7th Investment:
- After my July purchase of SNL, I only had around $1-2k left in my savings account.
- I continued to save $1200 per month or so on average in my savings account and was ready to pounce at any opportunity.
- After my SNL purchase, I begun to look for a concrete forumla that allowed me to put a value on a company. After continuing to read various books, I started to become frustrated that they talked about intrinsic value, margin of safety, etc but never showed any calculations on how to achieve this. I started looking at discounted cashflow analysis, but found this too difficult to put into practice. I looked at book value, net nets, etc but these didn't seem to fit well with businesses with bright futures, just the bottom of the heap pure value stocks which I wasn't particularly keen on. I wanted to be a "sit on my hands investor" like Charlie Munger talks about. Make one good decision and sit on it for years to come.
- I found a university textbook at my cousins house who was studying finance at Otago. I had all these business valuation methods and talked about the pros/cons of each and simple examples of each. Dividend Discount Model is what I had been looking for.
- I spent weeks on excel after work tinkering with putting together a spreadsheet for all these different companies I'd been looking at to put a value on these companies.
- It worked out well, but all the companies I was looking at were 20-60% overvalued by my calculations.
- I waited from July to December and nothing was looking great. Savings were building up to just under $10k and I was looking everywhere for anything that would provide a return on the ASX or NZX. I looked at arbitrage possibilities but was always late to the party and the returns were minimal.
- Credit Corp Group was getting ever closer to my target price until a few weeks ago it dropped from from over $9.00 to $8.59 in one day. I decided to buy with $3k at $8.60 increasing my holding in the company.
- I also put a few thousand into my student loan, reducing the value outstanding to under $7k
- Lesson I learned from this is to put together a game plan or "formula" that works in concrete numbers that doesn't cloud my judgement or allow my emotions to get involved.
- I also learnt that having cash on hand to act quickly is essential to getting good opportunities before others see them.
- Third lesson was that not to overlook companies that I already own for further investment.