know him said that he only bought stocks he is familiar with and he spread his investment across different sectors. And whenever he received his dividends, he will reinvest to buy more shares.
Ask ourselves, how many of us would accumulate our whole life wealth and contribute to the society to benefit the majority once we are dead? What really done through Mr Read's mind throughout his whole life? Is there something we can learn from him (in term of his investment skills or his character?)

07 October 2016

Only God knows

Constantly I will get the same question over and over and over again.

"Yongli, tell me at what price do you think is the bottom for this particular company?"

My consistent answer will be "Only God Knows"

Why am I giving this answer?

Because the answer is the brutal truth to that question! No one will ever know unless (Big boys with big financial muscles are manipulating the capital market and it is illegal and unethical to do so)

If someone ever told you that he/she holds the holy grails of the stock market, then you better run fast away, because he/she is a con artist. That person is lying straight in your face. The main source of income this type of person makes is mainly from selling courses, using unscrupulous marketing techniques to "cheat" peoples' money. I have met some and I tried to stop people from being cheated. However, the truth is it is easier to fool people than to convince them that they have been fooled.

Ultimately the main thing is to get to know the valuation of the company rather than to guess the millions' mind of where the price is going.

Which comes to the point that most only know the price of everything and the value of none.

05 October 2016

Aligning Interest With Shareholders

One of the most important factors to be considered before investment in companies is whether or not the interest of the CEO are aligned with the shareholders. Its important becauase as a shareholder, we do not want our money to be mis-managed by the leaders of the companies.

Most of the time, how the CEOs are being remunerated are based on the performace he/she able to bring to the table of the company he/she runs.

For example, is the CEO able to help the company increase revenues,what are the cost cutting strategy he/she adopting if the company is in losses, is he/she able to increase EPS (earnings per share). To keep it short and simple, the main objective is NET PROFIT for the company.

Having said that, some of the ways to know whether or not the interest between shareholders and CEO are being aligned are as follows:

1) does the CEO has shareholdings in the company he/she runs
2) does he/she deliver promises to shareholders
3) does the company pay out dividends to shareholders (what are the payout ratio? if no, why not?)
4) does the CEO think from the perspective of the shareholders etc.

Above listed are some and certainly there are more than that.

Do let me know if you do know more than that or comments if you have any.