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I will try to write up my thought of application of Microeconomics' general equilibrium regarding how our wealth position should be like in the next blog entry. At this moment, I have to spend more time in analysing companies and prepare a write-up about my thought process so as to network with fund managers.
Nicholas Tse
Over the last month till today, there is numerous stories about Nicholas and his family. It is quite sad that his wife is not truthful and should have be more mindful about people feelings. After meeting Edison, subsequent actions made by his wife apparently make the divorce getting more reality.
Beside that, it is great that he won the best actor award last month or earlier. Currently, he is acting with Jay Chou in a movie at Malaysia. Once he is done with this movie, I foresee that he will put more focus on his own personal issues.
Investments
Nicholas Financial Inc
I first heard this company from another value investor who is younger than me. I did first analysis on this company and did not subsequently made any purchase on this stock. However, I monitored this stock until I am totally convinced that I should invest this company as it was still undervalued.
Nickholas Financial Inc (NICK) is a specialised consumer financial firm in financial industry. It is listed in NYSE and founded in Canada USA
Financial industry is also heavily impacted by sub-prime crisis. Therefore, the market severely penalised all financial stocks so much that their stock prices had fallen dramatically. Naturally, value investors flock into buying financial-related stocks. I start checking financial related stocks that are worth under US$10 and below in 2010.
Those who have invested in this Stock G in early 2009 will have made very large profit. If one bought NICK at anywhere between Oct 2008 and 2009 for $2-$3, (suppose that it is bought at $2) the profit will be whopping 450%!
NICK's annual report is the most transparent report than that of any banks. It is able to describe its loan monitoring and credit risk management. It also explains its procedures to deal with loans that its customers have not repaid on time. At the same time, its exclusive compensation program (that is eligible for exclusive staffs) is quite competitive based on its revenue growth, operating income growth, increment in average closing stock price. Given its nature of business, the first two are difficult to achieve in uncertain US
My rationale of investing in this NICK is as follows:
1) There is enough margin of safety even when the share price has risen over 1.5 years (2009 to middle of 2010). Even its CEO thinks that its stock is underpriced.
2) There is reasonable amount of asset growth while its total liabilities are kept almost constant. This results in an increasing business value in my point of view.
As a result, I made a profit of 44.1% by buying NICK at $8.60 and selling at $13.00. Please take that the commission costs are included in calculating the percentage of profit.
Bassett Furniture Industries
When I look at new 52-week low list, I spot a potential investment opportunity in a furniture manufacturing firm. After the analysis, I liked its financial position. However, being cautious, I check other competitors. Upon doing that, I discover Bassett Furniture Industries (BSET). It has more liquid balance sheet than the former. Therefore, I bought most of the proceeds from the sale of Nu Horizons (NUHC) stocks.
At that time, it was clear that furniture industry was being depressed for odd reasons. Even one US-based value investor, whom I read his article regularly agree with me but he thinks that the firms in that industry has no future such that you cannot envisage in 5-10 years time. In other words, there is no moat. For this one, I agree. I do not care whether there is a moat because I have intention to sell it at the true business value according to my valuation method. I personally think that moat criterion is best applied for infinite holding stock. McDonald has incredible moat and I always see McDonald being crowded during lunch time despite of numerous people thinking of their own health.
This stock is badly beaten due to its real estate portfolio despite of its main operating business focus in manufacturing and selling furniture. BSET has two types of businesses, which are furniture manufacturing and retailing, and managing real estate portfolio. Asians like me may not know much about BSET. BSET has been in furniture industry for more than a century. It has furniture business in
There are two stages of price rise. First stage is the result of good quarterly (4th quarter) earning report and possible sale of its associate company, whose influence is less than 50% and more than 20%. Earning growth from $59.5m to $66.0m came from tweaked business model to sell furniture. Partly, it is the results of new-concept stores and closing unprofitable stores. The sale of that associate company will be finalised by the end of this month. Second stage is due to today article written by another value investor, whom I read every evening. I read this at 7.20pm before the US
The rationale of selling BSET stock is purely cautious. I cannot see whether it can do business profitably in the next 5 or 10 years time. I am actually cautious person than bullish person when come to dealing stock investment. If I can see what it will be doing in order to make profit (say 10-15% profit margin over 5-10 years time), I will be no doubt to hold it longer.
I bought BSET at $4.15 per share on buy limit order and sold BSET at $8.70 per share on the sell limit order. As a result, I made 102.4% profit (commission fees to broker included).
Century Casino
Century Casino (CNTY) is in casino and gaming Industry and is listed in NASDAQ and a stock exchange in Europe. Most of us will know that firms in casino industry will maximise their gambling revenue by ensuring that the customers does not win much. It is probably well illustrated by one major case, where Edward Throp, mathematics professor, who discovers how to earn a lot of money by playing blackjack, is banned by many casinos. Briefly, he discovers a system that involves card-counting in the form of statistics and mathematics. With this much success, he writes a best-selling book, titled ‘How to beat the dealers’, about how to win the blackjack game. Because of that, many casino operators devices new pattern of card dealing to make life more difficult for people who try to adopt his method.
Clearly, we all know that casinos can easily generate a lot of money very easily from most of the customers who are greatly affected psychologically. This means that they have the mentality of not leaving the casino until they win big for sure due to its attractive but difficult-to-achieve payout ratio. However, there is strong competition between casino operators in certain areas over the world. There is no strong brand power among casino operators from what I perceive. There is one exception, where casino operator has a strong monopoly presence in one country. It is Genting in Malaysia. In Macau and Las Vegas, there are a few major casino operators there and the customers are free to choose at their will. It is because there is no differentiation factors between card gaming, slot machines, and etc. Even if they try to differentiate the service, the competitors will improve service quickly in the end. In other words, the casino operators cannot differentiate themselves to have the most number of customers in one area.Besides that, the casino industry is strongly linked to the condition of the country’s economy. Specifically, if the economy is doing well (badly), there will be more (less) people going to casino with more (less) money on their hands and in their bank accounts. Furthermore, casino operators build hotels together with casinos for better accessibility for the customers, who do not need to travel from one building to another building. Because of this, casino operators heavily depend on the occupancy ratio. The higher the occupancy ratio, the higher gambling revenue comes from the customers who stay in the same place (that is, casino and hotel in one building owned by a casino operator).
CNTY is somewhere in top 20 biggest casino operators in the world’s casino and gaming industry. CNTY gets my attention when someone in the value investing community talks about it. Based on my analysis, it seems that its property is not well appreciated in terms of fair value or market value. In other words, there is a case of asset mispricing. The stock market may not have valued this company’s business value correctly.
According to its annual report, its business model seems to be that it focuses on operating medium-size regional casinos in the areas where there is high proportion of repeat business coming from local customers. Furthermore, this business model is not affected by international travel, which means that it does not depend on tourists but depend on the local ones. Consider hypothetically that there is a scenario, where two sets of same number of customers visit two casinos, one medium sized and large-sized, individually. Logically, medium sized casino has lower expenses than large-sized one. Therefore, based on this scenario, it is conclusive that the medium sized casino has greater profit than large-sized given the same revenue generated by same number of customers. Clearly, it can be very beneficial for casino operators with medium-size casinos who are facing cyclical economy, with lower fixed costs. Furthermore, 3 top casinos (in terms of total market valuation) have facilities in Las Vegas and Macau, which both are largely depend on the number of tourists, who visits these areas. The number of these tourists is determined by the condition of the world economy.
Unfortunately, I did not hold this stock to wait it to reach towards my perceived stock price. As a result, I sold it to fund my investment in few big cap stocks. In this case, I made very small profit, which is +1.6%.
Movies and Dramas
Fair Game (Hollywood Movie 2010)
Synopsis:
Based on real-life story, Plame undertook the task assigned by her work organisation, CIA. She was about to pull successful operation but political issues prevent her from pull that successful operation. In addition, someone within political circle exposes her identity. She faces huge unwarranted backlash from the public.
Rating:8.5/10
Remark: Unbelievable story. I like the flow of the story and I get stunned by the last 15 minutes of that movie. I guarantee that you will be like that.
New Heart (Korean Drama 2007)
Synopsis:
This drama is about two new medical students, one with poor academic result and the other with excellent academic result, starting to work as doctors in thoracic surgery department. The former is a male who is orphan and the latter is female who has father, who does not acknowledge her in the family line, working as head of the hospital she works at. Over time, the former influence the latter to be doctor with feeling and belief to save patients with low probability of survival.
Rating:6/10
Remark: Decent.
School!!(Japanese Drama 2011)
Synopsis:
With new regulation, people who work in private and non-school companies can be appointed as principal of primary school. A former primary school student was appointed to be principal based on the recommendation of his former principal. He change every teacher's mentality and handling of students over time. Sadness and unhappiness turn into happiness and joy.
Rating:7/10
Remark: Meaningful movie.
The Next Three Days (Hollywood Movie 2010)
Synopsis:
A wife was arrested for a murder that she did not commit. The husband was unable to find the vital clue, which she mentioned in the crime scene. Likewise for cops. Missing her too much, he plotted a prison break and got his wife out of USA. How can he do it?
Rating:8/10
Remark: Very nice story with smart action.
Solomon Kane (Hollywood Movie 2009)
Synopsis:
A mercenary fought a army and went to the castle, where there were a lot of treasuries. Inside there, he met a devil from hell, who curse him. At that time, he escaped from being killed by that devil. He turned into new life as a good man, not trying to kill more lives. A circumstance forces him to kill evil lives for the sake of good. Will he redeem himself and receive salvation?
Rating:7/10
Remark: Typical action movie
Game of Death (Hollywood Movie 2010)
Synopsis:
A CIA agent was assigned to be a spy on a arm dealer. One day, there was a CIA operation to catch that arm dealer and the head of hedge fund in action. Something went awry beyond him. His teammates went against him for some reasons. What are these reasons?
Rating:7/10
Remark: Decent action movie but touching ending story.
The Fighter (Hollywood Movie 2010)
Synopsis:
It is based on true life story. Micky Ward was trying hard to succeed in his boxing career but his elder brother, who beat a famous boxer and her mother, as a manager for Micky gave unfair boxing match. Once Micky met a lady and he wised up by going to his own way without using his mother's managerial services. His doing brought him unbelievable success.
Rating: 9/10
Remark: Brilliant story. Heart-wrenching!
Tron: The Last Legacy (Hollywood Movie 2010)
Synopsis:
A young kid saw his father disappeared into thin air. Fulfilling his father dream by keeping his father's company's software free to use, he pull all kind of stunt on his father's company. One day, his father's trusted colleague told him that he received a call on his pager from his father. He investigate only one clue about his father's whereabouts. More secrets came out of that whereabouts.
Rating:7/10
Remark: Nice sci-fi movie.
Battle: Los Angeles (Hollywood Movie 2011)
Synopsis:
One day, our technology devices spotted some moving items from the space going to fall on the land in Earth. Initially, they were assumed to be meteorites. Scientists were trying to identify them. Discovering abnormal pace of movement, US issued emergency call to every army to defend against them. Most army people are amused and thought nothing of the threat of them. It became reality as aliens attacked the earth. It is now official nightmare as aliens almost rule the earth because they are technologically advanced ahead of the humans.
Rating:7/10
Remark: Shocking story, stunned with how aliens deal with human beings.
Shining Inheritance (Korean Drama 2009)
Synopsis:
Go Eun Sung initially is a daughter of rich family who has construction company. One thing, unknown to her knowledge, that company is experiencing financial difficulties. Her father happens to be dead for some reason. She becomes poor girl with her brother who is autism. Her step mother is desperate to conceal her wealth so as not to become poor again with her blood related daughter. As a result, she pretended that the insurance claim on Eun Sung's father's death as if most of the proceeds used for settling creditors' claims. Secrets about her step mother began to unfold one by one over time.
Rating:6/10
Remark: Interesting Eun Sung's cute face.
The Warring States (China Movie)
Synopsis.
This movie is about edited Sun Bin's life. A dosage of love story was added to this life.
Rating:5/10
Remark: Disappointing movie. I love watching ancient china like Warring states and the romance of three kingdoms. In that movie, we can find unrelated and unconnected things in the story.
Tony Del Piero wrote and posted at at 11:24 am
