Empire
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Analysts Updates |
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UPDATES FROM ANALYSTS
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Kevin Scully- Jan 2008 Kevin Scully- Apr 2008 Kevin Scully- Jun 2008 Kevin Scully- Aug 2008Why it's (finally) time to buy
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YC CHAN-OCT 09
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UPDATES FOR THE MONTH
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| JAN 2010 | CYC- 22 Jan 2010 |
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Last week, US share prices plummeted unexpectedly due to the announced economic data fell short of expectation. The drop contradicted the earlier fear that the US government might withdraw from the market in the wake of economic recovery. Global markets trended upward for the past 6 months. Many people, among them US government officials, were of the view that the economy would recover soon. Recently held G20 submit conference also started talking about the market withdrawal time table, and punters used the good news as a bad news to play the market, ie. worry that the economic recovery would prompt global governments to withdraw from the markets, and stock markets supported by the stream of printed currencies would lose their glitters. The US latest economic data however, tell us that economic recovery is still uncertain. Is this uncertainly a good news or a bad news? There is no easy answer. From optimistic point of view, this uncertainly means global governments will not be too anxious to withdraw their upport. China’s finance officials have several times stated they will continue with the easing monetary policy up to this year end. When the property and stock markets overheated, they may make some “minor” adjustments, but then only these officials know how “minor” means “minor”. The US finance officials have also clearly stated they would consider withdrawing from the markets only after the first quarter next year. While we may not worry about the withdrawal issue, we have yet another issue to concern with: as long as economiy is not recovering, business corporations will not make profit and grow; stock markets will not go up either. This is probably the reason US maket had a comparatively greater adjustment last week. Investors have at one time or another entered the market since March. There are also people waiting for a major market adjustment before entering the market. Those willing investors are already in the market, and those who are waiting for a major adjustment will not enter the market at this stage. Fewer people are likely to enter the market again, and those who have entered the market deploying all their resources are nervous and sell their stocks whenever there is an adjustment, fearing it may become a major upset. After selling, they find themselves unable to buy back at a lower price. Many investors are facing the same problem at the moment.
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By Xavier Lim 22 jan 2010 Warren Buffett, the ‘Sage of Omaha’, is generally considered to be the world’s most successful investor. Everyone loves to know the secret of his success – to know how he has become one of the world’s richest men, and a living legend. Although Warren Buffett has not actually written a book about his investment principles himself, there are a lot of books written about Warren Buffett by others who have tried to put together the story and ideas behind the man and his fortune. If you find those books somewhat of a boring read, this writer recommends you to pick up this book, ‘Warren Buffett: An Illustrated Biography of the World’s Most Successful Investor’, authored by Ayano Morio. It is an easy to read illustrated novel, providing basic information about Warren Buffett’s investment philosophy and summarises the principles of Buffett into short lessons that can be quickly learnt and applied.
The 7 Rules For Success No matter if you are running a business or selecting the right company to invest, Buffett’s 7 rules for success will come into play. Here are some brief explanations of these 7 rules. RULE NO. 1: Ascertain The True Quality Of A Company And Its Top Managers In 1963, devastated by a scandal involving a large quantity of nonexistent salad oil, American Express Company (Amex) saw its stock price plummet from around US$60 to US$34. However, after carefully studied and analysed the company, Buffett concluded that Amex virtually owns the nation’s traveler’s check business and possesses by far the strongest credit card assets that were entirely unaffected by the scandal. These constituted an unassailable franchise – what Buffett calls “a castle with a moat around it,” his new margin of safety. RULE NO. 2: Stockholders Are Not Managers. They Should Leave The Running Of A Firm To Competent Managers With Integrity In 1965, Buffett accumulated 49%-stake in Berkshire Hathaway and named himself Director. The company was nearly into the ground due to terrible management by the major shareholder. Immediately, Buffett made Ken Chace the President of the company, giving him complete autonomy over the organization. The company started to make profits under the leadership of Ken. RULE NO. 3: Don’t Invest In Businesses You Don’t Understand In the 1960s, technology stocks like Polaroid and Avnet Electronics sold for over 100 times earnings, while IBM traded at a multiple above 80 times. Buffett did not invest a single cent in these technology businesses, because they make no sense to him and was overly priced according to him. He dissolved his investment partnership in 1969, returning cash to investors because he believed that the market was overvalued. By the end of 1969, stock market saw a big fall in stock prices. RULE NO. 4: Give Help And Advice If They Want It, But Let The Managers Make Their Own Decisions In 1976, the Government Employees Insurance Company (GEICO) announced a US$126m loss and the company’s shares, which had traded as high as US$42, were down to just under US$2. Buffett took the view that the company’s core business was sound and arranged to meet with John Byrnes, then new boss of GEICO and helped to intercede with the insurance regulators to ensure that GEICO kept its licences. RULE NO. 5: Never, Ever Break The Law Salomon Brothers may have died many years ago if Buffett had not stepped in to a leadership role at the firm in 1991. Buffett came in during a scandal involving the firm’s efforts to corner the market in U.S. Treasury bonds. RULE NO. 6: Owners Are Owners And Managers Are Managers – But They Should Work As Partners The best people to help you solve problems, particularly those involving customers, are the ones who experience them on a daily basis. Yes, that is right! Your employees are a wellspring of ideas on how you can make your customers happier. Hold a meeting designed to get them to share those ideas. RULE NO. 7: Keep Your Distance From The Market. You’ll Understand The Business Better Never follow the day to day fluctuations of the stock market. The market only exists to make it easier to buy and sell, not to set values. Keep an eye on the market only for someone who is willing to sell a stock at a not-to-be-missed price.
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