Portfolio

Leverage is fine if you are not ignorant
(Mar 25): To borrow a quote from Warren Buffett: “When you combine ignorance and leverage, you get some pretty interesting results.” Followers of this column would recall that I spent the past two weeks discussing prevailing reporting standards for financial statements and how they can, at times, make it more difficult to determine the underlying fundamentals of a company. Most ...
Total compliance in financial reporting, but was it misleading?
(Mar 18): Last week, I talked about how it can be difficult to interpret published financial statements because of overly ambitious objectives of the accounting profession, evolving reporting standards and the resulting vagaries that could sometimes translate into risky propositions for those relying on them to make investing decisions. This is made worse as financial instruments get more ...
Financial reporting: Myths, interpretations and limitations
(Mar 11): A majority of companies have financial years ending Dec 31. Most would have just finalised or are about to release their FY2018 results. They make headline stories, such as “earnings doubled” or “collapsed in earnings” and these are linked to stock price performances on the stock exchange, for publicly traded companies. It is as if these accounting numbers, as reported in the ...
Falling margins will hold back stock price gains
(Mar 4): Stocks around the world chalked up a second straight month of gains in February. This means that after having suffered one of the worst losses since the end of the global financial crisis in late 2018, markets are now enjoying some of the strongest starts to a new year. The world’s most closely watched bellwether, the Dow Jones Industrial Average has rebounded some 20% from last ...
Investing in late-cycle earnings growth
SINGAPORE (Feb 25): Positive news flow on the ongoing US-China trade talks continued to buoy sentiment for global stocks over the past week. Following reported progress after days of negotiations in Beijing, further discussions have resumed in the US. Clearly, markets have now priced in some sort of deal to avert another tariff hike or, at the very least, an extension to the March 1 ...
A fool's errand
SINGAPORE (Feb 18): Should we panic over a Treasury yield curve inversion? Investors worked themselves into a tizzy in early December last year, sending stock prices tumbling around the world. That was when the Treasury yield spread fell sharply (see Chart 1), to the lowest levels since the global financial crisis. For those unfamiliar with Treasury yield spread, it is the difference ...
Quantitative tightening fears overplayed?
SINGAPORE (Feb 4): Global stock markets have steadied in the first few weeks of trading in 2019, though many investors remain wary that the rebound may not last. The list of worries has been very well narrated and should be very familiar to all by now, one of which is the US Federal Reserve’s quantitative tightening (QT) actions. Recall that the Fed started QT in October 2017, by allowing a ...
There are 'real' (non-rent-seeking) corporate heroes
SINGAPORE (Jan 28): Pretenders to the throne, please be seated. Last week, I wrote about some of our public- and private-sector successes in embracing technology and delivering quality services efficiently and effectively. This proves that Malaysians have the capability, given the right environment. I truly hope that we will see greater concerted efforts by the government to cultivate ...
Let’s not sell ourselves short
SINGAPORE (Jan 21): Why do I say this? There has been much talk and discussion about how New Malaysia should move forward from hereon. We know that government finances are stretched and, therefore, can no longer prop up the economy with huge spending. We also know that the people are struggling, with sluggish income growth and rising cost of living. Therefore, we cannot expect a big boost from ...
Cash dividend or share buyback?
SINGAPORE (Dec 24): Uncertainties and volatility remain heightened in global equity markets. Swings of several hundred points are now a daily occurrence for the Dow Jones Industrial Average, probably the most closely watched market barometer in the world. It is enough to give investors whiplash — and may well be quite disheartening for those buying on fundamentals. It does appear as ...