Quotes of the Day

Easy is to judge the mistakes of others.
Difficult is to recognize our own mistakes.

Don't complain about others.
Change yourself if you want peace.

Don't compare yourself with any one in this world.
If you compare, you are insulting yourself.

Mistakes are painful when they happen.
But years later, collection of mistakes is called experience, which leads to success.

Think about it.

Jay Chou's Wai Po MV

Here's the meaningful song by Jay Chou. Dedicated to his beloved maternal grandmother/wai po.

For those who don't understand Chinese, here's the link to the lyrics-translated into English.

http://www.jay-chou.net/lyrics_view.php?a_id=8&s_id=4

Enjoy it!

What is Love?

Earthquake in Sichuan, China.

Actual Power Point
Created by: Robert Yi, PhD. hyi@dal.ca
Edited by: Robert Yi, Tong Yi, Wanda Grandy, Feng Gao

On May 11, 2008, the day before the earthquake, students in Beichuan High School were engaged in games and in high spirits, laughing and cheering for their teams.

One day - it only took one day for everything to change. Their happiness had become history, some of their lives nonexistent.

A husband, insisting that his wife’s body not be left in the ruins, bounded her to himself and transported her to the local dead house for her final honour.

A couple crying tears of happiness and bittersweet sorrows when they found each other alive.



This villager, sitting on his collapsed house, is racked with despair. Three of his family members are still missing.

The mother was dead when she was found. Her body was distorted, covered by the rubbles of the collapsed building. She was kneeling with her two hands on the ground to support her bent upper body, as if trying to protect something underneath.
After strenuous effort, rescuers made their way through the ruins and reached her. They found a 3-4 month old baby underneath the mother. He was asleep, and covered in a small quilt. He suffered no injuries due to his mother’s protection.
When a doctor checked the baby, he also found a cell phone wrapped within the quilt.
There was a message on the cell phone screen that was written by his mother when she was alive: “My Dear, if you can survive please remember, I love you!”.

May 14, 2008, Zhang Guanrong is cleaning her husband’s body. When the earthquake struck, her husband (Tan Qianqiu) stretched himself over a class table to cover four students underneath. His sacrifice enabled the four students to survive.



Zhang Guanrong could not hold her grief. “Darling, if there is an afterlife, I will still be your wife.

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HOW TO HELP
1. Pray for the people who died, saved, injured, lost their relatives, became homeless; and the rescuers, volunteers, and all the people who have been providing help by donating blood and/or money, etc.
2. Make some donation if you could. One dollar can make a difference.

HOW TO DONATE
1. The donation can be made to any official organizations which accept donations for Chinese Earthquake Relief, such as American Red Cross (write “AP 2060 China Relief Fund” in the note).
2. The donation can also be made to First Chinese Baptist Church at San Antonio (write “China Earthquake Relief” in the note of check).

THANK YOU for your kind contribution to the Sichuan earthquake relief!
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When is the last time you say “I love you” to someone you loved? When you say it, make sure you mean it.

There is a saying in Chinese, “People will appreciate only after they lose something”. Don’t wait until problems surface then only take action to make things better. Life is not just about money and work. Family, children, health and friends should come first (Remind me of S. Dali article on golf balls etc).

Don’t spend all your time on small unimportant things where you will never have room for other more important things. Spend more time with your parents (If you can’t go home, at least give them a call).

For some people, they are more close to their grandparents. Visit them and buy them something nice. The most important thing is spend more time with them (There is a very meaningful song by Jay Chou “Wai Po/Grandmother” which is dedicated to his Grandmother. See, even a superstar with hectic schedule can spend a lot of time with his family. How about you??). Remember how they pamper you when you were a small kid?

Again, spend more time with your loved ones (if not, make sure you won’t regret). Don’t give reasons (busy, no time, they don’t care one…you name it!). If you really want to something, you will do it. If not, you will find a reason.

Meaningful Life Stories

This is an email I received from someone who cares.

TRUST is a very important factor for all relationships. When trust is broken, it is the end of the relationship. Lack of trust leads to suspicion, suspicion generates anger, anger causes enmity and enmity may result in separation. A telephone operator told me that one day she received a phone call. She answered, "Public Utilities Board." There was silence. She repeated, "PUB." There was still no answer. When she was going to cut off the line, she heard a lady's voice, "Oh, so this is PUB. Sorry, I got the number from my Husband's pocket but I do not know whose number it is.

"Without mutual trust, just imagine what will happen to the couple if the telephone operator answered with just "hello" instead of "PUB".

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NO POINTING FINGERS

A man asked his father-in-law, "Many people praised you for a successful marriage. Could you please share with me your secret?" The father-in-law answered in a smile, "Never criticize your wife for her shortcomings or when she does something wrong. Always bear in mind that because of her shortcomings and weaknesses, she could not find a better husband than you.

"We all look forward to being loved and respected. Many people are afraid of losing face. Generally, when a person makes a mistake, he would look around to find a scapegoat to point the finger at. This is the start of a war. We should always remember that when we point one finger at a person, the other four fingers are pointing at ourselves.

If we forgive the others, others will ignore our mistake too.

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CREATING PERFECT RELATIONSHIPS?

A person visited the government matchmaker for marriage, SDU, and requested "I am looking for a spouse. Please help me to find a suitable one." The SDU officer said, "Your requirements, please." "Oh, good looking, polite, humorous, sporty, knowledgeable, good in singing and dancing. Willing to accompany me the whole day at home during my leisure hour, if I don't go out. Telling me interesting stories when I need companion for conversation and be silent when I want to rest." The officer listened carefully and replied, "I understand you need television."

There is a saying that a perfect match can only be found between a blind wife and a deaf husband, because the blind wife cannot see the faults of the husband and the deaf husband cannot hear the nagging of the wife. Many couples are blind and deaf at the courting stage and dream of perpetual perfect relationship. Unfortunately, when the excitement of love wears off, they wake up and discover that marriage is not a bed of roses. The nightmare begins.

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NO OVERPOWERING

Many relationships fail because one party tries to overpower another, or demands too much. People in love tend to think that love will conquer all and their spouses will change the bad habits after marriage. Actually, this is not the case.

There is a Chinese saying which carries the meaning that "It is easier to reshape a mountain or a river than a person's character. "It is not easy to change. Thus, having high expectation on changing the spouse character will cause disappointment and unpleasantness.

It would be less painful to change ourselves and lower our expectations.

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RIGHT SPEECH

There is a Chinese saying which carries the meaning that "A speech will either prosper or ruin a nation." Many relationships break off because of wrong speech. When a couple is too close with each other, we always forget mutual respect and courtesy. We may say anything without considering if it would hurt the other party.

A friend and her millionaire husband visited their construction site. A worker who wore a helmet saw her and shouted, "Hi, Emily! Remember me? We used to date in the secondary school." On the way home, her millionaire husband teased her, "Luckily you married me. Otherwise you will be the wife of a construction worker." She answered, "You should appreciate that you married me. Other wise, he will be the millionaire and not you.

"Frequently exchanging these remarks plants the seed for a bad relationship. It's like a broken egg - cannot be reversed.

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PERSONAL PERCEPTION

Different people have different perception. One man's meat could be another man's poison. A couple bought a donkey from the market. On the way home, a boy commented, "Very stupid. Why neither of them ride on the donkey? "Upon hearing that, the husband let the wife ride on the donkey. He walked besides them. Later, an old man saw it and commented, "The husband is the head of family. How can the wife ride on the donkey while the husband is on foot?" Hearing this, the wife quickly got down and let the husband ride on the donkey.

Further on the way home, they met an old Lady. She commented, "How can the man ride on the donkey but let the wife walk. He is no gentleman." The husband thus quickly asked the wife to join him on the donkey. Then, they met a young man. He commented, "Poor donkey, how can you hold up the weight of two persons. They are cruel to you." Hearing that, the husband and wife immediately climbed down from the donkey and carried it on their shoulders.

It seems to be the only choice left. Later, on a narrow bridge, the donkey was frightened and struggled. They lost their balance and fell into the river. You can never have everyone praise you, nor will everyone condemn you. Never in the past, not at present, and never will be in the future. Thus, do not be too bothered by others words if our conscience is clear.
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BE PATIENT

This is a true story which happened in the States. A man came out of his home to admire his new truck. To his puzzlement, his three-year-old son was happily hammering dents into the shiny paint of the truck. The man ran to his son, knocked him away, hammered the little boy's hands into pulp as punishment. When the father calmed down, he rushed his son to the hospital.

Although the doctor tried desperately to save the crushed bones, he finally had to amputate the fingers from both the boy's hands. When the boy woke up from the surgery & saw his bandaged stubs, he innocently said, "Daddy, I'm sorry about your truck." Then he asked, "but when are my fingers going to grow back?" The father went home & committed suicide.

Think about this story the next time someone steps on your feet or u wish to take revenge. Think first before u lose your patience with someone u love. Trucks can be repaired. Broken bones & hurt feelings often can't. Too often we fail to recognize the difference between the person and the performance. We forget that forgiveness is greater than revenge.

People make mistakes. We are allowed to make mistakes. But the actions we take while in a rage will haunt us forever.

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My views:

Remember, "Life is not measured by the number of breaths we take, but by the moments that take our breath away.” There is only one life. Live happily and cheerfully, don’t fill up your heart with hates and dislikes.

If you believe in yourself, there is no reason why you can't do what you want to do. It is easier to say than done IF you don't have the initiatives. Think positively. Always ask yourself “Why not” instead of saying “No, I can’t do it”. By asking yourself “Why not”, it opens up your mind. But if you say “No”, it closes your mind, you think nothing! Human has a bigger brain but think less. I wonder why.

I suggest you to read these meaningful life stories at least once a year. Why?? Human being tends to forget as time passed. Cheers!!!

The Concept of “Risk” According to Benjamin Graham

Taken from “The Intelligent Investor” 4th Edition. pg 121-122

We should like to point out that the words “risk” and “safety” are applied to securities in two different senses, with a resultant confusion in thought.

A bond is clearly proven unsafe when it defaults its interest or principal payments. Similarly, if a preferred stock or even a common stock is bought with the expectation that a given rate of dividend will be continued, then a reduction or passing of the dividend means that it has proven unsafe. It is also true that an investment contains risk if there is a fair possibility that the holder may have to sell at a time when the price is below the cost.

Nevertheless, the idea of risk is often extended to apply to a possible decline in the price of a security, even though the decline may be of a cyclical and temporary nature and even though the holder is unlikely to be forced to sell at such times. But we believe that what is here involved is not a true risk in the useful sense of the term.

The man who holds a mortgage on a building might have to take a substantial loss if he were forced to sell it at an unfavorable time. That element is not taken into account in judging the safety or risk of ordinary real estate mortgages, the only criterion being the certainty of punctual payments. In the same way, the risk attached to an ordinary commercial business is measured by the chance of its losing money, not by what would happen if the owner were forced to sell.

The bona fide investor does not lose money merely because the market price of its holding decline; hence the fact that a decline may occur does not mean that he is running a true risk of loss.

If a group of well-selected common stock investments shows a satisfactory overall return, as measured through a fair number of years, then this group investment has proven to be “safe”. During that period its market value bound to fluctuate, and as likely as not it will sell for a while under the buyer’s cost. If that fact makes the investment “risky”, it would then have to be called both risky and safe at the same time.

This confusion may be avoided if we apply the concept of risk to a loss of value which either is realized through actual sale, or is caused by a significant deterioration in the company’s position – or, more frequently perhaps, is the result of the payment of an excessive price in relation to the intrinsic worth of the security.

Many common stocks do involve risks of such deterioration. But it is our thesis that a properly executed group investment in common stock does not carry any substantial risk of this sort and that therefore it should not be termed as “risky” merely because of the element of price fluctuation. But such risk is present if there is danger that the price may prove to have been clearly too high by intrinsic-value standards – even if any subsequent severe market decline may be recouped many years later.
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My Views:

Declining dividends may imply the company’s business is deteriorating, unless the company retains its earnings for expansion/development purposes.

Unrealized loss is not considered loss of money until sale happens. Always measure the performance of your portfolio for a fair number of years, at least 3 years. Remember a house is not built overnight, it takes time.

If a company’s earnings are declining, the probability that the price will go down is high. Always evaluate the business performance, not the price. “If a business does well, the stock eventually follows.”

Overvaluation of the business value = high price paid = possibility of loss far outweight possibility of profit. Always insist on wide Margin of Safety. Always building a 15,000 pound bridge if you're going to be driving 10,000 pound trucks across it.

My current view of the stock market – For the last few months, most retail investors shy away from the stock market. Why?? This can be attributed to several “bad” news, from recession fear in US to political uncertainty in our country as well as recent downgrading by Goldman Sachs and petrol price hike. Is now the right time to invest in stocks?? Who knows? But for me, I care much on the valuation side. I tend to look at the discrepancy between price and value of a business before jump in. Investors should welcome low prices so that they can accumulate more stocks of wonderful businesses. As Warren Buffett said, “Be greedy when others are fearful, and be fearful when others are greedy”. Is now time to be greedy? You decide yourself.

Unconditional Love

This great article is taken from The Star dated May 14, 2008.
Posted by Xandra Ooi.

Taking loved ones for granted

THE other day, my mum called to tell me that she and my father were considering buying two placements in a memorial park as their final resting place ''when the time comes''.

I know very well that there will come a time when we will leave this world, but it is not something I often think about.

It is okay to plan for birthdays, weddings and retirement, but planning for death is not the norm. Not because it is not logical or practical, but to think of death is to bring on fear.

My boyfriend asked me a few days ago if I fear death.

“No, but I fear pain. But what I fear most of all, are the deaths of my loved ones.”

Just the mere thought of not seeing my parents and brother again cripples me with fear. When my parents speak of where they would like their final resting place to be, I am afraid to listen and refuse to take it seriously.

My grandfather was taken ill recently, and when I paid him a visit I was reminded that even the strongest and healthiest of us will not stay that way forever.

My father is 53 this year. He goes to the gym a few times a week, takes care of his diet and is far from old. He is able to fix almost anything in the house and he still takes cares of me like he always does.

All these years, I have looked upon my father as someone who is infallible, strong and able to find a solution to any problems that I may have.

It scares me to think of the day when he will not be as he is now, when time and age catches up. I would rather not see the lines around his eyes, or how tired he looks at times. I don’t want to notice him limping a little sometimes because his feet hurt.

My father is not a superhero, but sometimes it is easy to forget that because of how well he takes care of the family and me. Too often, I take his love and his health for granted.

When someone loves you unconditionally, it is easy to be careless with that love, because you assume that it will always be there.

You forget to say thank you, or be polite, or even do something nice in return.

During a meeting with the managing director of a company who is interested in working with me on an endorsement project, he said something to me that no one has ever said before.

“No offence Xandria, I think your work is great but the reason you are here is because of your mum.”

“Your mum is such a good person. I think what you are today is because of your upbringing. So you have to thank your mum and dad,” he told me with a smile.

I couldn’t be happier or more proud hearing this. I have always wished that people could see that. My mum is my manager, and I have had people being nicer to me than they are to her.

Some have even been downright insensitive and rude to her, but sugary sweet to me.

I have never understood that. Being a manager of a company is not an easy task, and if the company runs smoothly, it is very much due to good management.

My career has been on a steady climb because my mum is an amazing businesswoman and manager. I have manners, respect, compassion and faith because my parents have taught me that.

I have written in a previous article that if someone should praise me, they should praise my parents 10 times over.

Many have asked me during interviews if I feel that my mum is overprotective as my manager, and my answer is that I am much more protective of her.

Even then, I cannot be a hypocrite. I cannot expect people to be nice and kind to my mum when there are many times when I have also hurt her with my impatience and attitude.

The worst part of it is that the hurt she experiences because of me is much more painful than those inflicted by others.

And the irony is that it is often easier to be nicer to acquaintances and friends, than it is to be mindful of the feelings of our loved ones.

Mother’s Day has just passed and Father’s Day is around the corner. Being able to celebrate these occasions is just a reminder of how fortunate we are to have known unconditional love.

Death is inevitable and maybe if we stop and think about death once in a while, we would appreciate life better.

A Letter to My Uncle on Value Investing

Hi Uncle,

I want to share with you some investment stuff here.

Company A is listed in Bursa Malaysia

Background
The company is involved in the business of importing and wholesaling of original equipment manufacturer (OEM) parts and replacement tractor parts of leading Italian brands commonly used for Caterpillar and Komatsu equipment. By 1988, Company A had become a reputable dealer of spare parts for tractor and heavy equipment.

Last year, Company A has signed a joint venture with China-based Shandong Shantui Machinery Ltd, which is the third largest producer of bulldozers in the world, marking its entry into China. The company is expecting bigger growth from its China operation. Currently, overseas market contributes about 48% to revenue, with Malaysia making up the balance. The level of activities of the company is significantly dependent on the state of the economy and in particular the construction and timber sectors.

WHY I like this company

1. Money making business- Company A has been making profits for the last ten years, even during Asian Financial Crisis 97-98.

2. Improving dividend yields- It pays dividend of 4.5 sen (dividend return of about 4.5%) per year for past 2 years (2005-06), and 4 sen (2002-04). I expect the same dividend payment of 4.5sen for 2007. Therefore, dividend yield is 5% (0.045/0.90), still higher than Fixed Deposit of about 3.7%.

3. Prudent Management- Shares are tightly held with family holding around 52%. The company is now managed by the son of the founder, so succession plan is not a problem.

4. Stock selling less than 50% of book value – book value of RM2.03 is significantly lower than the stock price of RM0.90.

5. Cash per share of RM 0.42 – This level of cash should ensure dividend payments for the next few years are almost guaranteed.

6. Low debt ratio – Low level of debt means more able to withstand uncertainties such as recession. Company with high level of debt would suffer during bad times such as recession or economic downturn.

7. Low downside potential- a company with a value of RM1.40, being priced at RM0.90 is a steal, even if the stock continues downward, I will accumulate more. As Mohnish Pabrai said, based on his trading experiences, stock price will catch up the intrinsic value of the company in less than 18 months. Mohnish Pabrai is a value investor and his fund had outperformed 99% of the mutual funds in US, with a compounded annual return of 28% (after fees) for more than five years.

8. Margin of Safely – If the company is liquidated now, being more conservative, the liquidation value will be about RM1.40 compared to stock price of RM0.90. So, return on investment would be 55%.

Reasons of low price

1. Liquidity is a problem. The shares of the company are mostly held by institutional investors and fund management firms (about 36%) plus the family holding of 52%, therefore balance of only 12% available in the market. The stock turnover ratio is low i.e not many trades are done every day.
2. Market is not always efficient. Market hates uncertainly! If there is recession coming, people begins to unload their shareholdings, therefore lowering the stock prices. Fear causes market to become less efficient some of the times, the same applies to greed. Current market situation is a good example.

Financial data

Formulas/ calculations

Book Value or Net Tangible Asset = (SE– Intangible assets)/ No. of shares outstanding

Market Cap = the price the market gives you = Price*No of shares outstanding
= RM 0.90 * 87.2 million
= RM 78. 5 million

Share Price 21/1/2008= RM 0.90

Debt to equity = total borrowings / shareholders’ equity
Company with low debt to equity is preferable because it is more resilient during bad time. Generally, company with a lot of debts will suffer during bad time or recession.

Return on Equity (ROE) is the return to shareholders. This is a very important financial indicator that every investor should consider when investing. A high ROE is preferable.

Book Value = Shareholders equity (SE) = owners’ earnings = the value of the company

Conclusion
Company A appears UNDERVALUED to me. At a price of RM0.90, I can buy this company with a value of RM2.03 in 2006. Price is what I pay, value is what I get. Currently, the value goes up to RM2.11, therefore the margin of safety has increased slightly. Also we can see from the table, the price of the company (i.e market cap) seems little changed, even though the sales and profits has been increasing tremendously!! This is one of the valuation methods that I used to evaluate stocks. One thing you have to know is that there are only a few companies like company A being priced at such a low price with good fundamental. And it’s what I like being a value investor.

Quotes from Warren Buffett- the world’s greatest investor

1. “The market is there to serve us, not to instruct us”.

2. “Look at market fluctuations as your friends rather than your enemy; profit from folly rather than participate in it.”

3. “Price is what you pay, value is what you get”

4. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1

5. Time is the friend of the wonderful business, the enemy of the mediocre

6. Be fearful when others are greedy and be greedy when others are fearful

7. If a business does well, the stock eventually follows.

8. Risk comes from not knowing what you’re doing.

9. Only when the tide goes out do you discover who’s been swimming naked.

10. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.

And one of my favorites:

“When there is nothing to do, do nothing.”

Regards.

21/1/2008
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Comments:

One of the potent shortcomings in this letter is I tend to emphasize on the strong points and ignore all the weak points of the company. (Remind me of Charlie Munger who said, “All I want to know is where I’m going to die, so I’ll never go there.)

I was wrong on the dividend forecasted here. Company A announced a dividend of 2.5sen only.

The share price has recovered from a low of RM0.80 to RM0.92 now. Has the stock price reach its bottom? Who knows? I once heard that you just have to take care of the downside, the upside will take care of itself.

Patient is the key for value investing.