tag:blogger.com,1999:blog-28021668.post9176973436282899650..comments2023-10-12T21:12:41.408+08:00Comments on Value Investment - Musicwhiz's Journey: Value TrapsMusicwhizhttp://www.blogger.com/profile/10950754156386935254noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-28021668.post-81935823968834649282009-05-26T07:46:01.289+08:002009-05-26T07:46:01.289+08:00Hi Stilicon,
Thanks for your frank narrative on C...Hi Stilicon,<br /><br />Thanks for your frank narrative on China Sky. Yes, sometimes value traps occur in the most unlikely places, and it is up to the investor to be able to ferret them out, either through experience or by taking a closer look at the numbers and/or industry and business model. Admittedly, it's not easy and requires much patience and study.<br /><br />Of course, on hindsight for me as well, I would rather invest in companies with low or manageable gearing AND with high barriers to entry. Finding such companies selling cheaply is not easy, though.<br /><br />Regards,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-70077689309810315712009-05-26T07:43:10.139+08:002009-05-26T07:43:10.139+08:00Hello Kongming,
I apologize - I do not know or un...Hello Kongming,<br /><br />I apologize - I do not know or understand the banking industry very well, thus I cannot really comment. However, what I can say is that if the bank is operating on negative cash flows and if leverage is excessively high, this does not bode well for it as a business. That said however, some banks do have governmental support and this could be one factor for investors to pile into it.<br /><br />It would be good to understand the business and the dynamics of how banks work before putting money down. Just my 2-cents advice.<br /><br />Cheers,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-34326597877675166622009-05-26T02:01:34.949+08:002009-05-26T02:01:34.949+08:00Hi, Musicwhiz,
Your value-trap stories are instruc...Hi, Musicwhiz,<br />Your value-trap stories are instructive, and I do concur with your analysis.<br />Personnaly, I made last year a huge stupid bet on CHINA SKY, relying on seemingly good numbers, but failed to see that the textile industry would dramatically suffer under the Global Recession. I knew of others China plays such as pharmaceutical ones (i'm thinking SIHUAN or SINO BIOPHARMA), but still went for the textile play, which proved a painful value-trap, probably because I thought the value proposition was sligthly better. Retropectively,I just wish I had been more cautious on the respective outlook of each industry, should a recession occur (global or not).Stiliconhttps://www.blogger.com/profile/16480669246079326156noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-53710762375386999232009-05-25T21:19:40.980+08:002009-05-25T21:19:40.980+08:00Hi Musicwhiz,
I am thinking of investing china co...Hi Musicwhiz,<br /><br />I am thinking of investing china company listed in China or HK as I am confident of the future growth of some china companies. <br />One of my interest is china banking industry. But when i look at some china bank financial status, i can't really understand why is this. For example, China construction bank, their net cash per share is negative, debt/share % is many times higher. But still many big foreign investor interest on this share including Spore. How do you see on this issue?kongminghttps://www.blogger.com/profile/17394679679549555920noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-40232958539100812422009-05-21T21:57:50.639+08:002009-05-21T21:57:50.639+08:00Hi Akatsuki,
Yes, I do consider the economic moat...Hi Akatsuki,<br /><br />Yes, I do consider the economic moat and barriers to entry as integral qualitative aspects of a Company before I invest in it.<br /><br />That said, I do not know the businesses and industries of the S-Shares you stated, so I will not comment.<br /><br />Thanks !<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-77082199515094124652009-05-21T19:08:55.797+08:002009-05-21T19:08:55.797+08:00Hi ghchua,
Thanks for your cautionary tale. I gue...Hi ghchua,<br /><br />Thanks for your cautionary tale. I guess there's always such a risk when a listed company is majority-owned by one shareholder and the free float is very small.<br /><br />Regards,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-2217576836600415602009-05-21T18:48:09.962+08:002009-05-21T18:48:09.962+08:00Hi ZD,
Actually the risk of fraud is more of an u...Hi ZD,<br /><br />Actually the risk of fraud is more of an unseen risk rather than a value trap. It's got more to do with corporate governance and transparency and this has to be assessed separately, I feel. Value traps are more to do with numbers you can at least rely on, but which still may not give margin of safety.<br /><br />Cheers,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-18523895729739775502009-05-18T14:19:00.000+08:002009-05-18T14:19:00.000+08:00wow, another enlightening article.
I wonder if any...wow, another enlightening article.<br />I wonder if any of my S-shares are "value" traps??? <br />1)China Milk<br />2)China Essence<br />3)China Paper<br />4)Sino-Fibre Tech (very likely)<br /><br />Could it be that the strength of the company's economic moat and the easy of entry into an industry determines the company; whether its a value trap or not?Chlorophyll Inchttps://www.blogger.com/profile/14216258429478884397noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-88973038036096242112009-05-18T11:58:00.000+08:002009-05-18T11:58:00.000+08:00Hi Musicwhiz,
Let me share with you a story of va...Hi Musicwhiz,<br /><br />Let me share with you a story of value trap that I have encounterd. I shall name the company as Company A.<br /><br />Company A looks attractive to me, trading at significant discount from NAV and also showing good cash flow and operating profit. But Company A is heavily owned by a majority shareholder with more than 70% stake.<br /><br />The majority shareholder decides to take Company A private by paying only around 20% above its last traded price, but the offer price is still at a significant discount from its NAV. Minorities couldn't out-vote the majority shareholder at the EGM and Company A had been delisted.<br /><br />Lesson learnt: Though Company A looks attractive, one might not be able to realize its true value if majority shareholder do not want to keep it listed.ghchuahttps://www.blogger.com/profile/09475913934410840352noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-43473280294613142752009-05-17T23:33:00.000+08:002009-05-17T23:33:00.000+08:00May I add that fraud risk is also a value trap. Fo...May I add that fraud risk is also a value trap. For example,even when the company is trading in net cash position (ie Mkt cap lesser than (last reported Cash balance less last report total liabilities), the cash reported might be false. This was what happened to some of the S-Chips like Oriental Century and why ppl shun S-Chips now.ZDhttps://www.blogger.com/profile/09900409279985826117noreply@blogger.com