11-10-2010, 07:18 PM
To d.o.g.,
I guess the basic premise of any investment is to examine the business model of the Company in question, to at least be able to ascertain if it has a comptitive advantage and deep enough moat to be able to protect its margins and profits. Since you mentioned a lot about the dynamics of such commodity businesses, I guess it should be clear to investors that any profits made in the interim could be "supernormal" and are thus only temporary, before reverting back to the mean.
Commodity businesses also generally do not have FCF, as they need to invest in significant amounts of capex to ensure they keep up with the competition or rate of technological advancement. Margin erosion is also a common result of such businesses.
Though I would agree as well - on hindsight this all seems clear. Yet, the idea is to learn lessons from it and try to avoid investing in such businesses in the first place.
To Kazikurai,
I guess what was not mentioned was whether he pumped in additional capital to boost his portfolio in the first place. Giving a start and ending figure isn't very useful unless you assume he did not add in or withdraw any capital at all during the 30 years. And did he account for dividends as well?
My view is that he probably helped himself a great deal by being frugal and having good spending/saving habits. So this is all part of being a value investor - you seek value in all aspects of your life!
I also don't think he intentionally "diworsified"; it could be that he's already financially independent and has a very good cash stream so he can afford to try out something new without too much risk (i.e. he did not pump too much $ inside these ventures).
To yeokiwi,
Yep, I agree with you on this. d.o.g. also mentioned before that having a good work ethic is important. So what we need to do is work hard, save hard, insure against disaster, and invest for better returns; in that order!
I guess the basic premise of any investment is to examine the business model of the Company in question, to at least be able to ascertain if it has a comptitive advantage and deep enough moat to be able to protect its margins and profits. Since you mentioned a lot about the dynamics of such commodity businesses, I guess it should be clear to investors that any profits made in the interim could be "supernormal" and are thus only temporary, before reverting back to the mean.
Commodity businesses also generally do not have FCF, as they need to invest in significant amounts of capex to ensure they keep up with the competition or rate of technological advancement. Margin erosion is also a common result of such businesses.
Though I would agree as well - on hindsight this all seems clear. Yet, the idea is to learn lessons from it and try to avoid investing in such businesses in the first place.
To Kazikurai,
I guess what was not mentioned was whether he pumped in additional capital to boost his portfolio in the first place. Giving a start and ending figure isn't very useful unless you assume he did not add in or withdraw any capital at all during the 30 years. And did he account for dividends as well?
My view is that he probably helped himself a great deal by being frugal and having good spending/saving habits. So this is all part of being a value investor - you seek value in all aspects of your life!
I also don't think he intentionally "diworsified"; it could be that he's already financially independent and has a very good cash stream so he can afford to try out something new without too much risk (i.e. he did not pump too much $ inside these ventures).
To yeokiwi,
Yep, I agree with you on this. d.o.g. also mentioned before that having a good work ethic is important. So what we need to do is work hard, save hard, insure against disaster, and invest for better returns; in that order!