Friday, June 21, 2013
Value Investment Handbook [ZT]
Value investing, and any type of investing for that matter, varies in execution with each person. There are, however, some general principles that are shared by all value investors. These principles have been spelled out by famed investors like Peter Lynch, Kenneth Fisher, Warren Buffet, John Templeton and many others. In this article, we will look at these principles in the form of a value investor's handbook.
Tutorial: The World's Greatest Investors
Buy BusinessesIf there is one thing that all value investors can agree on, it's that investors should buy businesses, not stocks. This means ignoring trends in stock prices and other market noise. Instead, investors should look at the fundamentals of the company that the stock represents. Investors can make money following trending stocks, but it involves a lot more activity than value investing. Searching for good businesses selling at a good price based on probable future performance requires a larger time commitment for research, but the payoffs include less time spent buying and selling and fewer commission payments. (False signals can drown out underlying trends. Find out how to tone them down and tune them out in Trading Without Noise.)
Love the Business You BuyYou wouldn't pick a spouse based solely on his or her shoes, and you shouldn't pick a stock based on cursory research. You have to love the business you are buying, and that means being passionate about knowing everything about that company. You need to strip the attractive covering from a company's financials and get down to the naked truth. Many companies look far better when you judge them on basic price to earnings (P/E), price to book (P/B) and earnings per share (EPS) ratios than they do when you look into the quality of the numbers that make up those figures.
If you keep your standards high and make sure the company's financials look as good naked as they do dressed up, you're much more likely to keep it in your portfolio for a long time. If things change, you'll notice it early. If you like the business you buy, paying attention to its ongoing trials and successes becomes more of a hobby than a chore.
Simple Is BestIf you don't understand what a company does or how, then you probably shouldn't be buying shares. Critics of value investing like to focus on this main limitation. You are stuck looking for businesses that you can easily understand because you have to be able to make an educated guess about the future earnings of the business. The more complex a business is, the more uncertain your projections will necessarily be. This moves the emphasis from "educated" to "guess."
You can buy businesses you like but don't completely understand, but you have to factor in uncertainty as added risk. Any time a value investor has to factor in more risk, he has to look for a larger margin of safety - that is, more of a discount from the calculated true value of the company. There can be no margin of safety if the company is already trading at many multiples of its earnings, which is a strong sign that, however exciting and new the idea is, the business is not a value play. Simple businesses also have an advantage, as it's harder for incompetent management to hurt the company. (For a complete guide to reading the financial reports, check out our Financial Statements Tutorial.)
Look for Owners, Not ManagersManagement can make a huge difference in a company. Good management adds value beyond a company's hard assets. Bad management can destroy even the most solid financials. There have been investors who have based their entire investing strategies on finding managers that are honest and able. To quote Buffett, "look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you." You can get a sense of management's honesty through reading several years' worth of financials. How well did they deliver on past promises? If they failed, did they take responsibility, or gloss it over? (Find out more about Buffett's investing inWarren Buffett: How He Does It.)
Value investors want managers who act like owners. The best managers ignore the market value of the company and focus on growing the business, thus creating long-term shareholder value. Managers who act like employees often focus on short-term earnings in order to secure a bonus or other performance perk, sometimes to the long-term detriment of the company. Again, there are many ways to judge this, but the size and reporting of compensation is often a dead give away. If you're thinking like an owner, you pay yourself a reasonable wage and depend on gains in your stock holdings for a bonus. At the very least, you want a company that expenses its stock options. (Still wondering how to investigate the top brass? Check out Evaluating A Company's Management.)
When You Find a Good Thing, Buy a LotOne of the areas where value investing runs contrary to commonly accepted investing principles is on the issue of diversification. There are long stretches where a value investor will be idle. This is because of the exacting standards of value investing as well as overall market forces. Toward the end of a bull market, everything gets expensive, even the dogs, so a value investor may have to sit on the sidelines waiting for the inevitable correction. Time, an important factor in compounding, is lost while waiting, so when you do find undervalued stocks, you should buy as much as you can. Be warned, this will lead to a portfolio that is high-risk according to traditional measures like beta. Investors are encouraged to avoid concentrating on only a few stocks, but value investors generally feel that they can only keep proper track of a few stocks at a time.
One obvious exception is Peter Lynch, who kept almost all of his funds in stocks at all times. Lynch broke stocks into categories and then cycled his funds through companies in each category. He also spent upwards of 12 hours every day checking and rechecking the many stocks held by his fund. As an individual value investor with a different day job, however, it's better to go with a few stocks for which you've done the homework and feel good about holding long term. (Learn the basic tenets that helped this famous investor earn his fortune in Pick Stocks Like Peter Lynch.)
Measure Against Your Best InvestmentAnytime you have more investment capital, your aim for investing should not be diversity, but finding an investment that is better than the ones you already own. If the opportunities don't beat what you already have in your portfolio, you may as well buy more of the companies you know and love, or simply wait for better times. During idle times, a value investor can identify the stocks he or she wants and the price at which they'll be worth buying. By keeping a wish list like this, you'll be able to make decisions quickly in a correction.
Ignore the Market 99% of the TimeThe market only matters when you enter or exit a position; the rest of the time, it should be ignored. If you approach buying stocks like buying a business, you'll want to hold onto them as long as the fundamentals are strong. During the time you hold an investment, there will be spots where you could sell for a large profit and others were you're holding an unrealized loss. This is the nature of market volatility.
The reasons for selling a stock are numerous, but a value investor should be as slow to sell as he or she is to buy. When you sell an investment, you expose your portfolio to capital gains and usually have to sell a loser to balance it out. Both of these sales come with transaction costs that make the loss deeper and the gain smaller. By holding investments with unrealized gains for a long time, you forestall capital gains on your portfolio. The longer you avoid capital gains and transaction costs, the more you benefit from compounding. (Find out how your profits are taxed and what to consider when making investment decisions in Tax Effects On Capital Gains.)
The Bottom LineValue investing is a strange mix of common sense and contrarian thinking. While most investors can agree that a detailed examination of a company is important, the idea of sitting out on a bull market goes against the grain. It's undeniable that funds held constantly in the market have outperformed cash held outside the market, waiting for a down market. This is a fact, but a deceiving one. The data is derived from following the performance of indexes like the S&P 500 over a number of years. This is where passive investing and value investing get confused.
In both types of investing, the investor avoids unnecessary trading and has a long-term holding period. The difference is that passive investing relies on average returns from an index fund or other diversified instrument. A value investor seeks out above-average companies and invests in them. Therefore, the probable range of return for value investing is much higher. In other words, if you want the average performance of the market, you're better off buying an index fund right now and piling money into it over time. If you want to outperform the market, however, you need a concentrated portfolio of outstanding companies. When you find them, the superior compounding will make up for the time you spent waiting in a cash position. Value investing demands a lot of discipline on the part of the investor, but in return offers a large potential payoff. (Looking for a little more information on index investing, see the Index Investing Tutorial.)
Thursday, June 20, 2013
Another Manifestation
Today showed a small scaled crash ...... manifestation when the bar for "loss control" is pushed open, plus panic sell
Wednesday, June 19, 2013
瞧这，讲的真好！［ZT］
该爱一个什么样的人？
在很遥远的某一 天，当我的孩子仰头向我提出这个问题，我会微笑地回答他/ 她：去爱一个能够给你正 面能量的人。
每个人的生活都一样，在细看是碎片远看 是长河的时间中间接地寻找着幸福，直接地寻找着能够让自己幸福的一切事物：物质、荣誉、成就、爱情、青春、阳光或者回忆。 既然你想幸福，就去找一个能够让你感到 幸福的人吧。 不要找一个没有激情、没有好奇心的人过 日子，他们只会和你窝在家里唉声叹气抱怨生活真没劲，只会打开电视，翻来覆去的调转频道，好像除了看电视再也想不出其它的娱乐项目。人生就是在没完没了的工作和一样没完没了的电视节目中度过的。
拥有正面能量的人，对很多事情充满好奇，无论遇到什么样的新鲜事物都想尝试一下，会带你去尝试一家新的餐厅，带你去看一场口碑不错的电影，带你去体验新推出的娱乐节目，带你去下一个陌生的城市旅行。你会发现世界很大，值得用罄一生去不断尝试。
不要找一个没有安全感的人过日子，他们 一直在排查可能的不幸和焦虑未来的灾难。他们一直在想该怎么办，一直担心祸事即将降临。他们命名自己为救火队员，每天扑向那些或有或无、或虚或实的灾情，不停算计、紧张和忧愁。
拥有正面能量的人，会对生活乐观对自己信任。他们知道生活本来就悲喜交加，所以已经学会坦然面对。当快乐来临时，会尽情享受，当烦扰来袭时，就理性解决。 他们相信人定胜天，确实无法获胜时，就坦然接受。他们能够正确认识自己，有自知之明，不会自我贬损也不会自我膨胀，他们在该独立的时候独立，该求助的时候 求助。乐观和自信后面，深藏着对人生的豁达与包容。
不要找一个无知的人过日子，他们没有树 立起完整的人生观，或者对事情价值的判断缺乏基准线。他们常会做出匪夷所思的决定，不能独立思考或者过于固执己见。他们优柔寡断或专横无礼，他们扭捏作态 或者刻板无情。不是因为别的，正是因为无知。拥有正面能量的人，拥有大智慧，他们分得清世界的黑白曲直，不会在人生的道路上跑偏也不会随波逐流。他们不会 扭曲事物的本质，不会夸大事情的不利面。他们知道世界运作的原理，明白人人都有阴晴阳缺。他们在你需要时给你最中肯的建议，有原则却又求新求变，有主见却 又听得进劝。
不要找一个容易放弃的人过日子。他们得 过且过永久性地安于现状。他们没有信仰，也没有梦想。他们遇到挫折的第一反应和最终反应都是逃避，为了抵挡失败或者因为怕麻烦，他们可以放弃一整个世界。
拥有正面能量的人，坚定自己的信念，拥有人生的目标，知道自己的所需并为之不断努力。他们欢迎变化也制造进步。当困难来临，他们不嫌麻烦或贪图安逸，他们 知道山丘后面会有道更美丽的风景。
是的，去爱一个拥有正面能量的人吧。他 们会让你觉得人生有意思，会让你觉得世界色彩斑斓。他们会给你惊喜，同时也会带给你感悟。他们让你把路走直，戒断所有扭曲的价值观。
如果你本身就不是一个拥有足够正面能量的人，那么就请你一定要爱一个拥有正面能量的人。在这道数学题里，负负并不能得正，另一个同样具有负面能量的人会把你的人生拖垮，不同空 间的畸形与病态会让你过得一团糟。让这样具有正面能量的人导正你的灵魂和行为，潜移默化中，你会变得更加开朗和幸福。这一定，比任何财富更能长久的滋养你 的心灵。
在很遥远的某一 天，当我的孩子仰头向我提出这个问题，我会微笑地回答他/ 她：去爱一个能够给你正 面能量的人。
每个人的生活都一样，在细看是碎片远看 是长河的时间中间接地寻找着幸福，直接地寻找着能够让自己幸福的一切事物：物质、荣誉、成就、爱情、青春、阳光或者回忆。 既然你想幸福，就去找一个能够让你感到 幸福的人吧。 不要找一个没有激情、没有好奇心的人过 日子，他们只会和你窝在家里唉声叹气抱怨生活真没劲，只会打开电视，翻来覆去的调转频道，好像除了看电视再也想不出其它的娱乐项目。人生就是在没完没了的工作和一样没完没了的电视节目中度过的。
拥有正面能量的人，对很多事情充满好奇，无论遇到什么样的新鲜事物都想尝试一下，会带你去尝试一家新的餐厅，带你去看一场口碑不错的电影，带你去体验新推出的娱乐节目，带你去下一个陌生的城市旅行。你会发现世界很大，值得用罄一生去不断尝试。
不要找一个没有安全感的人过日子，他们 一直在排查可能的不幸和焦虑未来的灾难。他们一直在想该怎么办，一直担心祸事即将降临。他们命名自己为救火队员，每天扑向那些或有或无、或虚或实的灾情，不停算计、紧张和忧愁。
拥有正面能量的人，会对生活乐观对自己信任。他们知道生活本来就悲喜交加，所以已经学会坦然面对。当快乐来临时，会尽情享受，当烦扰来袭时，就理性解决。 他们相信人定胜天，确实无法获胜时，就坦然接受。他们能够正确认识自己，有自知之明，不会自我贬损也不会自我膨胀，他们在该独立的时候独立，该求助的时候 求助。乐观和自信后面，深藏着对人生的豁达与包容。
不要找一个无知的人过日子，他们没有树 立起完整的人生观，或者对事情价值的判断缺乏基准线。他们常会做出匪夷所思的决定，不能独立思考或者过于固执己见。他们优柔寡断或专横无礼，他们扭捏作态 或者刻板无情。不是因为别的，正是因为无知。拥有正面能量的人，拥有大智慧，他们分得清世界的黑白曲直，不会在人生的道路上跑偏也不会随波逐流。他们不会 扭曲事物的本质，不会夸大事情的不利面。他们知道世界运作的原理，明白人人都有阴晴阳缺。他们在你需要时给你最中肯的建议，有原则却又求新求变，有主见却 又听得进劝。
不要找一个容易放弃的人过日子。他们得 过且过永久性地安于现状。他们没有信仰，也没有梦想。他们遇到挫折的第一反应和最终反应都是逃避，为了抵挡失败或者因为怕麻烦，他们可以放弃一整个世界。
拥有正面能量的人，坚定自己的信念，拥有人生的目标，知道自己的所需并为之不断努力。他们欢迎变化也制造进步。当困难来临，他们不嫌麻烦或贪图安逸，他们 知道山丘后面会有道更美丽的风景。
是的，去爱一个拥有正面能量的人吧。他 们会让你觉得人生有意思，会让你觉得世界色彩斑斓。他们会给你惊喜，同时也会带给你感悟。他们让你把路走直，戒断所有扭曲的价值观。
如果你本身就不是一个拥有足够正面能量的人，那么就请你一定要爱一个拥有正面能量的人。在这道数学题里，负负并不能得正，另一个同样具有负面能量的人会把你的人生拖垮，不同空 间的畸形与病态会让你过得一团糟。让这样具有正面能量的人导正你的灵魂和行为，潜移默化中，你会变得更加开朗和幸福。这一定，比任何财富更能长久的滋养你 的心灵。
Friday, June 14, 2013
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