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- Wiley
More About This Title Value Investing in Growth Companies
English
This revised edition of Value Investing in Growth Companies serves as a step-by-step guide that lets investors combine the value investing and growth investing models to find excellent investment opportunities in emerging Asian companies. Though these two investing styles are very different, the authors' proprietary "jigsaw puzzle" model integrates them into a holistic investing approach that will help readers enjoy the kind of extraordinary results that investors like Warren Buffett or Peter Lynch built their fortunes on. This model focuses on four vital criteria that, when combined, pinpoint excellent companies in which to invest. Those criteria are: simple business models, quality management, healthy financial numbers, and accurate valuation. This book shows investors how to find growth companies in Asia that combine these four criteria for nearly surefire profits.
- Offers a sensible and stress-free investing strategy that is ideal for anyone looking for investment opportunities in fast-growing Asian countries
- This revised edition includes new case studies focused specifically on Asian companies and their unique characteristics
- Perfect for investors who want to focus on high-growth, small-cap companies that offer excellent potential returns
English
Rusmin Ang and Victor Chng are the Chief Investment Analysts at 8 Investment Pte Ltd. Together they specialize in unearthing high-growth, small-cap companies. 8 Investment was founded in 2008 with the founders' intention of inspiring investors through the sharing of successful learning experiences in business and investing. Driven by the values of integrity, responsibility, mastery and growth, the company has achieved excellent financial results with an average 139% growth in revenue annually over the last three years. Subscribing to its FASS business model (Feasibility, Adaptability, Sustainability and Scalability), 8 Investment has built one of the largest networks of value investors in Asia and developed a comprehensive range of investing books, CDs and digital learning programmes to cater to this growing audience. Their seminars and courses have been attended by over 70,000 people throughout Asia in the last six years.
English
Foreword xi
Preface xiii
Rusmin Ang’s Journey xiv
Victor Chng’s Journey xvi
How We Met xvii
Overview of the Contents xix
Acknowledgments xxi
Chapter 1 The Making of a Value-Growth Investor 1
The Common Journey of New Investors 1
Short-Term Trading to Long-Term Investing 2
Growth Investors 4
Value Investors 6
Value Investors versus Growth Investors 7
Value-Growth Investors 9
Warren Buffett’s Journey 10
Value-Growth Investors 12
Definition of Growth Companies 13
Common Misconceptions about Growth Companies 14
Myth 1: The Higher the Growth Rate, the Better the Company 15
Myth 2: Fast Growers Are Companies in Fast-Growing Industries 16
Myth 3: You Cannot Buy Growth Companies at Bargain Prices 16
Myth 4: Fast Growers Are Companies That Have Small Market Capitalization 17
Myth 5: Small and Fast-Growing Companies Are Not Covered by Analysts and Institutions 18
Myth 6: Growth Companies Pay Very Little Dividend 18
Why Value-Growth Investing? 19
Capital Appreciation or Intrinsic Value Appreciation 20
Dividend Growth and Passive Incomes 23
Summary 26
Chapter 2 The Secrets of Successful Value-Growth Investors 29
Healthy Thoughts Lead to Sustainable Results 29
Mindset 1: Understand the Power of Compound Interest 29
Mindset 2: Start Young! 33
Mindset 3: Be a Long-Term Investor! 35
Mindset 4: Never Leverage to Invest in the Long Run! 36
Mindset 5: Exercise Independent Thinking 38
Mindset 6: Be Emotionally Stable 39
Mindset 7: Think Contrarian When Investing 41
Mindset 8: Understand Mr. Market (Effi cient Market Theory versus Mr. Market) 43
Summary 46
Chapter 3 The Jigzaw Puzzle—Four Pieces to Value-Growth Investing 47
The Jigsaw Puzzle Model 47
The Art and Science of Investing 49
Looking for the Right Information 53
Information Released by the Company 53
Information from Outsiders 57
Summary 58
Chapter 4 Business—The First Piece of the Puzzle 61
Understand a Company’s Business Model 61
Simple Business 63
Circle of Competence 65
Going Beyond the Limit 67
Competitive Advantage 70
Knowing the Competitors 73
Think Like a Customer through the Scuttle-Butting Process 74
Finding Future Growth Drivers 76
Understanding Risks—What Can Go Wrong? 78
Summary 79
Chapter 5 Management—The Second Piece of the Puzzle 81
Management Forms the Cornerstone of a Business 81
Criterion 1: Trustworthiness 83
Criterion 2: Candid in Reporting 86
Criterion 3: Aligned with Shareholders’ Interests 88
Criterion 4: Track Record/Experience 90
Criterion 5: Visionary Managers 92
Summary 96
Chapter 6 Numbers—The Third Piece of the Puzzle 97
Numbers Do Not Lie 97
Numbers to Look at When Reading the Income Statement 98
Revenue 98
Cost of Goods Sold 100
Gross Profit 100
Expenses 102
Net Profit 103
Earnings per Share (EPS) 106
Numbers to Look at When Reading the Balance Sheet 109
Noncurrent Assets 110
Current Assets 112
Noncurrent Liabilities 114
Current Liabilities 115
Shareholders’ Equity 116
Current Ratio 117
Return on Equity 118
Debt-to-Equity Ratio 120
Numbers to Look at When Reading the Cash-Flow Statement 122
Cash Flow from Operations 123
Cash Flow from Investment 124
Cash Flow from Finance 127
Summary 129
Chapter 7 Valuation—The Fourth Piece of the Puzzle 131
The Valuation of a Stock 131
Price-to-Earnings Ratio 133
Types of PE Ratio 136
Price-to-Earnings-to-Growth Ratio 137
Discounted Earnings Model 141
Intrinsic Value 141
Margin of Safety 148
Undervalued 149
Fair Value 149
Overvalued 150
Summary 154
Chapter 8 Screening—Buy—Monitor—Sell 155
Screening (Using Numbers against Competitors) 155
Stage 1: Consistency in Key Performance Indicators 156
Stage 2: Comparing the Compound Annual Growth Rate 157
Stage 3: Finding Consistency or Increases In Margins 158
Stage 4: Digging Further into a Company’s Debt and Cash Position 159
Stage 5: Digging Further into Other Numbers to Confi rm Your Pick 159
Conclusion 161
Buy, Monitor, and Sell 162
Buy, Buy, and Buy 163
Monitor, Monitor, and Monitor 166
Online Monitoring 169
Offl ine Process 170
Sell, Sell, and Sell 171
Summary 177
Chapter 9 Portfolio Management for Growth Companies 179
Understanding Your Portfolio 179
Types of Diversifi cation 180
Personal Diversifi cation 181
Company Diversifi cation 182
Industry Diversifi cation 183
The Sky Is the Limit 184
Summary 185
Chapter 10 Avoid Common Mistakes 187
The Dos and Don’ts of Investing 187
Mistake 1: You Think You Are a Long-Term Investor but You Are Really a Speculator 187
Mistake 2: Timing the Market 189
Mistake 3: Investing in High-Technology and IPO Companies 190
Mistake 4: Investing in Companies that Are Not Consistent 192
Mistake 5: Buying a Growth Trap (Not Focusing on the Quantitative Side) 194
Mistake 6: Buying a Value Trap (Not Focusing on the Qualitative Side) 195
Mistake 7: Sell Your Winners; Keep Your Losers 198
Mistake 8: Diversification Mistakes 199
Summary 200
Chapter 11 Case Studies and Conclusion 201
Bibliography 205
About the Authors 207
Index 209
