i believe that what is improtant is whether your own investment philosophy and system will allow you to generate good returns in the long term. Benjamin Graham, Warren Buffett and Peter Lynch have different style of investment though they will all never overpay for a lousy stock. No system is perfect and no one will be able to identify every single "good" stock correctly. Missing out on VICOM will more likely means that you may miss out on another supposedly good stock that actually has a lousy business instead.
We will always be susceptible to Mr Market, he can let a stock goes up or down at his own will. We will never be able to second-guess what will happen, but we can only wait for a good stock to come down to a price in which we will be comfortable to buy.
At the current price, I will not exactly advocate people to buy it as I feel it might be near its short-term fair value. Then again, we will never know how Mr Market will value it at. For me, I will continue to hold it since I do not see any problem with the business and that I have gotten it at a lower price. Anyway, this constitutes 40-45% of my portfolio. I will not want it to spike up to P/E of 20 to 30 which might let me be inclined to sell the stock.
There aren't many companies with a P/B of 3 or higher. VICOM is one of them because of its business model, and SIA Engineering happens to be another. If one uses history as the basis for ascertaining P/B values, then the pertinent question to be asked is whether the business model has remained constant over time? Has it improved since then or deteriorated?
(14-02-2012, 07:20 AM)weijian Wrote: [ -> ]hi dzwm87, 'flexibility' is just another word for 'not following your rules'? 
(at least this is how i will see myself if i had panicked at the runaway prices n let greed take over) My 'strict margin of safety' has also saved me heart pain at times...bottomline is, i try to follow my rules. If my rules are wrong, i will review and change them.
On hindsight, i slapped a big premium on the entry dividend yield, as
(1) It is a small company with small float and not so liquid (as many mentioned)
(2) the memories of late2008-early2009 (investing at the bottom) were still fresh in my mind and i got a blue chip cash cow with a nice dividend yield just 1yr earlier. Therefore, contrasting the profile of the cash cow and VICOM, my margin of safety rule demanded a dividend yield of 200 basis points higher for VICOM.
I am still in the process of reviewing 'what went wrong' with my system (rules) with missing out on VICOM...
No, I certainly don't think it as being not disciplined. In fact, investing is very much an art than a science. I am not sure how u derive the 1.50 hurdle rate but IMO, I personally find myself losing out on good potentials when I pegged a fixed P/E hurdle rate at 6x, with an implicit intention of getting 50% margin of safety. However, with that, I have found I have also earlier missed out companies with good fundamentals that are trading at 15x P/E normal times - which implied 7x P/E hurdle rate. Nowadays, I have shifted my hurdle to 50% margin of safety instead of having a pegged valuation ratio.
Hope you can figure out what went wrong with your system!
It is rather impossible for VICOM to fall to P/B of 1. With its 20% ROE, you will need PE to fall to 5 to achieve P/B of 1.
P/E, P/B and ROE are all linked together
I sold 50% of vicom at $4 as i feel it's fairly valued at this STI 2950 pts.
don't think vicom will fall to $1 or $2...usually suffer from corrections/panic selling during crash.. will buy in around $2.80 if market crash due to europe BOOMZ!
let see how it goes!
in times of uncertainty, safer to take profits and cash in pocket...
Whatever your data (PTB, ROE, etc..) are all past data. Even the latest data if you manage to access or possess are considered very important but we buy stock for the future. Who can really tell what's going to happen. But at least we do our homework, that's all.
From the book of "RULES OF WEALTH":
"Remember that investments of any sort are a form of gambling no matter which way you look at it"
i agree completely. If not all very high IQ people will rule the stock markets of the world. Ha! Ha!
There is "Fairness Up-stair" after all.
(14-02-2012, 09:25 AM)dzwm87 Wrote: [ -> ]No, I certainly don't think it as being not disciplined. In fact, investing is very much an art than a science. I am not sure how u derive the 1.50 hurdle rate but IMO, I personally find myself losing out on good potentials when I pegged a fixed P/E hurdle rate at 6x, with an implicit intention of getting 50% margin of safety. However, with that, I have found I have also earlier missed out companies with good fundamentals that are trading at 15x P/E normal times - which implied 7x P/E hurdle rate. Nowadays, I have shifted my hurdle to 50% margin of safety instead of having a pegged valuation ratio.
Hope you can figure out what went wrong with your system!
Thanks for sharing your valuation method.
I have designated VICOM as a cash cow, ie. a dividend stock. So my entry price and margin of safety wld be solely on dividend yield only.
In GFC, i got a blue chip cash cow at 5% yield (based on its historical payout). Contrasted to VICOM, which had poorer competitive moat or liquidity (i was also sceptical - if VICOM was fantastic, why didnt ComDelgro take it private?), i determined the margin of safety to be 7% yield. Based on VICOM's historical payout average of ~10cents (up to 2009), my entry price was ~1.50sgd...
As much as my strict margin of safety enabled me to invest in the depths of GFC2008, it also made me missed gems like VICOM - There are no hard and fast rules - Investing is indeed alot like art..
(14-02-2012, 01:30 PM)weijian Wrote: [ -> ]As much as my strict margin of safety enabled me to invest in the depths of GFC2008, it also made me missed gems like VICOM - There are no hard and fast rules - Investing is indeed alot like art..
If I were to tell you the excellent investments I'd missed over the years, it would fill up a long list.
More important are the investments you don't want to miss going forward!
Was discussing abt Neratel with a fellow friend and I mentioned that ultimate aim is to make profits.
He then reminded me, the no 1 rule is not to lose money.
Sometimes at the wake of realising the many good investments we have missed, we nifty end up laxing on our discipline and just make another investment thinking that this will be another missed profit making opportunity if we do not grab the chance.
Let us rmb the no 1 rule.
A little tad overbought IMHO.