How long does it take you to study an individual business?

Lone Wolf said:

You might not agree with Tech's view on value investing, but I think he raises a valid point.

So you've found a quality business and calculated that it's currently priced at a discount to its intrinsic value. That alone hasn't made you any money yet, so there must be other components to success.

If you bought every quality business the moment it trades below intrinsic value and held until it returned to intrinsic value, is that profitable? What if you only bought the ones that were trading at more than 20% discount? How far does price need to drop below intrinsic value before it's worth buying? Will you buy more if it gets cheaper? If it continues falling, is there a point at which you consider your evaluation may be flawed in some way? Do you sell when it returns to intrinsic value or do you hold, expecting the quality business to rise in value? Or maybe you sell when it's "close enough" to intrinsic value, freeing up some cash to put into a more heavily discounted business?

I'm not actually asking these questions, just presenting them as examples. I know nothing of value investing. I don't have what it takes to be a value investor. But I suspect that generating a list of quality business trading at a discount is only a small part of what makes an investor successful. When you eventually come up with a detailed investment strategy, remember this thread and ask yourself what the duck asked - How do I know this is profitable?

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Ah ok. Yeah their are those questions. Well if the price does fall alot I guess you analyze why it fell alot and possibly buy more because it could be cheaper. Or sell because you made a mistake depending on why it dropped of course. The 2 components I was talking about I believe I heard it from Roger Montgomery. I mean sure there is stuff like competitors that you must look at but I believe these are the 2 core components.

tech/a said:

Many aspire to be here.(successful)
I don't know any who have.(Value investors)

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Yes you do!

RandomInvestor said:

So there are 2 components in successful value investing. Finding quality businesses and finding out their intrinsic value then buying the stock which is alot lower than its true value. How much time do you spend on each would you say? This investor on youtube said takes about 1000 hours to get ready to make an investment decision, that sounds crazy to me, what the hell do you do for 1000 hours? Surely it doesn't take that long to figure out whether or not the business is of high quality.

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What is "value" investing anyway - so many different interpretations that you can't say anything general about it really. I would be ready to start an investment accumulation in a few minutes of understanding, when I see the right thing. The longer your first assumptions play out, the longer you get to stay the more you will get to know. The more you know the greater opportunities in the future.

craft said:

What is "value" investing anyway - so many different interpretations that you can't say anything general about it really. I would be ready to start an investment accumulation in a few minutes of understanding, when I see the right thing. The longer your first assumptions play out, the longer you get to stay the more you will get to know. The more you know the greater opportunities in the future.

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Ah ok.

tech/a said:

No patience if I'm waiting for profit

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Thats why you are a trader and not an investor, its a perfect example of matching your temperament to your strategy. Of course it tales more than that, given that 90%+ of traders lose their shirts over time, to be one of the less than 10% - which you obviously are - must be a function of lots of hard work and finding edges that others cannot perceive.

craft said:

Yes you do!

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Let me alter my view.
I only know of one who has.

galumay said:

Thats why you are a trader and not an investor, its a perfect example of matching your temperament to your strategy. Of course it tales more than that, given that 90%+ of traders lose their shirts over time, to be one of the less than 10% - which you obviously are - must be a function of lots of hard work and finding edges that others cannot perceive.

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Yes Both Craft and I would agree in our chosen methods of trading/investing.

knowledge is accumulated over time and how much stuff you read and how good are you at processing those information, it not a precise science that you have to put in this number of hours.

it is something that hard to fast track if you start young and start reading financial books, paper, news
chance are you picked up a lot of knowledge from a lot of business and over time it like a compounding thing, once you get to that stage it doesn't necessary mean you have to studies some business for 1000 hours or 100 hours to be able to invest in them

It just comes naturally and from that knowledge, you can come up with your own set of rules and strategy.

I been reading for many years I know which business I don't want to be in and which one I want to be in and with what criteria and it from there it pretty straight forward once you accumulated that compounding knowledge.

Anything to do with Argi like plantation is a no go zone for me
No airlines, No Mining, unless it trading at excessively cheap where they can cut cost, flock off an asset that can drive price higher, once that objective is done I am out, but as a long term hold and buy I never do for these type of business.

I prefer Amcor, smartgroup, Pact group, ansell, credit corp, greencross, brambles etc.. business for long term holding

Then there regulation and market dynamics you got to keep an eye on the business you have holding and act accordingly etc..

I start out as buy and hold but my knowledge is decent enough now for me to branch out with shorting and options play and opportunity trading.

Buy and hold still a large part of it for dividend but I expect the other strategies will play a significant part going forward as well.

Trading, shorting has been a bonanza for me this year

The other part is risk management, it important as well, I never let one stock do damage to more than 1 year worth of my dividend and that around 30-40K
worse case for me is I lose one year worth of dividend and I have plenty of capital to come back in no time

Obviously this number will grow over time as the portfolio get bigger each year but the proportion still stays the same.

My tips subscribe to AFR and read them every day after a few years your knowledge would be pretty good on most business, regulations and bad management

This is hard to implement :
Industry mechanics
- Industry standards, margins (e.g. who's the lowest cost player)
"
can't really find any info on this

In a summary when analyzing this is what i do read few years worth of annual reports input all the financial statements data into a excel spread sheet make some ratios like roe,roa, roic, fcf etc. And by that decide if its a good company, I also look it if has long term prospects, dividend history. Also look at what company does where revenue comes from and where does most of it arrive from what countries. All this doesn't take more than 10 hours I'd say. But I always think to my self surely there is more research to do. It can't just be getting numbers and doing ratios on them. I guess I could use all the information I have saved over the 2 years and try implement it. Maybe cause the company I am researching "A2milk" there isn't much to know about it? It's just a simple company that sells 1 product?

Below is an extract from a report (late 2016) on a company I am currently reading up on.
What can anyone derive from these numbers ?

At a financial level, the Company's performance met the earnings guidance that was provided at the start of the year. FY2016 Cash EBITDA – which is the best measure of how the business has performed – was $62.2 million, up 8% on FY2015. Cash revenue of $175.5 million was 16% higher than FY2015, with increases across all the Company's main revenue streams. Net Profit After Tax of $90.1 million was lower than FY2015, however this was due to a reduction in non-cash revenue driven by foreign currency movements. Our cash position at year end was a strong $107 million, putting us in a strong position to deliver further growth in FY2017. The Board also elected to maintain the current fully franked dividend.

Boggo said:

What can anyone derive from these numbers ?

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Not much, without the context of the full financials and an understanding of the business and its management they mean very little. (eg it could be lifted from the Quintis report!)

galumay said:

Not much, without the context of the full financials and an understanding of the business and its management they mean very little. (eg it could be lifted from the Quintis report!)

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Well done galumay, it was from the 11th Nov 2016 chairman's briefing to shareholders of QIN.

A good example of the fiction that can (and does) mislead.
Very interesting reading the reports and financials etc while comparing positions on the chart, especially the annual report to Dec 2016 that was issued on the 27th Feb 2017 and where the price was at that point.

Boggo said:

Well done galumay, it was from the 11th Nov 2016 chairman's briefing to shareholders of QIN.

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LOL! Not really, while I would like to credit my insight and apply my dear old Dad's principal that there are two things in llife, "good management and bad luck", I have to say it was pure co-incidence that i chose my eg of QIN. I guess there might have been some subliminal prompting given that the tread on QIN was in the recent posts list, but I have never looked at the financials of QIN nor had any interest in the business.

galumay said:

LOL! Not really, while I would like to credit my insight and apply my dear old Dad's principal that there are two things in llife, "good management and bad luck", I have to say it was pure co-incidence that i chose my eg of QIN. I guess there might have been some subliminal prompting given that the tread on QIN was in the recent posts list, but I have never looked at the financials of QIN nor had any interest in the business.

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If you get a spare hour its worth reading through the last six months of reports etc.

I remember reading through the Harris Scarfe (HSL), Onetel(ONE) and HIH Insurance reports etc that were published prior to their demise and as one administrator I think it was said "the HIH collapse related more to vanity and inflated egos, poor systems and lack of monitoring rather than systemic fraud".

This seems to be the common pattern, but nothing that a good stop loss point won't fix.

Boggo said:

This seems to be the common pattern, but nothing that a good stop loss point won't fix.

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" The News is in the Price "

Quant said:

" The News is in the Price "

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Kindly refer to this thread where the price didn't know the news.

https://www.aussiestockforums.com/threads/asx-shockers.31661/

You hear this a lot and it is true that every trader should ask if the news is "priced in".... and the correct answer in most often is "not priced in enough".

skc said:

Kindly refer to this thread where the price didn't know the news.

https://www.aussiestockforums.com/threads/asx-shockers.31661/

You hear this a lot and it is true that every trader should ask if the news is "priced in".... and the correct answer in most often is "not priced in enough".

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I'm not about to chart all the stocks in that thread but i'd be surprised if most of them didn't have some news in the price , naturally we can always find an anecdote of where it is " unexpected " but the majority will likely have the insider footprint in them . The very subject of that thread is why I am very very selective about what stocks and prices I participate in . Gaps are a painful thing to be on wrong side of , no control ....

Quant said:

I'm not about to chart all the stocks in that thread but i'd be surprised if most of them didn't have some news in the price , naturally we can always find an anecdote of where it is " unexpected " but the majority will likely have the insider footprint in them ....

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Two reported today where there have been signs of presumption recently, AST (I hold) and SSM.

Hey guys I have a question I am reading a book called its earnings that count as it talks about making a defensive income statement and a enterprising income statement and it says this:

In 2002 Wrigley spent $216.9 million on additions to property, plant, and equipment. Its depreciation charge, meanwhile, was $85.6 million. Thus, Wrigley made a $131.3 million investment in fixed capital. This use of cash is an expense in the defensive income statement.

For a2milk is the correct steps to getting this data?

First this part "216.9 million on additions to property, plant, and equipment" is that this part in a2milk cash flow statement? "Payment for property, plant & equipment" then it says"Its depreciation charge, meanwhile, was $85.6 million" does this relate to this item on the balance sheet? "Depreciation/amortisation" But its confusing because page 39 on the 2016 annual report here: https://thea2milkcompany.com/wp-content/uploads/A2ML0029-a2-2016-AR_Spreads.pdf there are 2 depreciation values. One of left and right. Then for the final part "Wrigley made a $131.3 million investment in fixed capital" I can't find anything relating to fixed capital except for this "Other intangible assets" this is all I could find.

Sorry I think I got it wrong for investment in fixed capital that is Cap spending - Depreciation.

Oh posted this on wrong topic please ignore.