Posted by: donmihaihai | September 4, 2011

How I do my reading of company?

I pick company to read. That is easy for me as after doing it for 10 years, I have come across all kind of names so I will always has few names on my head. Sometime I might just scan through the whole list in newspaper and I am currently reading Boustead Singapore. And it has been ringing on my head for years. Read this company, my head tell me. But I keep saying wait, this company is popular with “value investors” and there are pages and pages in blog and forum. I don’t like popular stock. I give in this time.

How do i read? It is easy, I will start with earliest available information which is usually an IPO prospectus or annual report. Read all the way until the last available annual report then go through last few quarterly report and some research reports I saved earlier. The whole process usually takes about 1 to 3 weeks, depend on size and complexity of the company and my timing. My estimate is that I look into 10 to 20 companies per year.

But you don’t buy 10 to 20 companies per year. That is right. I don’t read them after I want to buy the stock. I read it before. At time without ever look at the share price. Not until I have finish it. Then I will ask myself those same old questions. Will I buy the share? At what price?

But that is a prefect example. Most of the time, I already know the price before or even during my reading. It is not good at all so I usually just dump the company aside as long as the valuation is not dirt cheap and pick it up later.

Why would I do that? It is because I don’t want to do stupid thing. That why I keep reading new company with no intention of buying any. I don’t want to be anchored by 2 things. Price and company. If I know the price is cheap before I started, the whole reading process is to reinforce the buy signal and ignoring signs of nonconfirmation. That is the same for company, I mean better company. All I will do is to search for things that tell me how good is the company and ignoring the rest. I am trying to avoid that, but I do not want to think about what kind of process and thinking I had before I make all my purchase. It will be ugly but hopefully I had minimise it

I do ratio or rather use spreadsheet to do ratio. I spend little time on it. Ratio on spreadsheet is useful only because my memory is lousy. I will not remember details of past 5 years performance of say Boustead Singapore one year down the road. That is when ratio and spreadsheet is helpful and they are over-rated.

You don’t use it analyse the company. You don’t understand the company if you use ratio to analyse. Read the financial statements to understand and analyse the company.

Boustead Singapore is a good example. I have not finished it but it has at least 2, if not 3 different kind of businesses in it. Ratio does not tell the story at FY2006 & FY2007. It does not say the star player in Boustead Singapore is ERSI and the kind of competitive advantage it enjoy. Neither does it say about maneuvers that created those results.

Boustead Singapore is quite interesting because it require quite a bit of skill to understand the company and I believe it has been highlighted before by CEO. But the key is able to know it by reading the number and I would bet many don’t.

Those who know are the ones that spend load of time doing the same thing over and over again. Reading annual reports. That is what I am doing and intent to keep doing. I only know the valuable of reading annual reports until I read lot of it.

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Responses

  1. So after reading do u find boustead attractive?


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