[TSO]

Gusto ko yumaman e.

Just to be clear, short of a winning lottery ticket or an inheritance package from your family, you can only attain wealth (or the proverbial financial freedom) by making your money work hard for you via a business or investors with plenty of cash. The latter is extremely hard because trust is hard to come by these days, plus they're easy to break.

Case in point: look for the various scammer threads here in PMT.

[reytave19]

Just to be clear, short of a winning lottery ticket or an inheritance package from your family, you can only attain wealth (or the proverbial financial freedom) by making your money work hard for you via a business or investors with plenty of cash. The latter is extremely hard because trust is hard to come by these days, plus they're easy to break.

Case in point: look for the various scammer threads here in PMT.

I get your point. This is just the 1st step. I know it's going to be a long journey. Para sa akin, mas importante for now na madevelop ko yung practice of saving and investing. i really don't care kung malaki man or maliit ang gains ko. i started with EIP sa BDO last june. Ngayon stocks naman ang pinagaaralan ko. hehe. actually more than 1 year na ko nagiinvest sa stocks pero minimal amount lang and di ko talaga siniseryoso. i just read through pmt kung anong mga patok na stocks then yun din bibilhin ko. kumbaga, nakikisabay lang sa uso. haha! i want to be able  to confidently pick my own stocks in the future.

plan ko talaga na magkaroon ng sariling business someday. i really don't want to be an employee for long. 1'm 23 years old and working as IT professional here in SG. wala pa kong nisusupport na family so solo ang kita. i see myself lucky kasi malaki ang competetive advantage ko with my peers. plan ko lang magwork for around 5 years before putting up my own business. this october, mag 3 years na ko as an employee. i still have more than 2 years to work para makuha ko yung capital na kelangan ko. 

[decapolis]

Wowww bright future for you, you're so young at 23yo and i assume earning a lot

Im also here in SG for a little bit of 4 yrs now also in IT, but only started investing this year and im already 30yo.

Happy investing & good luck

[TSO]

Last night I computed my monthly or so returns for my Philippine portfolio, and the results are so striking I need to bump up this dead thread as proof that value investing works.

Age of my portfolio: 3.26 years as of September 2012 month-end.
Time-weighted rate of return over same period: 38%
Standard deviation: 6.25%
My Sharpe Ratios: 1.9 vs PSEi, 0.5 vs. First Metro, 1.0 vs. Philequity, 3.0 vs. Philam, and 2.1 vs. Sunlife
Compare against:
>> PSE index, 26% (1200 bps difference), 4.6% stdev
>> Philequity, 32% (600 bps difference), 5.3% stdev
>> First Metro, 35% (300 bps difference), 5.0% stdev
>> AIG's Philam Equity, 19% (1900 bps difference), 8.6% stdev
>> Sunlife Financial, 25% (1300 bps difference), 4.7% stdev

My portfolio is less volatile than PSEi, Philequity, Philam, and Sunlife in terms of variability, despite the supposedly "higher risk" that my standard deviation represents.

Under the efficient market hypothesis, Philam should be earning higher than me, yet my performance was double its own. While my standard deviation of 6.25% indicates my portfolio is "riskier" than Philequity, First Metro, Sunlife Financial, and the index, take note that I don't trade often, and I'm often busy looking at my US basket.

This reflects my choice of going into companies I find worthy of value and my decision to stick to them instead of trading or "closet indexing" (albeit with higher weights on certain corporations as to give Philequity and First Metro their 600 and 900 bps difference).

And these are supposedly "growth funds" I'm competing against. As such their "risk" AND "return" should be higher than mine.

Huh.

[glady]

Last night I computed my monthly or so returns for my Philippine portfolio, and the results are so striking I need to bump up this dead thread as proof that value investing works.

Age of my portfolio: 3.26 years as of September 2012 month-end.
Time-weighted rate of return over same period: 38%
Standard deviation: 6.25%
My Sharpe Ratios: 1.9 vs PSEi, 0.5 vs. First Metro, 1.0 vs. Philequity, 3.0 vs. Philam, and 2.1 vs. Sunlife
Compare against:
>> PSE index, 26% (1200 bps difference), 4.6% stdev
>> Philequity, 32% (600 bps difference), 5.3% stdev
>> First Metro, 35% (300 bps difference), 5.0% stdev
>> AIG's Philam Equity, 19% (1900 bps difference), 8.6% stdev
>> Sunlife Financial, 25% (1300 bps difference), 4.7% stdev

My portfolio is less volatile than PSEi, Philequity, Philam, and Sunlife in terms of variability, despite the supposedly "higher risk" that my standard deviation represents.

Under the efficient market hypothesis, Philam should be earning higher than me, yet my performance was double its own. While my standard deviation of 6.25% indicates my portfolio is "riskier" than Philequity, First Metro, Sunlife Financial, and the index, take note that I don't trade often, and I'm often busy looking at my US basket.

This reflects my choice of going into companies I find worthy of value and my decision to stick to them instead of trading or "closet indexing" (albeit with higher weights on certain corporations as to give Philequity and First Metro their 600 and 900 bps difference).

And these are supposedly "growth funds" I'm competing against. As such their "risk" AND "return" should be higher than mine.

Huh.

Hi TSO - di ko masyado maintindihan mga technical terms pero congrats sa good performance ng portfolio mo Pa-share naman kung ano yung mga stocks na hawak mo 

[alacrity]

@TSO

I have no doubts about the principles (and returns) of VI, but is there a place where value and growth can meet halfway? Even though I still consider myself primarily a VI, I have to admit that I have been reading Phil Fisher's book a lot now.

My problem is this, it's hard to integrate his growth principles with VI, they contradict each other (Graham says buying growth stocks is 'paradoxical' and Fisher says don't buy stocks just because they are cheap, he is more subjective and buys if he can see a long term growth potential).

I never had any problem like this with VI, it immediately clicked with me,. But Growth Investing? It scares me, especially on the part where Fisher is more subjective when analyzing stocks than Graham. But then, Fisher does make good points (actually, 15). Thus, I really feel that I have to at least incorporate some of his point into mine.

[TSO]

Hey alacrity!

Yes there is.

The solution to your conundrum lies on semantics—on definitions. You need to ask yourself this question: What is value? What is growth? What do these two mean?

I had the fortune of growing up in a family steeped in entrepreneurship, so I find it easy to connect the two (whereas many professionals and DIY investors undergoing self-improvement both stumble at the initial contradiction of Fisher's and Graham's principles). For me, when I think of "value", I think of "bargains". I'm getting more for what it's being sold for, and so I snap it up before the seller realizes I'm playing him for a fool.

Dad does this a lot with his business ventures. One example is our printer equipment business (established about 4 years ago?), where we went to China and became an exclusive distributor in the Philippines. After ensuring the products' flexibility across customer needs, we pretty much acquired the printers at a great bargain (more than half the price of whatever our competitors were getting them for), and then undercut the industry price by as much as 25% while keeping profit margins at the same level as the industry's before we entered the game. As a result, we stole market share from the competitors AND the increased prosperity of the economy (i.e. a growing market) enabled us to use our cost advantage to attract the new clients entering the market.

See what we did here? We got the printers at a value price, pulling clients away from existing players and moreover, positioning ourselves for future growth. Existing players, on the other hand, turned out to have gotten their printers at a premium price and paid for it heavily when a new entrant swooped in and stole their game right before their very eyes in an industry conference.

Going back to your conundrum, Graham's definition of "growth stocks" falls more in line with "glamor stocks" while Fisher's definition of "value stocks" are aligned with "businesses being sold for far less than what they're really worth". Benjamin says buying growth stocks is "paradoxical" because they are priced at a premium, because the market—the investing community at large, may they be retail investors or algorithms—have placed high, often unrealistic, expectations on their underlying business performance. Phil, in contrast, warns against blind purchases of low P/E stocks "just because they're low P/E"—he is insisting that the analyst-investor must exercise more prudence to avoid value traps, companies that look like their bargains but have been correctly priced by the collective.

Obviously, Fisher's approach is more subjective than Graham's, as you end up analyzing potential growth and the competitive advantages inherent in a company's business and its individual nature. But why should this scare you? Investing is subjective. It is not quantitative—note that Graham himself understands this, as in Security Analysis he both stands by and cautions against the use of averages as "rough ind[ices] of the future". Remember that "risk" is itself subjective.

Take another look at my performance up there. My standard deviation is 6.25%, compared against First Metro's 5% and Philequity's 5.3%. Modern Portfolio Theory dictates my so-called risk is greater than First Metro and Philequity, and the higher returns I have seems to validate this. However, consider this: (1) the businesses I picked had high margins of safety when I acquired them, (2) I don't sell holdings or "rebalance" my portfolio just because I'm not exceeding benchmarks every quarter, and (3) I operate a heavily concentrated portfolio.

In other words, I stick to my guns, I plow my money into places I expect will make money, and I evaluate conservatively. Modern Portfolio Theory says I'm riskier than a growth-oriented actively-managed mutual fund. Doesn't that sound ridiculous to you? Do you think my method is "risky"?

The reason why I mentioned risk here is because all investments are evaluated on risk and return. People are often fixated on "return". Greedy, willfully forgetting the dark side. Whether or not a company is a "bargain" depends completely on how much risk is being taken for the returns it'll bring, and the price you end up paying to take on this venture. Graham probably defined growth stocks because of the high risk of the underlying business failing the market's unrealistic long-term expectations, while Fisher looked at cheap stocks that run the high risk of the underlying business further deteriorating or actually dying instead of turning around as the contrarian would expect.

To conclude this post, the bottom line is that there is no distinction between growth and value and it is a grave mistake for you to do so, or even listen to the finance professionals who assert its existence. There is only price, expectations, and economic reality. This dynamic exists in every market capitalization in every geography.

I have no doubts about the principles (and returns) of VI, but is there a place where value and growth can meet halfway? Even though I still consider myself primarily a VI, I have to admit that I have been reading Phil Fisher's book a lot now.

My problem is this, it's hard to integrate his growth principles with VI, they contradict each other (Graham says buying growth stocks is 'paradoxical' and Fisher says don't buy stocks just because they are cheap, he is more subjective and buys if he can see a long term growth potential).

I never had any problem like this with VI, it immediately clicked with me,. But Growth Investing? It scares me, especially on the part where Fisher is more subjective when analyzing stocks than Graham. But then, Fisher does make good points (actually, 15). Thus, I really feel that I have to at least incorporate some of his point into mine.

@ glady

LOL okay. XDDDD

Major holdings ko: EEI, MWC, EDC, and also AMC (sold all my shares because they were delisting. Grrr!!!!). I'm considering accumulating more MWC (up until my average cost hits P20) and am about to study either LOTO or Holcim Philippines (or both?) as potential investments as I've a sh*t ton of money floating around doing nothing, plus I've every intention to use my 3-year record to wring a few hundred thousand from my dad. Hahahaha. Maswerte pa ako kung isang milyon ibibigay niya sakin

I really should consider tapping trusted PMT investors 8D But eh... mamaya na 'yun siguro.

Hi TSO - di ko masyado maintindihan mga technical terms pero congrats sa good performance ng portfolio mo. Pa-share naman kung ano yung mga stocks na hawak mo

[glady]

@ glady

LOL okay. XDDDD

Major holdings ko: EEI, MWC, EDC, and also AMC (sold all my shares because they were delisting. Grrr!!!!). I'm considering accumulating more MWC (up until my average cost hits P20) and am about to study either LOTO or Holcim Philippines (or both?) as potential investments as I've a sh*t ton of money floating around doing nothing, plus I've every intention to use my 3-year record to wring a few hundred thousand from my dad. Hahahaha. Maswerte pa ako kung isang milyon ibibigay niya sakin

I really should consider tapping trusted PMT investors 8D But eh... mamaya na 'yun siguro.

Sobra ka naman kasi technical TSO, hirap maka-relate at hirap mo ma-reach lol 

Pwede mo rin pala donate floating-money-doing-nothing mo, hehehe, joke lang...

Thanks sa pag share pala ng holdings mo. Pag nagka-fund na ulit bili din ako ng MWC

[alacrity]

See what we did here? We got the printers at a value price, pulling clients away from existing players and moreover, positioning ourselves for future growth. Existing players, on the other hand, turned out to have gotten their printers at a premium price and paid for it heavily when a new entrant swooped in and stole their game right before their very eyes in an industry conference.

That's also what I have in mind when I think of value. I had a few small-time business ventures back in college since I knew a lot of people who made name plates and uniforms, and I knew where to find the cheapest used or new books.

For me it's really important to buy things cheap because there's the advantage of being able to sell them for a lower price than your competitors and having a margin of safety when in-case you aren't able to sell them, you can just sell them for how much you bought thus getting the capital back.

Going back to your conundrum, Graham's definition of "growth stocks" falls more in line with "glamor stocks" while Fisher's definition of "value stocks" are aligned with "businesses being sold for far less than what they're really worth". Benjamin says buying growth stocks is "paradoxical" because they are priced at a premium, because the market—the investing community at large, may they be retail investors or algorithms—have placed high, often unrealistic, expectations on their underlying business performance. Phil, in contrast, warns against blind purchases of low P/E stocks "just because they're low P/E"—he is insisting that the analyst-investor must exercise more prudence to avoid value traps, companies that look like their bargains but have been correctly priced by the collective.

Obviously, Fisher's approach is more subjective than Graham's, as you end up analyzing potential growth and the competitive advantages inherent in a company's business and its individual nature. But why should this scare you? Investing is subjective. It is not quantitative—note that Graham himself understands this, as in Security Analysis he both stands by and cautions against the use of averages as "rough ind[ices] of the future". Remember that "risk" is itself subjective.

To conclude this post, the bottom line is that there is no distinction between growth and value and it is a grave mistake for you to do so, or even listen to the finance professionals who assert its existence. There is only price, expectations, and economic reality. This dynamic exists in every market capitalization in every geography.

Semantics! Thank you for explaining that clearly, that was the most clear and concise explanation of growth and value. Specially the dynamics of price, expectations and economic reality.

It reminds me of a passage I read from a book, it was asking to fill in the blanks: To get rich all you have to find is a company that is compounding its ____ at a very fast ____, thus the stock goes up in price there you are.

So naturally I filled-in earnings and rate, and the next paragraph said I was wrong. Very wrong. Next, the book wanted me to explain why the said statement was false: None of my explanations were correct, in the end, the explanation for it was that "(earnings) records only show the past and the market cares about the future". So thank you for reminding me that, I almost forgot that.

 Btw, I haven't read Graham's Security Analysis, I'm still saving up for it.

Take another look at my performance up there. My standard deviation is 6.25%, compared against First Metro's 5% and Philequity's 5.3%. Modern Portfolio Theory dictates my so-called risk is greater than First Metro and Philequity, and the higher returns I have seems to validate this. However, consider this: (1) the businesses I picked had high margins of safety when I acquired them, (2) I don't sell holdings or "rebalance" my portfolio just because I'm not exceeding benchmarks every quarter, and (3) I operate a heavily concentrated portfolio.

In other words, I stick to my guns, I plow my money into places I expect will make money, and I evaluate conservatively. Modern Portfolio Theory says I'm riskier than a growth-oriented actively-managed mutual fund. Doesn't that sound ridiculous to you? Do you think my method is "risky"?

That is the most ridiculous thing I've ever heard. I don't think the method is risky, I believe in concentration, especially if the companies have been screened with due diligence and with a margin of safety in mind. One thing I noticed about the MPT and Random Walk is that the formulas don't include people in the equation. Granted, 6.25% is high, but according to whom? Maybe for some people 6.25% is too high. Personally, I'd gladly take on a high SD if I picked the companies myself, knowing their potential and respective margins of safety.

Oh, and thank you very much (again) for answering my question.

[GIG]

hey guys!

FMIC is delisting at 89 per pop. To those who have this stock, sad to say, its the end of the run. I'm pretty sad to part with this stock. Started buying this from 26 to 75 with average at high 40s. This is one stock Im prepared to hold for years. Well as they say" all good times ends".

Bye FMIC!

[abolababo]

^ pag na delist ba sir meaning mawawala na investment nyo? sorry newbie question

[GIG]

nope. The company needs to buy those minority shares held by you and the public. They often buy those shares at above market price in a tender offer. FMIC closed last friday at 84.5 while the company agreed to buy those shares at 89.

[mikoangelo]

Tender offer is higher than the current market price.....alam na..

[alacrity]

hey guys!

FMIC is delisting at 89 per pop. To those who have this stock, sad to say, its the end of the run. I'm pretty sad to part with this stock. Started buying this from 26 to 75 with average at high 40s. This is one stock Im prepared to hold for years. Well as they say" all good times ends".

Bye FMIC!

I was also hoping to keep this company for the long run. But, I guess it's time to part ways so goodbye FMIC. It was relatively short, but it was a good run.

[GIG]

@alacrity

Problem now is where to allocate that capital. Any Ideas? The stock comprises my single largest shareholding and is 33% of my whole portfolio. "How bout the new LR2" a friend said . . . hmm very tempting hehehe!