Showing posts from April, 2010

Book Review: Trade-Off

Trade-Off , by Kevin Maney, discuss his idea on the trade-off between high fidelity and high convenience. He defines fidelity as the total experience of something (e.g. concert).
Interesting points: a) Fidelity vs convenience. Products/service must either position themselves as high fidelity or high convenience. Customers will always trade fidelity for convenience or convenience for fidelity (e.g. consider eating out at a further high-class restaurant or a near-by fast-food restaurant.)
b) Tech effect. Technology always improves both fidelity and convenience. In other words, if a product is of the highest convenience/fidelity today, technology will ensure that a higher convenience/fidelity will be created in future.
c) Fidelity belly. Product that is not of high/sufficient fidelity or convenience resides in the fidelity belly. An example is music CD.
d) Fidelity Mirage. Companies who choose to position their products as both high fidelity and high convenience will fail.
e) Super Fidelity…

Investing and IQ

Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.-- Warren Buffett
Lots of people have used the above statement to illustrate that intelligence does not matter in investing. Well, they are wrong, if Buffet really meant IQ above 125.
If you refer to Wikipedia, an IQ of 125 is the 95th percentile of the population. A IQ above 125 will put you the top 5% of the population! Hence, if Buffett really meant IQ above 125, success in investing would correlate with intelligence. It is just that success in investing would not correlate with high intelligence.
Either Mr Buffett has gotten the IQ score wrong, or his definition of ordinary intelligence does not mean average intelligence. Well, to each his own.
P.S. Personally, I find it strange if intelligence does not matter in investing. To some extent, intelligence will…

Memories of My Psychology

Today, I have thought about the behavioral traps that I have fallen during the last few years, which include a stock market boom and a stock market burst.
Trap #1: Anchoring When the market was trending downwards, I thought that the market was quite undervalued, compared to the valuations seen in the earlier stock market boom. It turns out that for some stocks, what was cheap turned to be cheaper. And for other stocks, what was cheap turned to be very expensive, as their earnings also trend downwards. I have fallen into the trap of anchoring to the valuation seen during the stock market boom.
Trap #2: Over-confidence Similarly, while I felt uncertain about the market in late 2007, I was confident that I would not suffer large losses if the stock market tanked. Needless to say, I was proven wrong. I have fallen into the trap of over-confidence. I find myself still susceptible to over-confidence every now and then.
Trap #3: Over-enthusiastic Every now and then, I would find myself over-ent…

Portfolio as at end Mar 2010

This is a post on my portfolio holdings as at end Dec 2009.

My portfolio, as at end Dec 2009, contains the following stocks:
Best World
BroadwayChina Zaino
Fujian Zhenyun (FZ) Plastics Heeton
UOA Viz Branz

Sold: Fabchem, Tuan Sing, Guocoleisure,
Fabchem is sold due to its results not meeting my expectations. Tuan Sing and Guocoleisure were sold not only for cash raising purpose but also due to my impatience with their stock movements. I wonder whether their share price will prove my impatience wrong a few years later.
Partial Sold: Metro and Fujian Zhenyun.
They were also partially sold not only for cash raising purpose but also due to my impatience with their stock movements.
Bought and Sold: Saizen
Bought Saizen on the premise that it is very undervalued. However, after further reading, I find that the under-valuation may not be much. I presume that it will start giving an annualised yield of 9-10% starting July and a 9-10% yield does not provide me with sufficient margin to safety…

Do not blindly follow Winners' Common Traits

Recently I've been reading the book "Hard Facts, Dangerous Half-Truths & Total Nonsense". The book has pointed out an very useful but easily overlooked idea.
That is, we tend to look for common traits in Winners and think that we can be winners if we follow these common traits too. But sadly, focusing on the common Winners' traits is insufficient.
One also has to compare these Winners' traits against the Average (group). If a trait can be found in the both Average and Winner, then this trait may not be differentiating factor between Winner and Average.
In addition, even if a trait is only present in the Winners, we have only observed a correlation. For people who know statistics, correlation does not imply causation. Similarly, a trait that is only found in Winners does not necessarily mean that such a trait is important in being a Winner.
How can we apply this idea? In my previous book review on "The Greatest Trade Ever", I have noted a lot of intere…