DISCOVER DATA-DRIVEN-INVESTING
Your Go-To Source
Welcome to data-driven-investing, a blog to help the small investor by providing him/her with useful data to make better investment decision. These data are previously not available to the retail investors. This investment blog follows the value investing philosophy and the teachings of gurus Warren Buffet and Peter Lynch.
Not just another investment blog
Please see sample report below.
At ddinvesting, we show you the key data which Warren Buffet looks for, such as its Return On Equity (ROE), Fixed asset level, capex, Free Cash Flow (FCF) etc. We also look into how the company finance its operations - by way of debt or issuing of shares - and the ability to repay debt. We understand that quality of the business is highly valued and is favoured over the cheapness of the share - by looking at its Return On Invested Capital (ROIC) and stability. Some of these data are presented yearly for the past 3 years so that you can see the trend, while others are determined on a longer 5-year perspective as growth rate, FCF etc tend to be uneven.
To avoid unethical company, we also test whether a company has manipulated its earnings using M-Score as created by Professor Messod Beneish, and test how financially strong the company is, using the F-Score of Professor Piotroski.
The aim of investment is to make sure that the shares we pick are giving us good return. To determine whether the company has been creating value for the investors, we carry out the Warren Buffett's $1 test to see whether the past share price had outperformed its retained earnings. It is important not only that the company is making good returns for the investor in the past, but that it continues to do so in the future. Focusing on the long term, we determine its sustainable growth rate and also how much is the company investing on its future via its reinvestment rate.
Investing is simple but not easy
One of the greatest stock picker is Peter Lynch. He was able to see opportunities in many different places, by categorizing companies and developing the "story" line to come up with reasonable expectations. The 6 categories are: fast grower, stalwart, slow grower (dividend), asset play, cyclical and turnaround. Companies may not always fit neatly into a particular category. Many are known to have changed categories at some point in time. Once a company has been categorised, it is easier to monitor the progress the company is making, and to know when to sell the share (as this is one of the most difficult actions to take). Please see the table on the next tab for more details.
Ddinvesting has prepared a list of companies categorized as per Peter Lynch's classification, based on analyzing the company's business nature, performance and its industry. We even go 1 step further and provide the appropriate valuation metric for each category, so that you can easily follow the company's development. To complete the picture, we also provide the associated growth rate for the past 5 years and earnings volatility. Knowing the valuation, you will not be paying too much even for a wonderful company.
Margin of Safety
Warren Buffett frequently quotes from the classic Intelligent Investor on the concept of margin of safety (MOS). He demands adequate MOS for downside protection. We compare the current valuation with the past 5 years to determine whether there is any margin of safety (using standard deviation or favourability ratio in the case of Price Earnings Growth ratio. Generally, a standard deviation of -1.0 to 1.0 is taken to mean that the share price is fairly valued. For comparison, the current price over the estimated intrinsic value (as per the formula of Benjamin Graham) is also computed.
Here's the current list:
fast grower - Best World, Riverstone, Sina (US), Straco, Thai Beverage
stalwart - Breadtalk, Comfortdelgro, Raffles Medical, Tianjin Zhongxin
slow grower (dividend) - Astro Malaysia (Malaysia), Mapletree Logistics trust, SGX , SIA Engineering, Singtel, ST Engineering
asset play - Berkshire Hathaway (US), Hong Leong Finance, Ping An (HK), UOB
asset play (net current asset value or high cash) - Chuan Hup, Hanwell, Powermatic
cyclical - AEM, Design Studio, Fu Yu, Low Keng Huat, LTC, Rex, Sembcorp marine, SIA, Spindex, Sunningdale, Sunpower, Tat Seng Packaging, Venture Corp, Yangzijiang
cyclical (property) - Bonvests, Bund Center, Bt Sembawang, Capitaland, Guocoland, HongKong Land, Hotel Grand, Keppel Corp, UOL
turnaround - Gallant, Nuskin (US), Sapphire, Silverlake
What's next
Using the report as a starting point, you would have a good idea of the company's financial performance. As a safeguard, you can take the market approach and compare the valuation with comparable company within the same industry, and to be able to account for the differences. Warren Buffett advises investors to stay within their circle of competence. Before taking investment action, you are cautioned to do your own due diligence. Please refer back to the table on the next tab for any follow-up action.
That's all folks
At ddinvesting, we take pride in our work and hope that you will find the reports useful to your investment decision. We treasure your feedback so that we can keep improving our services. As it takes some manual effort to process the company data, you are invited to return to this page often to check out new companies added or updates to the existing ones. Lastly, we hope that our efforts will help the small investors to lessen their mistakes and here's wishing everyone Prosperity (or Huat arh! 发呀!)
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