Saturday, December 23, 2006
Triage article is a very good article about prioritising patients to treat.
It gives you an overview of how battlefield medicine works. This principle is also applied to emergency medicine. Imagine you were in accident and emergency department. If you were to suffer heart attack, you want to be treated straight away and not waiting for your queue. If you were to suffer minor cuts, you could wait to be treated.
Triage in fact is equivalent to time management. Do the really important stuffs first that can make an impact.
So how does triage apply to investing?
Warren Buffett said to be a great investor, you have to study all listed companies to find the hidden gems; starting from alphabet A to Z.
However, this may not be the most efficient way.
You have to apply "triage" principle to stock analysis too. You should screen for companies that are hitting 52 weeks low, and these are the companies to analyse first. The other effective way is to study the most recent filings of great investors, i.e Mohnish Pabrai. For example, recent filing showed that Mohnish Pabrai invested over 11.5% of CryptoLogic shares. As he is a great manager and with such a significant investment, it should be the top priority to analyse why he bought so much. If you study CryptoLogic now and think is it worth a lot more, you could buy the company now without paying excessively.
Friday, December 22, 2006
Charlie Munger said that multidisciplinary approach to investing is vital. And, I believe that the technique of reading bible could be applied to reading annual reports more efficiently.
This preacher said you don't have to read from page 1 to finish.
Bible consists of a collection of 66 literatures and one should read bible like reading short story book.
Likewise, to read annual report, you don't have to start from page 1. I always start from the balance sheet, income statement and cashflow statement, and then jumping to relevant notes first.
Having said that, Warren Buffett said good investor should at the end, read the whole annual report in order not to miss things out.
It is worth watching this short video clip of 6 mins: How to read the Bible.
Thank you Terence Tan for sharing,
Resigning William Hill for further 3 years is a great news to CRYP. This will increase credibility of CRYP.
One of the most significant happenings to CryptoLogic is that Mohnish Pabrai, a great investment manager, has purchased significant amount of CryptoLogic shares. The total amount of CryptoLogic shares that are owned by his funds, and his personal holding is over 11.5% of shares outstanding!
Wow, Mohnish Pabrai is definitely thinking CRYP is undervalued.
If you have any comments on CryptoLogic, please send me an email.
Thursday, December 21, 2006
11 June 2007
I hope most of you have read the Little Book That Beats the Market by Joel Greenblatt.
If you haven't, please get a copy asap and read it a couple of times. I have personally read it many times, and have come to conclusion that for most investors, Magic Formula Investing, which is only based on simple combination of earning yield and return on invested capital, is the best way to beat the market over the long run.
Thank you Joel Greenblatt for your generous sharing on MFI.
I truly agreed with Mike Price, who said that this book is one of the most important books ever written in the last 50 years.
Therefore, I have discontinued Lau Model Portfolio to track companies as investors are much much better off following the advice by Joel Greenblatt.
I am creating a model portfolio, which I would name it as Lau Model Porfolio, to track all the companies that I think are undervalued and worth investing.
The purpose of this portfolio is to help investors monitor the undervalued companies.
Lau Model Portfolio:
- MGIC Investment Corp; MTG at $63.00 Feb 10, 2006
- Gannett Co; GCI at $61.26 March 14, 2006
- Gannett Co; GCI at $56.00 April 19, 2006
- Intel Corp; INTC at $19.60 March 29, 2006
- Berkshire Hathaway; BRK.A $90,000 April 6, 2006
- Microsoft; MSFT $24.15 April 29, 2006
- Dell; DELL $24.20 May 18, 2006
- K-Swiss; KSWS $26.50 June 1, 2006
- MGIC Investment Corp; MTG at $58.44 Sept 4, 2006
- CryptoLogic; CRYP at $20.00 Nov 20, 2006
- Wal Mart; WMT at $46.50 Dec 18, 2006
I believe that the above companies are undervalued at the price mentioned, and should offer a market-beating returns over a long-term period. If you were to invest in the above companies, do your due diligence.
Remember, only invest if you know what you are doing.
Dah Hui Lau (David)
Previous recommended companies, but not anymore:
- The Buckle; BKE at recommended at $35.10 Sept 11, 2006; recommended sale on Dec 21, 2006 at $40.50 to realize profit. An increase of over 40% in less than 4 months.
Question by anonymous investor:
Is time a factor in your decision to buy an investment?
Time is a crucial factor in buying decision. We only invest when the time is right, in other words, we only invest when Mr. Market is pessimistic and offer good companies at bargain or great price.
Question by anonymous investor:
What would you do if the stock does not move in a designated time frame, would you sell and find something else? Worst case, if the stock goes down, what is your risk tolerance levels.
Time is great friend to good companies. As time passes, good companies will not only survive the temporary setbacks, but will strive and increase its shareholders value. When Mr. Market realises this, it may bid the price of the stock up. How long it takes for Mr. Market to respond is beyond my prediction. We are long-term investors and will wait for the good returns to unfold, between 3 to 5 years. Having said that, we would monitor the underlying fundamental of the companies and reassess the companies from time to time to make sure we have not made mistakes at the first place.
If the stock goes down, we would reassess the companies to make sure its moat is intake and the “events” that cause the stocks to dive are temporary rather than permanent. If we believe that we are right, we would take advantage of the price drop to increase our holdings.
If we made mistakes in judging the companies, and if we found out at later date that the companies are not as sustainable as we thought, we would sell the companies.
Mr. Market seems to be over-excited on BKE now. It is a good time to take a profit.
Merry Xmas and Happy New Year!
To investigate further: MSN BRK Board.
If you are interested in my analysis on CRYP, please send me an email. If you have particular insight in CRYP, do send me an email too. I appreciate everyone's contribution.
Monday, December 18, 2006
Saturday, December 16, 2006
Warren Buffett, chairman of Berkshire Hathaway Inc., says he expects the diversified holding company to increase its net worth this year by a record $14 billion.
Mr. Buffett said the increase in net worth, which he said would translate into strong growth in Berkshire's book value, could be the biggest of any U.S. company, barring any disasters over the next few weeks that could hurt 2006 earnings in Berkshire's lucrative reinsurance business.
Friday, December 01, 2006
I have re-evaluated my PartyGaming position and concluded that PartyGaming poses significant risks in many forms.
I have therefore dropped PartyGaming off my Lau Model Portfolio as it is too risky.
If you would like to see my calculation of why PartyGaming is considered overvalued, send me an email.