Investorial

Now that Warren Buffett has shown us how oppportunities arise when the market is at its emotional extremes, it’s time to pick his brain on how he selects businesses. If you were just joining us, Investorial is running a series of Buffett’s tenets — his ideas on investing. We’ve already covered some of Buffett’s tenets on the market. If you want to catch up, by all means! We’ll wait for you.

The overriding tenet for all the discussion in this chapter will be that investors should “never invest in a business you cannot understand“. If you’ve ever played poker or know someone who does, you’ll often hear the notion that “poker players are not gamblers”. The good players win on their skill, temperment, and intimate knowledge of the game. “Dead money” describes the unskilled poker players; having to rely more on luck than skill to sit at the same table. Are you “dead money” when it comes to stock investing? (more…)

What has not already been written about Warren Buffett? No investor has been more prolific and enjoyed more success in the realm of investing than the “Sage of Omaha”. Indeed, many investors have deified Buffett, hanging on every word that the “Oracle” can deliver. Warren himself is only too happy to freely dispense of his earnest advice with a flair for an amusing gab. I suspect that Warren would be very content had he been a comedian in a past life.

Since so many out there enjoy Warren’s wisdom, let’s take a look at some of the opinons, doctrines and idealogies that Buffett has made popular — his investing tenets. Investorial will be hosting a series on Buffett’s Tenets with the coming posts in the next few days. I want to also invite our readers to share with us some of your favourite tenets of investing; whether they’re from Buffett or not. Today we start by examining my favourite Buffett thoughts on the market in general. (more…)

Sometimes it’s hard to get a true value investor to not talk about the facts and come with some emotion, just ask Jim Chuong! Does this mean that value investing fund managers don’t ever hard sell? There are always exceptions and Joel Greenblatt of Magic Formula Investing is one of them.

Though the site sounds more like it belongs to Ripley’s Believe It or Not, Joel considers himself a value investor and is the author of the book, The Little Book That Beats The Market (you can read excerpts on Amazon.com). I recently read an April 2006 interview that Joel did with MoneySense. The interview angle depicted Joel as if he was a sideshow salesman who’s found the magic formula to generate great investment returns. Joel talks candidly about (more…)

This post will definitely be one of those memorable moments in Investorial’s history. Aside from being my first podcast, it is also my first interview with a fund manager, Jim Chuong! Jim will be the first to humbly tell you that being compared to the Oracle of Omaha is a bit much. But there certainly exist similarities. Jim founded the Chuong Investment Management (formerly The Toronto Investment Club). Chuong Investment Management (CIM) is an investment partnership that followed closely Warren Buffett’s own partnership structure when he first started. As well, Jim has managed CIM to an annual return of 22.9% since 1998 (without buying tech stocks) by following the tenets of value investing.

We had lunch at a local Tim Hortons before Jim went for his regular workout. I tried cleaning up the audio, but I want to apologize for the background noise and the occasional baby’s cry. Jim was a really nice guy who spoke very intelligently and candidly on every subject that came up during our 43 minutes. We chatted about a wide variety of subjects from MERs, to value investing, to comic books, tennis, saving for yourself and many other subjects. I learnt a lot from this experience and I know you will too! Download it, put it in your iPod and listen on your way to work. You’ll be glad you did!

Jim Chuong Podcast Interview (10 MB, 43 minutes)

I definitely believe that Jim is one of the good people you will find in (more…)

Many mutual fund companies and financial advisors often preach the virtues of long-term investing by citing the “10 best days” scenario. They will show you that if you attempt to time the market, you may potentially miss out on the 10 best days of the stock market and affect your returns. But what are the 10 best days? Does it depend on your perspective?

Perhaps the financial companies have it all backwards. They always show the 10 highest gaining days as the 10 “best” days. I understand why their marketing department spin using positive returns; as most investors rather think in terms of pluses instead of minuses. However, if you are preaching to an audience interested in long-term investing — young investors. Shouldn’t the 10 best days be the days with (more…)

My favourite deep-value fund manager, Irwin Michael of ABC Funds, reflects upon the past month’s correction in commodities and looks forward to the future. Speculators are certainly becoming braver since the last big market crash. Their work is evident in their hasty retreat in the last 2 weeks.

Playing the contrarian, Irwin still believes that there are values away from the hot sector that remain unexploited.

[...] We continue to believe that common shares are the last major asset class to participate in the mid-2000 decade asset price run-up which includes gold, silver, base metals, real estate, art, jewelry and collectibles. In effect, we believe that it is cheaper to drill for oil on Bay or Wall Street versus actually drilling for oil in the ground in Alberta, Texas, the North Sea or the Middle East. [...]

There is also a new picture of Irwin Michael at his work-space that wasn’t there in previous months!

Hindsight is always 20 / 20. I’m a huge advocate for learning from the past but would like to remind readers that it is not beneficial holding onto past mistakes. Learn from your experience and look forward to the future to become a better investor!

Investorial readers will be familiar with my slant towards value & contrarian investing principles. But I wasn’t always that way. I started out doing what most people just getting into the stock market would do — a speculative trader. My first true value & contrarian decision was a good one. Looking back on it, it could have been a great one. Here’s the story! (more…)

“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

We’re starting off with this quote to remind us that we should not follow opinions, but rely on our ability to reason and gather facts. Easier said than done, what are facts? Everybody has a way to interpret numbers, figures. One analyst can recommend a stock while another is downgrading it. There can be no consensus in the market for the buyer / seller principle to work - one’s man junk is another man’s treasure.

I am going to look at this post using some numbers; some publicly disclosed, some calculated. But rest assured only to the level that I can understand. Being a Bachelor of Mathematics doesn’t mean anything when it comes to analyzing financial numbers. I’ll only refer to common sense numbers, hopefully nothing beyond comprehension! I’ll also use Canadian dollars for convenience!

The IPO Story
To recap, Wendy’s decided to spin off 15% of its ownership of Tim Hortons in a public IPO. In total, 29 million shares will be made available at C$25 to C$27 per share. Here’s the press release that explains that the preliminary filing prospectus showed an initial target range of C$21 to C$23 per share. The stock IPO has garnered national attention, appearing in newspapers, television, radio, blogs and virtually any media out there! There is a mania going on and that’s why this is a story for Investorial!

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