Value investing

[timinator]

Hello!

I've been lurking in the background reading about what you lot think of different companies listed on the NZX for over a year now. I'm very appreciative of everyone's inputs, the differing views and the wisdom from all of you, so thank you!

I have really enjoyed digging a little deeper into the companies and learning about the different businesses nz has to offer and figuring out what they all do.

I've dipped my toe starting to invest in the NZX. I begun with ETFs and now starting to get into individual stocks. Results have been good in my short exposure to the stock market.

However having recently read Benjamin Graham's 'the intelligent investor'. I have seriously had to rethink my portfolio and my exposure to risk. I understand there has been a huge tailwind and we are currently in the largest bull market in history.


Here is where I need some directing...

I'm not from a financial background and need some guidance in learn how to value stocks.

I've been lucky enough to have done a couple of 100 level accounting and finance papers as part of my Bachelor of Commerce Degree but I lack any real knowledge of how to find value in stocks. I open annual reports and start to read them but quickly get overwhelmed with the financials and how to interpret them and compare them to other companies. It's very hard to stay motivated and I don't seem to have a lot of direction.

I am wanting to get insight as I am still passionate into how you learnt to find value in stocks from a financial perspective. I understand its a long process and time and experience is the key.

Are there any:
-Clubs
-Courses
-Teachers
-Books/textbooks with examples
-YouTube channels

Is there anything that helped you accelerate your learning? More specifically your understanding financial statements, ratios, discounted cash flows etc etc.

Any help or ideas would be much appreciated.

Timinator

[JBmurc]

Many good books ... my last one was "Insider Buy"

10936

Youtube many great clips on here more trading focused but still great tips https://www.youtube.com/channel/UCdnzT5Tl6pAkATOiDsPhqcg

Personal not a fan of investing long term with the share market even though at times they can end up being held for years ..

[kiora]

https://www.marketscreener.com/
Look up stock here is a good start

[timinator]

Many good books ... my last one was "Insider Buy"

Looks exciting!

10936

Youtube many great clips on here more trading focused but still great tips https://www.youtube.com/channel/UCdnzT5Tl6pAkATOiDsPhqcg

Thanks for that. I listened/watched an episode this morning over breakfast and enjoyed it.

Personal not a fan of investing long term with the share market even though at times they can end up being held for years ..

How has that gone for you? Do you look into companies financials or do you trade more based on charts and trends?

[peat]

PE/G

and,
as per Beagles statement in SUM thread 'make results , not excuses'.

[mshierlaw]

Hello there

I have found this TA tuition handy https://www.youtube.com/watch?v=y7iVTTH5tOA

hope you do too.

Cheers

[JBmurc]

How has that gone for you? Do you look into companies financials or do you trade more based on charts and trends?

Charts + Trends + Macro factors ... but still do a good amount of fundamentals before taking a position

[timinator]

PE/G

and,
as per Beagles statement in SUM thread 'make results , not excuses'.

I'll look into that PE/G ratio some more. Yes, hard work generally pays off. Just want to make sure I'm working on the right things.

[timinator]

Hello there

I have found this TA tuition handy https://www.youtube.com/watch?v=y7iVTTH5tOA

hope you do too.

Cheers

I've come across this before! Very useful, reminds me to look over again. They do a lessons of Warren Buffet series that I've found useful.

[peat]

Yes, hard work generally pays off. Just want to make sure I'm working on the right things.
No, I mean this in terms of evaluating companies performance. If they make excuses instead of results then exit or reduce the position.
It is a stunning axiom (also something Beagle has commented on ) that the most reliable predictor of the future is the present and the immediate past. If a company is doing well as a result of its management performance it is likely to continue to do well , and if times get tough it will adjust and do the best it can given the circumstances - active skilful management is the best asset a company can have.

[SBQ]

No, I mean this in terms of evaluating companies performance. If they make excuses instead of results then exit or reduce the position.
It is a stunning axiom (also something Beagle has commented on ) that the most reliable predictor of the future is the present and the immediate past. If a company is doing well as a result of its management performance it is likely to continue to do well , and if times get tough it will adjust and do the best it can given the circumstances - active skilful management is the best asset a company can have.

Basically what Warren Buffet says, a company with a large moat.

But really, before anyone starts investing into shares, they need to start understanding taxation. Most would disagree as in the past in other postings i've been very critical to NZ's tax approach to investments in shares, particularly domestic vs foreign. Don't forget NZ corporate tax rate at 30% is a clear disadvantage to other countries where corporate tax rates are far less.

@ timinator: The studies you read about finance online, around great investors like Buffet will be in conflict to the NZ perspective. Again it's due to differences in taxation. If you asked Buffet about investing in NZ, he would point you 1st thing to probably declare non-resident in NZ and move to a country that is more favorable (or equitable) to investing in shares. Because what we have right now in NZ is a huge inequality between investment in real estate properties and equities in the share market.

[peat]

Basically what Warren Buffet says, a company with a large moat.

To be frank I don't see good management as a moat, although clearly it is a point of distinction.

A moat is something that operates as a barrier to entry in the industry - which could be a lot of capital but would generally be something more specific. A good example is Trade Me (no longer listed but familiar to all NZer's) and its large installed user base resulting in dominance of the online auction sector here in NZ. That is not something that can be created by a competitor overnight no matter. Regulatory compliance can also act as a moat - acquiring govt approval to sell a drug or a health product - something that can take time and effort to obtain. There are probably even better examples.

[percy]

Moat....
Management.?
When we look at Mainfreight and Ebos there was no moat.
Ebos were a very small medical supplier.Nothing clever.Sir Ron Brierley told Mark Waller it had potential to do $40mil turnover.[$8 bil this year].
Mainfreight was just a very small trucking business.
There was no moat with either.There was no barrier of entry to either.
Today they have created big moats.
So a moat can be a company's reputation or the way a business does business.
Bruce Plested at Mainfreight,and Mark Waller at Ebos created moats out of very ordinary businesses.
So yes management can create moats.

[mfd]

But really, before anyone starts investing into shares, they need to start understanding taxation. Most would disagree as in the past in other postings i've been very critical to NZ's tax approach to investments in shares, particularly domestic vs foreign. Don't forget NZ corporate tax rate at 30% is a clear disadvantage to other countries where corporate tax rates are far less.

The corporate tax rate in NZ is 28%, not 30%, and as a shareholder this is mitigated by NZ being one of the very few countries in the world to offer imputation credits with dividends to avoid double taxation.

[peat]

https://www.morningstar.com/invglossary/economic_moat.aspx

[SBQ]

To be frank I don't see good management as a moat, although clearly it is a point of distinction.

A moat is something that operates as a barrier to entry in the industry - which could be a lot of capital but would generally be something more specific. A good example is Trade Me (no longer listed but familiar to all NZer's) and its large installed user base resulting in dominance of the online auction sector here in NZ. That is not something that can be created by a competitor overnight no matter. Regulatory compliance can also act as a moat - acquiring govt approval to sell a drug or a health product - something that can take time and effort to obtain. There are probably even better examples.

I would disagree with TradeMe. They use a model similar to eBay and the reason why TradeMe has been successful was simply "The 1st Mover" model ; that is they were the 1st to capture the market share and it's not likely something better will come later on. Pre 2000 Yahoo Auctions came out but could not beat eBay's market share of being 1st mover. Even eBay had it's go in NZ (in conjunction with eBay Australia) but no one uses it in NZ.

[SBQ]

The corporate tax rate in NZ is 28%, not 30%, and as a shareholder this is mitigated by NZ being one of the very few countries in the world to offer imputation credits with dividends to avoid double taxation.

A pointless issue just like how NZ building products pride itself on "Made for NZ Conditions". NZ corporate tax rate is uncompetitive to the big OECD nations and inputation on dividend tax credit is nothing to be raving about. Why? Because places like Canada and the US already provide tax free registered investment schemes for their residents. If you follow my posts in the other thread here (https://www.sharetrader.co.nz/showthread.php?11685-The-beginners-struggle&p=786579&viewfull=1#post786579) i've explained for the vast majority of investors, they do so without their portfolios being subjected to paper gain taxes year after year (their portfolio does tax free compounding). So programs like Canada's TFSA, they receive dividends 100% tax free, even on foreign shares - something you can't do in NZ where the NZ resident is subjected to withholding tax by owning foreign shares abroad. Besides, inputation credits by IRD is very strict and rarely 100% is credited. IMO no investor should be subjected to a narrow base investment such as NZ equities for the key reason that they get a tax cut on the dividend imputation.

But who am I to say? Even the financial advisors i've spoken to tell me that the issue of taxation in NZ must be consulted by a tax consulted and they can't speak on any scenario of taxation like the qualified CPA financial planners in N. America are required to when advising for all of their clients.

[mfd]

Well aware that other countries have different rules, some will be better, some worse. With no strict capital gains tax and imputation credits, investing in NZ companies is quite favourable, perhaps the different treatment on foreign holdings is to encourage capital to stay in the country. Maybe I just have more of a 'glass half full' attitude.

I can't comment directly on reclaiming imputation credits as I haven't had to yet, but I believe it is possible.

You may have found it pointless, but I thought it worth correcting your error in a post talking about the importance of understanding and researching tax.

[peat]

I would disagree with TradeMe. They use a model similar to eBay and the reason why TradeMe has been successful was simply "The 1st Mover" model ; that is they were the 1st to capture the market share and it's not likely something better will come later on. Pre 2000 Yahoo Auctions came out but could not beat eBay's market share of being 1st mover. Even eBay had it's go in NZ (in conjunction with eBay Australia) but no one uses it in NZ.

I would argue that the first mover status allowed them to build a moat and as such they have a moat.

[macduffy]

I would argue that the first mover status allowed them to build a moat and as such they have a moat.

I agree, peat. In fact, capturing a dominant market share by being first mover is one of the widest, deepest moats to be had.

[SBQ]

Seem like you guys have a different meaning of what qualifies as a 'moat'. I don't see having a new idea / plan to be the 1st in the market as meeting the definition of having a moat. If you survive the business plan for many years to thwart off competition such as barriers of trade, THEN yes the moat is established. For the moat to qualify, you need to demonstrate you've thwarted off competition and the "1st Mover" approach in itself is not a recipe of developing a moat. Maybe i'm just splitting hairs but this is what business classes has taught me.