Sunday, July 22, 2018

Categorising My Big Ideas Investing Theory

I have read a few articles on Charlie Munger recently. The articles explains how he influence Warren Buffett from investing in “good business at wonderful prices” with a more activist mindset to buying “wonderful business at good prices”.

I felt similarities in the stories from the way how Simple Investor SG had influenced me to how I invest lately. Previously I have always been a more “value-oriented” investor, but even since we started Fundamental Scorecard website together, I have been looking at his Full Analysis scorecard (which includes the recent Moat scoring). Then a few months ago, I started on my Big Ideas Investing Theory which has been significantly influenced by him (as explained in Big Idea 1)

Since the start of Big Ideas Investing Theory, I came up with 9 Big Ideas – Some were long held companies and some were just purchased a few weeks ago. 

Recently, I tried to further categorize my Big Ideas into certain theories in order to understand how I could continue to breakdown and understand this Big Ideas Investing Theory. In addition, I tried to understand more about the moats lately and this article had deep correlations with Michael Porters – Porter’s 5 Forces theory.

I remembered someone told me before on reading on the book about Porter’s 5 Forces. Maybe it is time to do so! 

Before I proceed, I like to briefly explain (again) that Moats are essentially durable competitive advantage.  

Major 3 Categories of Big Idea Investing Theory: 

Widening of Moat

Widening of Moat - Companies that are still growing. It may not have a huge competitive advantage now, but you can see the increase in competitive advantage in their letters/annual report/financials. Thus, these companies may not be the top tier companies, but it could eventually reach there.

Big Moat

Big Moat – These companies are most probably big market cap firm with huge market share/global presence. They could be market leaders with HUGE market caps and it will be hard for new entities to out-muscle them within the same space. However, Big Moat also does not mean its moat will not be reduced. Thus, Big Moat companies should not consist of only a buy and hold tactics.

Undervalued Company with Huge Cash Pile 
 
Undervalued Company with Huge Cash Pile – Companies with huge cash pile and still undervalued at the current market price relates back to my older investing theories, especially so in value investing. Even though I had change in the way I invested, I still believe in investing in companies with a huge cash pile with a much lower Price to book value. The huge cash pile will allow a company to engage in actions that could push the share prices higher, such as acquire companies or give out special dividends.

It will be interesting to see how my portfolio will change in August as many companies announced their results. I do have 3 different companies within the Big Ideas Investing Theory that will announce their full year results and I am looking forward!

In Short

The purpose of writing this post is: 
1. Allow myself to further understand about my current investing strategy; and
2. Emphasized that moats are important in such an investing theory; and
3. To explain that one’s investing method could change as you progress along your investing journey. 

In addition to point 3, with so many business disruptions in the world and volatility in today’s market, we should not be afraid to change our views or investing methods. But despite these changes, our main mindset should not change. 

For me, my thoughts of fundamental investing has never change. I only enhanced the methods revolving around Fundamental investing.

Please do your own due diligence before you invest in any of the companies above.

If you are interested to know how to measure a moat, do sign up with us to get the latest score of  the moat of all the SGX counters now! At only $10 a month!

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