Cold Eye (Fong Siling) is famous value investor in Malaysia, respected by many including myself. There are several value investment books written by Cold Eye. In this article will share why I would strongly recommend all investors to read this book.
Remark ! – The book was written in Chinese. I have made translations on the book name and content for the purpose of this article. If you prefer to read this article in Chinese, please click here.
Introduction
This book “Right Way to Make Investment” that I recommend here is not the first book written by Cold Eye, and it is not his latest published book about investment either. However this is the first book written by Cold Eye that I have read. In fact at the time of writing, Cold Eye just published his latest investment book.
For beginner investor, I hope you will be interested to fully read this book after reading my article. For investors that have already read this book, this article could serve as a mind refresher for you about value investment.
SPOILER ALERT ! This article will reveal some of the content in the book. If you do not wish to know in advance, suggest you to leave this page and come back after you have finished reading the book. For readers that are interested to buy this book, it can be purchased from here online.
Core value from this investment book – Stock is share holding !
When you by a stock, essentially you are buying a portion of the share holding of that company. Of course I believe all investors are aware of this. Unfortunately most of the retail investors do not treat stock as share holding when the stock.
One of the famous quote by Warren Buffett is “Price is what you pay, value is what you get”. Stock is the price you pay, share holding is the value you get.
I have seen instances when people were invited to start up a business as partner, normally people tend to make a lot of researches to make a decision. However when same amount of money is used to buy stock, people will just buy based on “insider news” without hesitation. Buying stock is the same as business investment, do not buy without your own research !
Core value from this investment book – Spend more time on company, less time on share price !
This is a point that I need to keep on reminding myself. Think about that, if you spend more time on share price than on the company itself, then you are not spent at the right place.
Spending time at share price is so much easier than spending time to understand the company and its business. Judging by the fact that much more retail investors lost money than making money in stock market, that should tell that easier way is often not the right way.
Based on my personal experience, to understand a new company, it would take me at least 4 to 8 hours. Of course, it depends on many factors such as your reading skill, complexity of the company & business etc. The good thing is, once you have finished your homework upfront, it saves you a lot of time and effort for the following up work such as reading the latest financial reports and understanding the latest news.
Ask yourself, are you the type spending more time on company or spending more time on stock price?
Core value from this investment book – Profit is the King !
Buying stock means investing in the company and business. Of course we all want to invest in a company that is making profit. Compared to net profit of the company, it is more important for investors to monitor EPS (earning per share). Why? Because EPS represents how much profit from company actually belongs to you.
It is common for listed companies to have all sorts of corporate exercises that would affect your share holding percentage. Some examples are private placement, dividend re-investment plan, bonus share, employee stock options etc. EPS is a perfect indicator to exclude these factors, and tell you how much money company has made for your portion of share holding.
Company with EPS growing every year is the company that we would like to hold for long term!
Core value from this investment book – Only Buy 5-Star Stocks !
Warren Buffett has said “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
Issue with many investors is holding a rubbish stock and pray that it will go up some day, or don’t let it go when the stock has turned into rubbish stock.
Ask yourself, are you confident to say that you are holding 5-stars stocks? Or you are still praying for your rubbish stocks to go up?
Core value from this investment book – Go against the crowd!
Everyone should one of the most famous quote by Warren Buffett – “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”
It is always easier to say than do. One’s mental strength plays an important role to execute this strategy. In addition, in my opinion, another reason that investors failed to execute this strategy is because they simply do not understand the company.
If you don’t understand the company and business,
- You do not actually have an idea yourself how much the company worth. One of the most frequently asked question by retail investors is “can i buy this stock at this price”. Remember, end of day no one is responsible for any answer given to you.
- You cannot tell whether drop in share price is (1) driven by market sentiment, or (2) the company is really caught in trouble. So it becomes a gambling game, you are betting that the company is actually doing fine.
My thoughts after reading
I must emphasis that in no way this article can fully deliver the values and content from this investment book from Cold Eye. I personally think Cold Eye has done a very good job in writing the book to deliver the messages. Cold Eye used different examples, scenario, angles to bring all important concepts together, something that I definitely cannot make it here.
For readers that are lazy to make notes from the book, this article can refresh your mind before investment. So that before buying any stock, let’s check from here whether you are on the right path of value investment !
For readers that are interested to buy this book, it can be purchased from Kinokuniya online store here.
