Yew Jin's Sometimes Blog

Lately I have been more critical of my posts, abandoning at least three over the past few weeks. The posts were all from the personal finance theme whereby I lay out my investments (deemed too private), my goals (deemed too ambitious and probably highly unattainable) and my returns on investments so far (deemed too private).

I had "abandoned" my kaChing! account a while back due to several problems I encountered with the site, but reflecting more I guess it's the most public forum for which I can openly discuss my investment philosophy (investing $10M and $XXXK are two totally different modes of thinking and operations).

How would I invest $10M?

I make long term investments as if we were buying shares to become a partner in the business. Looking for a mix of both good growth and value companies. During the "great recession of 2008", it seems that stocks were so oversold that large cap stocks that would have been sold at a premium in normal times became affordable and safe. In other words, lots of potential for profit, but manageable safety margin (when taking a 10 year and beyond horizon).

We do not particularly look for either value or growth as both are valid investments - a great price for a good company or a good price for a great company, but we give preference to the latter.

It is my opinion that predicting the market short-term *might* be possible, but it is too time-consuming and error-prone for me to consider trying. I do, however, believe that long-term trends can be gleaned from understanding macro-economics, human psychology and politics. If I can't understand a business, it is not worth the risk. If the situation warrants time to analyze, and the opportunity passes, so be it. I would rather have a margin of safety.

Knowledge about finance and accounting can only get you so far in investing - you actually need to know the company. i.e. spend time talking to the management, the employees and the customers. You also need to somehow learn about the company beyond the company reports to see if the company is sound and to really know if a company has the right stuff. Recall Enron, WorldCom, Long-Term Capital, and how "amazing" their books were before they collapsed. I buy into companies under these conditions:
1. Fundamentals are good. I favor a holistic view, but will typically screen based on Price/Book, Price/Sale, Free Cash Flow and Return on Equity.
Action: None, but is a necessary condition for further investigation.
2. I know the industry and the company. Probably due to having experience using their products or knowing someone in the company.
Action: Invest in the company.
3. Long-term prospects for a sector is sound and it is reasonable to buy a basket of stocks of the sector.
Action: Invest in the sector. Note that while such "diversification" is frowned upon by Warren Buffet, but it mitigates the need to determine which company is good or not to invest in. The rationale is to invest in high potential sectors to seek gains, and to diversify within the sector to gain safety. This might not result in the maximum profit, but it reduces volatility.

To summarize, my main investment style is long-only, and to average down as the stock price drops as long as the company valuation looks good. I sell under two conditions:
1. When the macro or micro economics have changed and the company or sector no longer looks attractive.
2. Or, when there are better investment opportunities elsewhere, and there is no other asserts available to sell to finance that better investment.