Friday, March 7, 2008
Investment Nuggets:John Neff
An expert investor, John Neff was called “the professional’s professional”, as many fund managers entrusted their money to him in the belief that it would be in safe hands.
That view was justified by his remarkably consistent performance. For more than 30 years, the Windsor Fund managed by him routinely featured in the top 5 per cent of all US mutual funds.
A hardcore value investor, Neff invests in companies with moderate growth and high dividends while they are out of favour and sells them once they rise to fair value.
Neff always stuck to a simple investment style based on the following seven selection criteria:
Low P/E ratio.
Fundamental earnings growth above 7 per cent.
A solid, and ideally rising, dividend.
A much-better-than-average total return in relation to the P/E ratio
No exposure to cyclical downturns without a compensatory low P/E
Solid companies in growing fields.
A strong fundamental case for investment
Below are some of his key sayings:
“Absent stunning growth rates, low P/E stocks can capture the wonders of P/E expansion with less risk than skittish growth stocks.”
“An awful lot of people keep a stock too long because it gives them warm fuzzies — particularly when a contrarian stance has been vindicated. If they sell it, they lose bragging rights.”
“A dividend increase is one kind of ‘free plus’. A free plus is the return investors enjoy over and above initial expectations.”
“As a low P/E investor, you have to distinguish misunderstood and overlooked stocks selling at bargain prices from many more stocks with lacklustre prospects.”
“When you make up your mind stick to your conclusion and above all be patient”.
“Businesses exhibiting higher growth always suffer from increased mortality.”
“Don’t chase highly recognised growth stocks. Their P/E ratios are invariably pushed up to ridiculously expensive levels. This greatly increases the risk of a sudden collapse in the share price.”
“It’s not always easy to do what’s not popular, but that’s where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognised.”
“Sell substantially when the stock goes up and hold on to your position. If the stock falls back again you may buy it back.”
Source: thehindubusinessline
That view was justified by his remarkably consistent performance. For more than 30 years, the Windsor Fund managed by him routinely featured in the top 5 per cent of all US mutual funds.
A hardcore value investor, Neff invests in companies with moderate growth and high dividends while they are out of favour and sells them once they rise to fair value.
Neff always stuck to a simple investment style based on the following seven selection criteria:
Low P/E ratio.
Fundamental earnings growth above 7 per cent.
A solid, and ideally rising, dividend.
A much-better-than-average total return in relation to the P/E ratio
No exposure to cyclical downturns without a compensatory low P/E
Solid companies in growing fields.
A strong fundamental case for investment
Below are some of his key sayings:
“Absent stunning growth rates, low P/E stocks can capture the wonders of P/E expansion with less risk than skittish growth stocks.”
“An awful lot of people keep a stock too long because it gives them warm fuzzies — particularly when a contrarian stance has been vindicated. If they sell it, they lose bragging rights.”
“A dividend increase is one kind of ‘free plus’. A free plus is the return investors enjoy over and above initial expectations.”
“As a low P/E investor, you have to distinguish misunderstood and overlooked stocks selling at bargain prices from many more stocks with lacklustre prospects.”
“When you make up your mind stick to your conclusion and above all be patient”.
“Businesses exhibiting higher growth always suffer from increased mortality.”
“Don’t chase highly recognised growth stocks. Their P/E ratios are invariably pushed up to ridiculously expensive levels. This greatly increases the risk of a sudden collapse in the share price.”
“It’s not always easy to do what’s not popular, but that’s where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognised.”
“Sell substantially when the stock goes up and hold on to your position. If the stock falls back again you may buy it back.”
Source: thehindubusinessline
Thursday, March 6, 2008
Tuesday, March 4, 2008
QUOTE OF THE DAY
"There are two kinds of investors, be they large or small: those who don't know where the market is headed, and those who don't know that they don't know. Then again, there is a third type of investor- the invstment professional, who knows that he or she doesn't know, but whose livelihood depends upon appearing to know."
-Bernstein, William.
-Bernstein, William.
Sunday, March 2, 2008
Investment Nuggets : George Soros
George Soros, founder of the Quantum Fund, is one of the most successful hedge fund investors ever. He was a master at translating economic trends into highly leveraged plays in bonds and currencies. As an investor, Soros was a short-term speculator, making huge bets on the directions of financial markets. He believed that market participants influenced one another and moved in herds. He said that most of the time he moved with the herd, but always watched for an opportunity to get out in front and “make a killing”. George Soros knew well when to be cautious and when to be aggressive. His top investment tenets are:
The first priority is preservation of capital.
Be risk averse.
Develop a personal investment philosophy, an expression personality.
No two highly successful investors have the same approach.
Develop a personal system for selecting, buying, and selling investments.
Diversification is for the birds.
Do everything possible to legally minimize taxes.
Only invest in what is understandable.
Do not make investments that do not meet personal criteria. Learn to effortlessly say no.
Always search for new investment opportunities that meet personal criteria, and engage in research.
Soros’s skill as an investor is simply the successful application of his philosophy. Below are a few of his nuggets:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
“The usual bull market successfully weathers a number of tests until it is considered invulnerable, whereupon it is ripe for a bust.”
“Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.”
“The prevailing wisdom is that markets are always are right. I take the opposite position. I assume that markets are always wrong. Even if my assumption is occasionally wrong, I use it as a working hypothesis. This line of reasoning leads me to look for the flaw in every investment thesis. Also, when there is a discrepancy between my expectations and the actual course of events, it doesn’t mean that I dump my stock. I re-examine the thesis and try to establish what has gone wrong. I may end up actually adding to my position rather than dumping it. But I certainly don’t stay still and I don’t ignore the discrepancy.”
Source:- thehindubusinessline
The first priority is preservation of capital.
Be risk averse.
Develop a personal investment philosophy, an expression personality.
No two highly successful investors have the same approach.
Develop a personal system for selecting, buying, and selling investments.
Diversification is for the birds.
Do everything possible to legally minimize taxes.
Only invest in what is understandable.
Do not make investments that do not meet personal criteria. Learn to effortlessly say no.
Always search for new investment opportunities that meet personal criteria, and engage in research.
Soros’s skill as an investor is simply the successful application of his philosophy. Below are a few of his nuggets:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
“The usual bull market successfully weathers a number of tests until it is considered invulnerable, whereupon it is ripe for a bust.”
“Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.”
“The prevailing wisdom is that markets are always are right. I take the opposite position. I assume that markets are always wrong. Even if my assumption is occasionally wrong, I use it as a working hypothesis. This line of reasoning leads me to look for the flaw in every investment thesis. Also, when there is a discrepancy between my expectations and the actual course of events, it doesn’t mean that I dump my stock. I re-examine the thesis and try to establish what has gone wrong. I may end up actually adding to my position rather than dumping it. But I certainly don’t stay still and I don’t ignore the discrepancy.”
Source:- thehindubusinessline
THE MARKET
Trading in the Stock Market and making handsome profits is a fascination for all. The market gives us ample oppurtunities to make money. But the darker side is that the chances of losing is much much more than gaining money. One has to be careful in timing and selecting the levels for entry and exit. Losing oppurtunities is far better than losing capital
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