(28-08-2013, 11:36 AM)minimax Wrote: [ -> ]"To the extent we have been successful, it is because we concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers."
---Warren Buffett
I'd just like to add that S-chips are the proverbial 7-foot hurdles that Warren Buffett says that one should avoid. Too difficult to get it right and too easy to get it wrong.
So please stop trying to find value in S-chips and instead look for one-foot hurdles to step over.
I do agree that the majority (99.999%) of us will be better off avoiding S-Chips.
But, let's not over-generalise Warren Buffett's quote. Your 1-foot hurdle may be my 7-foot hurdle and vice versa, as we have different areas of competence... For eg. Warren Buffett sees Tech Stocks to be his 7-foot hurdle but he's also aware that to his good friend, Bill Gates, it's just a 1-foot hurdle...
So, as long as S-Chips are 7-foot hurdles to you (myself included), please do avoid it....
PS. To some others who'd over-generalised and lumped all Chinese cos. or even Chinese nationals and tarred them with the same brush.... do remember the roots of the majority race in Singapore and where their ancestors came from...
(28-08-2013, 02:30 PM)jeremyow Wrote: [ -> ]I think Warren Buffett once mentioned something along this same line. Integrity, knowledge and energy are essential traits of the management of a business to look out for.
If the the management has integrity, but not sufficient knowledge and energy, the business will not progress too far.
However, if the management has surpassing knowledge and great energy, but lacks integrity, the knowledge and energy of this dishonest management is going to make its shareholders suffer greatly.
I believe one must always assess the integrity of the people in management of a business first before looking at their performance. A bare minimum way is through attending AGMs to have a first hand experience on who are the people managing the business. If we are not even comfortable and trusting of the people in management, how can we trust them to manage our money when we invest with them?
This brings us to the importance of knowing the people in management well enough as this is part of the due diligence an investor has to perform. If the integrity is not present, all other showings (e.g. financial statements and even things we may observe about the operations of the business may be just pretencious for all we know). It is not easy to assess integrity, so one should be making effort to know the management of a business as much as one can know about them through whatever limited means for the retail investor (e.g. attending AGMs).
Not disagreeing with the gist of it... This is all very interesting for a Sunday morning breakfast discussion at Kopitiam, but how does this really translate to useful actions from a layman investor's POV?
Unless you can propose a rigorous framework other than attending a 1hr AGM every year which I get to ask the Chairman 1-2 questions (if lucky) to help us evaluate management character and integrity, all this talk about assessing the senior leadership honesty is just pointless banter equivalent to the old adage of buying the "right stock" or hiring the "good people".
If I possess the smarts to know where and what to look out for, deep local knowledge, and good research methodology, why shouldn't I invest in s-chips if they are so attractively priced?
For example, if I were a small time vegetable businessman in china, I would be able to ascertain the validity of CMZ's margins, or even its suppliers and customers. Comparing CMZ's margins against another 2-3 listed company of similar business cannot be better than the knowledge I gained from my own vegetable business. Unless you can trust the accounts of the companies you're comparing against, there's no point in doing so.
I have none of those qualities. I haven't been to china, I have zero local knowledge, and there's not even a chance for me to see the products of CMZ (or whatever company it maybe). Neither do I know how to conduct background checks on the material claims china companies make in the AR.
What then?
I stick to 'clearing one-foot hurdles.' I prefer companies with a business plan that I can comprehend, and is uncomplicated. Mostly, they are small cap stocks. There's not many that are within my circle of competence, and even fewer that i consider a good bargain. But i've managed to narrow my choices to that tiny handful that i'm confident in going big. It takes a long time to search, and once bought most of the time (in years) I'm just sitting on my hands, and adding more when it is deemed worthy. I haven't bought a new stock in more than a year and a half.
Remember that you're a long term business owner, which means you should aim to know as much about the business as the CEO.
(28-08-2013, 04:08 PM)karlmarx Wrote: [ -> ]If I possess the smarts to know where and what to look out for, deep local knowledge, and good research methodology, why shouldn't I invest in s-chips if they are so attractively priced?
For example, if I were a small time vegetable businessman in china, I would be able to ascertain the validity of CMZ's margins, or even its suppliers and customers. Comparing CMZ's margins against another 2-3 listed company of similar business cannot be better than the knowledge I gained from my own vegetable business. Unless you can trust the accounts of the companies you're comparing against, there's no point in doing so.
AR.
"To the extent we have been successful, it is because we concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers."
---Warren Buffett[/i]
I have no doubts that there are legit S-chips out there but S-chips are 7-foot hurdles.
My congrats to forummers who have acquired the ability to clear seven-foot hurdles but for other forummers who are looking to find value in S-chips, I just want to ask the following questions:
1) do you have the ability to clear 7-footers?
2) if not, which is the better use of your time : looking for one-foot hurdles to step over or acquiring the ability to clear 7-footers?
Happy value investing and peace out.
(28-08-2013, 01:31 AM)Spidey Wrote: [ -> ]Total fees made by SGX cannot cover for the losses made by Singaporeans in S chips. As a country, Singapore is just another net loser in this game.
US's SEC have been trying unsuccessfully to get audit work papers from china auditors. Even the big brother cannot do anything to these fraudulent China company listed in US, don't talk about SGX.
With state protection, there is huge incentive for chinese companies to defraud investors in overseas exchange. It is a net win for the country as money flows in. This is like financial war games between countries, and s chip is the perfect weapon to suck money out of another country.
it is not just this. four years ago, personally learnt (without strong evidence) of prc(s) coming here thr one of those malaysian job-middle-man/agent, setting up 'shell companies', give themselves high post and imaginery 'pay' through series of kickback arrangement while waiting for approval of pr. those were the crazy years.
(28-08-2013, 11:02 AM)yeokiwi Wrote: [ -> ]Quote:to say all is worthless, is saying any companies that deal with china are frauds
Not really. It is just that the risk or probability of fraud is in-deterministic from the viewpoint of a retail investor. Anything that is in-deterministic will render any MoS invalid and since I base my purchase of stocks using MoS, there is no mean to know whether it is or it is not a bargain.
Singapore stocks, collectively, have a low probability of fraud. Since the probability is low, all the financial metrics derived from the financial statements can be used to assess the merit of a stock. So, if the investment period is lengthen to 30-40 years, the probability of someone who is investing in Singapore stocks will, in the worst case, encounters probably 1 or less fraud in his investment journey.
Vice versa. If an investor holds more than 5 s-chips in his portfolio currently, the probability that he will hit a fraud case will be very high based on historical information.
Every investor has their own investment methodology. For myself, I tend to incorporate probability into the thought process.
just to add- fraud from s-chip usually happen at the top/high level..is like a top-down approach.
while fraud in sg companies if any is by far isolated/employee case..
so s-chip frauds are usually explosive & impactful
(28-08-2013, 11:46 PM)touzi Wrote: [ -> ]According to the Glaucus report, Putuan Daziran has zero revenue and zero COGS for 2 consecutive years. Is this possible? Could this be case of parking the numbers in related companies?
I don't know, I haven't been diligent enough to go through the numbers. We should be hearing from them very soon though.
(29-08-2013, 12:40 AM)Wildreamz Wrote: [ -> ]I don't know, I haven't been diligent enough to go through the numbers. We should be hearing from them very soon though.
You might want to take this opportunity to "go through the numbers" and see if you can learn something from this episode. The money is most likely already lost, but you can still gain some knowledge. Don't waste the losses, at least try to learn what to do differently next time. There is nothing wrong with making mistakes, as long as you learn from them and don't repeat them in future.
(29-08-2013, 12:58 AM)d.o.g. Wrote: [ -> ]You might want to take this opportunity to "go through the numbers" and see if you can learn something from this episode. The money is most likely already lost, but you can still gain some knowledge. Don't waste the losses, at least try to learn what to do differently next time. There is nothing wrong with making mistakes, as long as you learn from them and don't repeat them in future.
Thanks for the advice, given that there is really nothing much I could do with that investment at this point, I am currently focusing my energy on other things as I have already spent a lot of time on the Minzhong episode, reading reports and searching for information.
I will not go through the forensic accounting of the (somewhat dubious source) old auditor's report that Glaucous provided, as my knowledge on this area is limited anyway. I would, however, read the finalized report by independent source or relevant authorities when the verdict is out.