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Wednesday, June 22, 2016

Head or Tail : My Investment Portfolio

Head or Tail : My Investment Portfolio

Author: Mohamad Jeffrey Ismail   |   Publish date: Wed, 22 Jun 2016, 10:04 AM 

"Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity. At that point, all favourable facts and opinions are already factored into its price and no new buyers are left to emerge” – Howard Mark
2016 provides a challenging years for Malaysian economy and the equity market. Many companies especially of those public listed are suffering from loss in their recent quarter report. Short term catalyst provides more uncertainty of our future market direction. Thus, should we wait for all those negative catalysts went away and keep wait until we can see clear market direction to start our investment?
"The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices." - Ben Graham
When bear market seems in control, there are hundreds of speculation coming. You can read their comment about direction of stock and our market everywhere now and then. They’re trying their best to predict where is the lowest point the stock can go, so they can buy them cheaper than everyone else, but most of the time they just could not make it.
“Following the beliefs of the herd will give you average performance in the long run and can get you killed at the extremes. “– Howard marks
To be a good investor, you must be differ from those herd. Be a contrarian from the market trend is what makes Warren Buffet a world great investor today. You must be able to seek coming opportunity in uncertainty condition and feel the risk when market is seems performing well. So, current situation should provides a good opportunity for long term investor to collect some good stock that currently being neglected by the market.
I define opportunities as chance to buy a stock that its price is less than what it worth, while risk is action of buying a stock at higher price than what it worth.
So, what should my stock portfolio made up this year. I am looking form stock that fulfil the criteria shown below :-
  1. High and constant return of capital
  2. Health balance sheet with total debt less than 50% to its equity
  3. Positive free cash flow at least 3 years
  4. Constantly paying dividend of no less than 2/3 of fixed deposit rate or >2.5%
  5. Margin of safety more than 20%
Apart from that, I also set criteria of magic formula, which are :-
  1. ROIC > 10%, and
  2. Earning Yield > 10%
Finally, I came up with these stocks :-
CodeStockRef. priceROICEYEV/Ebit
5062Hua YangRM1.7874%22%4.30
It can be view here : BREXIT 16
Those are 10 stocks that meet the 7 criteria of my investment portfolio. Investment is long term process, thus, short term driven catalyst is not considered in my portfolio building process.

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