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 版块 作者 回复/查看 最后发表
测试帖，来个“法老之蛇”（慎入） attach_img 三八线 逍遥探花 2012-2-25 3 32 茉莉 2012-2-25 14:36
有关均线的测试 attach_img 黑虎帮 小绿爷 2012-2-28 7 200 仙猪 2012-2-28 17:41
【工作纪事】新测试发行 attach_img 心情小筑 landlord 2012-3-9 10 142 landlord 2018-1-4 00:42
发个测试，称骨 八卦闲聊 猫元帅 2012-4-16 23 168 profer 2012-4-17 22:26
测试 attach_img Forum 寞洑 2012-7-9 12 71 王不留 2012-7-10 02:33
公车系列 - 胸围几何？ attach_img 男人帮 夏雨 2012-8-3 9 116 皇家骑警总监 2012-8-6 00:01
音频上载测试 - [阅读权限 180]attachment 八卦闲聊 齐若散 2012-9-12 7 31 东张西望 2012-9-12 10:18
和日月金竟打个擂，7常测第11.8版习以下强源洋对阵德岐丽 丐帮 潜恒 2012-11-4 5 82 潜恒 2012-11-4 20:16
FBI犯罪心理测试1-2 Forum sylvia 2012-11-19 4 154 happy2011 2012-11-29 16:06
FBI犯罪心理测试1-2 (答案） 读报组 sylvia 2012-11-29 3 56 赫然 2012-11-29 22:35
年终总结? 管理议事 绿葱头 2013-1-10 5 61 绿葱头 2013-1-17 10:27
我的测试帖 美食版活動籌備 爱菊轩 2013-1-27 0 4 爱菊轩 2013-1-27 04:47
群组功能测试帖 群组功能测试 绿葱头 2013-4-3 0 2 绿葱头 2013-4-3 10:45
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相关日志

分享 碉堡了 毛子真是战斗种族 防弹射击测试居然防弹玻璃后面还有人 ... ...
热度 10 樱木花道 2013-4-6 12:15
http://www.bilibili.tv/video/av371668/ o(∩_∩)o 哈 真是看得俺菊花一紧。 打野猪 @东湖 http://www.bilibili.tv/video/av327837/
725 次阅读|2 个评论
分享 也来测试有没有强迫症
热度 17 不打不相识 2013-3-16 05:48
1.怀疑自己没有锁车，越想越没有底，不去停车场看看就焦虑。 2.手机贴膜翘一个角，心急火燎地想揭掉重贴。 3.困得要死也要先刷牙再睡觉。 4.饭桌上有牙签，一定要一一折断。 5.看到耳挖子，趁人不注意就掏耳朵，掏了两个不过瘾，恨不得多长几个耳朵。 6.看到卷裤腿的，猫抓得一样想替人撸下来顿平。 7.包装袋有泡泡的，不悉数挤破不罢休。 8.看到裸露的电线，心中有个小魔鬼不停怂恿着自己去摸一摸。 9.有未读邮件，尽管是垃圾邮件也要标记已读。 10.看到一长排摆放在一起自行车，手痒痒地当多米诺骨牌推倒它们。 11.在一张白纸上验算，要从最上最左开始写，从中间写的话会痛不欲生。
995 次阅读|26 个评论
分享 测试
热度 1 冰蚁 2013-1-17 04:56
2 次阅读|1 个评论
分享 ISTJ 检查员型——细致、谨慎地执行好现有规则
热度 10 山菊 2013-1-12 04:34
鼎革的测试贴（ http://www.aswetalk.org/bbs/blog-60-20936.html ） 叶子极力推荐，刚才做了一下，感觉基本上挺准的~~~尤其是弱点。 叶子鼎革她们都不好意思表扬自己，俺就得瑟一把吧：） --------------------------------------------------------------------------------------------------------- 才储分析：您的性格类型倾向为“ ISTJ ”(内向 实感 思维 判断 倾向度： I86 S57 T71 J57 不假思索指数：14) 对你的总体描述 1. 实际，有条理，认真仔细。 2. 注重规则、政策、契约、例行习惯和时间要求。 3. 一旦他们承诺一件事情，总会坚持完成它。 4. 在跟进、规范方面做得很好。 5. 以第一次和每一次都做了正确的事情为荣。 6. 对需要注意的事情有敏锐的洞察力。 7. 善于尽可能有效地利用现有资源完成工作。 你潜在的弱点 1. 容易只看到事情有黑和白两种情况，而看不到中间的灰色地带。 2. 可能不能很快地做出改变和适应。 3. 有些此类型成员不擅长变通、缺乏想象力。 　 ----------------------------------------------------------------------------------------------------------- 再看看俺合适的工作单子~~~嗨，做的都在里面： 地质，会计，税务检查员，电脑编程员：） 还有昨天我的日志里的那个测试结果： SHY, NAIVE, LOVELY, OUTGOING。 这个可以看作是俺的成长过程吧~~~小时候的胆怯都成了一种毛病了，现在可以说是克服了90%以上的shyness。自己都觉得挺lovely的：）
个人分类: 不妨一笑|1380 次阅读|8 个评论
分享 测试记录
到处停留的叶子 2013-1-11 02:22
INFJ 博爱型——基于博爱的理想，设身处地的关怀他人 测试链接(著作权以及版权属于才储公司)： http://www.apesk.com/mbti/dati.asp 报告接收人: 才储成员1249467 日期: 2013-01-11 一、你的MBTI图形 MBTI倾向示意图(类型：INFJ 总倾向：29.7) 外向（E） （I）内向 实感（S） （N）直觉 思考（T） （F）情感 判断（J） （P）知觉 •倾向示意图表示四个维度分别的倾向程度。从中间往两侧看，绿色指示条对应下面坐标的哪个区间。 •本报告地址不会长期有效，请复制报告内容到本地或自己的博客。 二、基本描述 才储分析：您的性格类型倾向为“ INFJ ”(内向 直觉 情感 判断 倾向度： I57 N57 F57 J86 不假思索指数：10) 寻求思想、关系、物质等之间的意义和联系。希望了解什么能够激励人，对人有很强的洞察力。有责任心，坚持自己的价值观。对于怎样更好的服务大众有清晰的远景。在对于目标的实现过程中有计划而且果断坚定。 INFJ型的人生活在思想的世界里。他们是独立的、有独创性的思想家，具有强烈的感情、坚定的原则和正直的人性。即使面对怀疑，INFJ型的人仍相信自己的看法与决定。他们对自己的评价高于其他的一切，包括流行观点 和存在的权威，这种内在的观念激发着他们的积极性。通常INFJ型的人具有本能的洞察力，能够看到事物更深层的含义。即使他人无法分享他们的热情，但灵感对于他们重要而令人信服。 INFJ型的人忠诚、坚定、富有理想 。他们珍视正直，十分坚定以至达到倔强的地步。因为他们的说服能力，以及对于什么对公共利益最有利有清楚的看法，所以 INFJ型的人会成为伟大的领导者。由于他们的贡献，他们通常会受到尊重或敬佩。因为珍视友谊 和和睦，INFJ型的人喜欢说服别人，使之相信他们的观点是正确的。通过运用嘉许和赞扬，而不是争吵和威胁，他们赢得了他人的合作。他们愿意毫无保留地激励同伴，避免争吵。通常INFJ型的人是深思熟虑的决策者，他 们觉得问题使人兴奋，在行动之前他们通常要仔细地考虑。他们喜欢每次全神贯注于一件事情，这会造成一段时期的专心致志。满怀热情与同情心，INFJ型的人强烈地渴望为他人的幸福做贡献。他们注意其他人的情感和利 益，能够很好地处理复杂的人。INFJ型的人本身具有深厚复杂的性格，既敏感又热切。他们内向，很难被人了解，但是愿意同自己信任的人分享内在的自我。他们往往有一个交往深厚、持久的小规模的朋友圈，在合适的氛 围中能产生充分的个人热情和激情。 您适合的领域有：咨询、教育、科研等领域 文化、艺术、设计等 您适合的职业有： · 特殊教育教师 · 建筑设计师 · 培训经理/培训师 · 职业指导顾问 · 心理咨询师 · 网站编辑 · 作家 · 仲裁人 · 人力资源经理 · 事业发展顾问 · 营销人员 · 企业组织发展顾问 · 职位分析人员 · 媒体特约规划师 · 编辑／艺术指导（杂志） · 口译人员 · 社会科学工作者 · 心理诊疗师 · 大学教师（人文学科、艺术类） · 心理学、教育学、社会学、哲学及其它领域的研究人员 · 作家 · 诗人 · 剧作家 · 电影编剧 · 电影导演 · 画家 · 雕塑家 · 音乐家 · 艺术顾问 · 设计师 三、气质类型 根据大卫.凯尔西（David Keirsey）气质与性情理论，你属于“理想主义者”，下面是对“理想主义者”的描述： “理想主义者”型的人感兴趣的是事物的意义、关系和可能性，并基于其个人的价值观念做出决定。这是一类关心个人成长和如何理 解他人与自我的人。 “理想主义者”做人的原则是：“真实地面对自已”，是精神上最具哲理性的人。“理想主义者”乐于接受新的思想，善 于容纳他人。 “理想主义者”好象永远在寻找生存的意义。他们非常崇尚人与人之间和各种关系中的真实和正直，容易将别人理想化。许多“理想 主义者”本能地喜欢帮助别人成长和进步。“理想主义者”是很好的传播者，被人们认为是促进积极变化的催化剂。 他们天生能够理解别人的情感，关心他们在生活、工作中碰到的人们（如同事、病人或客户、雇员）的需要。 对于“理想主义者”型的人而言，一份好的工作应该是对他们个人很有意义的工作，而不是简单的常规工作或只是一种谋生手段。“ 理想主义者”崇尚和谐，不愿意在一种竞争激烈或四分五裂的环境中发展。他们喜欢民主、能够激励各种层次的人们高度参与的组织 。他们会被那些促进人性价值的组织或那些允许他们帮助别人完成工作的职业所吸引。 总体描述 1. 对别人的情绪敏感，能理解、体会别人的心情，善于安慰、鼓励别人 2. 对文字、语言敏感 3. 善于分析、总结 4. 善于从整体上把握事物 5. 能理解复杂的理论概念，善于将事情概念化，善于从中推断出原则 6. 擅长策略性思维 潜在的弱点 1. 有仅仅凭个人的好恶或价值观来决定事情，并希望别人也以同样的角度或标准来处理问题的倾向。 2. 有时他们心里老想着别人的问题，可能会过于陷于其中，以至于被其困扰。 3. 有时容易将别人或事情理想化，不够实际。 4. 不是特别善于管束和批评他人，尽管常常自我批评。有时会为了和睦而牺牲自己的意见或利益。 5. 有些此类型成员比较容易动感情，情绪波动较大。 四、优势与劣势 INFJ的特质： 博爱型——基于博爱的理想，设身处地的关怀他人 优势： 你有计划、有条理，喜欢遵照固有的模式处理问题，乐于探求独特的方式以获得有意义的成长和发展。你通过认同和赞扬与别人进行沟通，具有很强的说服力，你可以成为伟大的领导者。你的贡献被人尊敬和推崇。 你喜欢独处，性格复杂，有深度，是独立的思考者。你忠诚、有责任心，喜欢解决问题，通常在认真思考之后行动。你在同一时间内只专注一件事情。 你有敏锐的洞察力，相信灵感，努力寻求生活的意义和事件的内在联系。你有坚定的原则，就算被别人怀疑，也相信自己的想法和决定，依靠坚韧不拔取得成功。 他人能随时体会到你的善良和体贴，但不太了解你，因为你总是做的含蓄和复杂。事实上你是非常重感情，忠于自我价值观，有强烈的愿望为大家做贡献，有时候你也很紧张和敏感，但表现的深藏不露；你倾向于拥有小范围的而深长久远的友谊。 劣势： 你的完美和固执，使你易走极端。一旦决定后，拒绝改变，并抵制那些与你的价值相冲突的想法，以至于变的没有远见。你专注的追求一个理想，不会听取别人的客观意见，因为自己的地位是不容置疑的。 你总是探寻事情的意义和价值，过于专注各种想法，会显得不切实际，而且经常会忽视一些常规的细节。你需要留意周围的情况，并学会运用已被证实的信息，这样可以帮助你更好的在现实世界中发挥你的创造性思维。 你敏感，非常关注个人的感受和他人的反应，对任何批评都很介意，甚至会视为人身攻击。对你来讲，你需要客观的认识自己和周围的人际关系，更好的促进事情向正面转化。 财富是由什么构成的？ 按世俗的观点，就是占有金钱和财宝。 但如果我们用除金钱之外的其他方式来衡量财富， 那么许多在物质上匮乏的人在精神上却是富有的， 许多在物质上富有的人在精神上却是匮乏的。 ———— The Road Less Traveled 分享这个测试给好友？ 请打开测试地址： www.apesk.com/mbti/dati.asp ，点击页面左上角的分享按钮。 •温馨提示：若您希望更全面了解自己及发展建议，可以继续参与MBTI第二步测试 •若您是即将面临专业选择的同学，可以继续参与APESK专业选择评估测试 •若您是HR(企业人力资源)，可以继续了解MBTI在人才招聘、选拔中的应用 •你可能感兴趣的：加入INFJ讨论组 •放空三分钟 —— 赏析《本能》周刊：INFJ——心灵才是真正的栖所 | 灵性特质的作家型 INFJ ©版权声明: 本作品著作权以及版权属于才储公司，并受法律保护 测试链接(著作权以及版权属于才储公司)： http://www.apesk.com/mbti/dati.asp
个人分类: 收藏|0 个评论
分享 测试日志保密性
热度 13 绿葱头 2012-12-10 06:41
测试日志保密性
这样好看么？ 灰色是不是太不显眼了？
554 次阅读|16 个评论
分享 哈哈 测试勉强及格
樱木花道 2012-11-18 22:53
http://bilibili.smgbb.cn/video/av395886/
549 次阅读|0 个评论
分享 测试
热度 2 鼠标 2012-11-8 10:42
test
994 次阅读|1 个评论
分享 敏捷开发为什么能敏捷
热度 8 code_abc 2012-9-1 21:08
通过观察和一些交流发现国内许多号称实施了敏捷开发的团队大多不是真正的敏捷。经常遇到一些令人无语的场面。比如：和他们将迭代、讲 User Story 、讲点数什么的都很好，末了大多会问那么测试该怎么写呢？ …… 我认为在没掌握测试驱动开发的情况下谈论任何敏捷过程都是没有意义的。敏捷开发之所以能够敏捷其核心是代码本身是敏捷的，也就是代码本身可以快速地响应变化。编写测试不仅仅在于测试令软件修改后的正确性验证得到保证，更在于先行的测试迫使程序员做出松耦合的设计，在代码的中间插入各种隔离措施。让我们修改程序的时候不至于发生牵一发而动全身的事故。而还只是测试提升代码敏捷性的其中一个作用。 敏捷开发扬弃了早期英雄程序员的概念，但是回归到开发以程序员为主的概念。敏捷团队强调程序员的主动性，程序员应能主动花时间修改糟糕的设计。而这种主动性是建立在测试驱动的基础上的，否则在项目进度压力下除非万不得已，没有人愿意花时间冒险修改已经完成功能实现的代码，那怕这个修改看上去是那么轻而易举。而这种修改在敏捷团队中几乎是家常便饭，这些时间和风险投资的回报就是代码的敏捷性。 只有代码具有敏捷性，敏捷过程才能真正体现其价值。这些过程协调了项目各方的关系，令工作有序地进行，并且将代码的敏捷性转换成项目的收益——这才是真正的敏捷。
个人分类: 有码|769 次阅读|5 个评论
分享 测试的答案
热度 15 船长阿道克 2012-8-28 23:09
测试的答案
542 次阅读|9 个评论
分享 测试日志发图片-----遵义羊肉粉（兴隆街南头路西的小店）
热度 12 逍遥探花 2012-7-4 17:40
测试日志发图片-----遵义羊肉粉（兴隆街南头路西的小店）
37 次阅读|12 个评论
分享 FLASH，mp3测试
热度 2 绿葱头 2012-7-4 06:12
http://sjr0328.bokee.com/inc/taiduo.wma
个人分类: 爱坛FAQ|450 次阅读|4 个评论
分享 相机测试之2
热度 8 樱木花道 2012-5-7 00:37
相机测试之2
612 次阅读|3 个评论
分享 本日志测试
ccqi 2012-5-3 09:40
测试分数的涨跌
个人分类: 股市|0 个评论
分享 相机测试
热度 14 樱木花道 2012-5-1 20:02
相机测试
811 次阅读|27 个评论
分享 测试ipad发中文日志
热度 6 小剪子 2012-4-30 10:14
It doesn't work...
532 次阅读|7 个评论
分享 日志图片宽度测试
热度 8 绿葱头 2012-4-25 11:04
日志图片宽度测试
现在是这样的 变成下面会不会好一点？
个人分类: IT|464 次阅读|15 个评论
分享 读书笔记测试
landy 2012-3-4 03:57
---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- 那么，问题来了，这样一种空头类型的ETF，到底适不适合持有以达到对冲市场风险的目的呢？ 　　 　　答案并非是肯定的，对于组合基金来说，答案甚至是否定的。 　　 　　在ETF界占有先驱地位的爱世公司旗下，有这么一只跟踪指数股，在纽交所的代号是FXI，它追踪的是25只大型中国公司的股票综合表现。作为它的反向指数股，由普适公司发行的代号为FXP的ETF，采用了双倍杠杆率操作空头，被很多做空中国股市的散户所津津乐道。可是实际在金融风暴最集中的两个月时间里，它的表现却非常有趣。在08年9月5日，FXI股价收于39.17，FXP收于96；在11月5日，FXI收在24.65，从而两个月里的回报率是（24.65-39.17）=-37%，印证了同期中国股市的大跌。按说，以双倍杠杆做空的FXP，理论的回报率应该是37%的双倍，也就是74%，对应的股价应该飙升至96×1.74=167才合适。实际是多少呢？11月5日FXP收在87，总回报率是负的9.3%！到底出了什么问题？ 　　我曾经去察看过被归于熊市基金一类的某只共同基金的持股，发现为了达到与大市相反走向的目标，这只共同基金里持有了大量的黄金和有色金属的开发矿业公司的股票，排在持股比例的前几名。分析这里面的逻辑，这一类贵重金属，在股市牛市的时期，表现都与市场背道而驰，因为投资者都被短期的利益所驱使，把资金投在了炒作效应浓厚的小型股上面，没有人会投资黄金白银这些最保守，比传统行业大型股还要稳健的板块，从而造成了从事采掘开发的公司股票表现低于大市的情形；但是在漫漫熊市，情势正好反过来，保守成了终极目标，所谓盛世买古董，乱世买黄金，这类公司也就成了香饽饽，表现会优于大市。可见，在共同基金里面，由于不得做空的规定，要想达到实际表现和大市反向的效果，就只有去增持这一类公司，实际上是寻求一种近似的负相关。而在当前流行的反向杠杆空头ETF之中，实现做空的手段，是直接买入大量的与指数挂钩的回报互换交易仓位（total return swap），并不是简单的卖空指数所包含的成份股，理论上这一类交易的回报可以做到和实际对应的行业地区市场指数非常高度的负相关。 　　 　　爱世公司旗下出品了大量的跟踪指数股，他们的策略无一例外的是买进指数包含的成份股，所以能够完全体现指数的涨跌。普适公司旗下大量的双倍杠杆空头ETF是以回报互换交易为主，而不是卖空指数成份股，这样的做法能够最大限度的体现与指数的负相关性，但是限制之一也表达的很清楚，就是这类空头ETF股，只能够忠实的对应体现指数每天的涨跌百分比，在一定时期过后，如果指数经受了上下剧烈的波动，那么由于复利的原因，这一天天的叠加效果，在终期体现的实际总回报率，往往不但不能达到指数同期的反值，反而会劣于这个期望值。上面FXI和FXP的对比就是一个极好的例子。 　　 　　为了说明这样叠加起来复利的差异，再举一个极端一些的例子，假设某个指数第一天本身跌20%，那么做空的反向双倍ETF理应有当天20%的双倍增值，即由初始值100变为140；第二天，这个指数又涨回25%，从而两天下来指数不涨不跌，持平（1x(1-20%)x(1+25%)=1），那么在第二天，这个反向双倍ETF应该跌去当天指数涨幅25%的双倍，即由当天初值140跌去50%，只剩下70。两天下来，指数没变，这个反指ETF已经惨遭七折优惠。这里面的关键就在于这类ETF体现的是当天的指数回报率，从而我们可以引申出的一个简单结论就是，这类杠杆率操作的空头ETF，实在是不适合长期持有。尤其在市场波动性大大异于平时平均水平的大熊市，貌似持有这类ETF可以从中获得丰厚利润，实际上如果对于操作进入点和离开点的稍微不慎，就可能导致巨量损失。对比之下，买入长期的认沽期指合约，大概是稳妥得多的对冲市场风险方式 Contents Generals Strategy Glossary Generals · It seems easy to foresee which industry will grow the fastest, that foresight has no real value if most other investors are already expecting the same thing. By the time everyone decides that a given industry is obviously the best one to invest in, the prices of its socks have been bid up so high that its future returns have nowhere to go but down. (p16) · Stocks become more risky, not less, as their prices rise-and less risky, not more, as their prices fall.(p17) · The defensive investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition.(p29) · Definition of investing (p35) · You invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price (p36). · Never mingle the money in your speculative account with what’s in your investment accounts; never put more than 10% of your assets into your mad money account (p46). · There is no close time connection between inflationary/deflationary conditions and the movement of common-stock earnings and prices (p51). Reasons for why rising prices do not have effect on the earning power (p53): (1) rise in wage rates. (2) The need for huge amounts of new capital, thus holding down the ratio of sales to capital employed. · Stocks failed to keep up with inflation about one-fifth of the time (p61). · It is wrong that those who cannot afford to take risks should be content with a relatively low return on their invested funds (p88). · Straight-Nonconvertible-preferred stocks are not good for intelligent investor (p98). Preferred stock offers individuals no tax advantage (p99n). · A traditional rule of thumb was to subtract your age from 100 and invest that percentage of your assets in stocks, with the rest in bonds or cash. It is nonsense (p102). · The yield on stocks has (so far) continuously stayed below the yield on bonds. “High prices” of stocks affect their dividend yields (makes it low) (p113n). · An industrial company’s finances are not conservative unless the common stock (at book value) represents at least of half of the total capitalization, including all bank debt. For a railroad or public utility the figure should be at least 30% (p122). Book value liability. · “Buy what you know” (p127)? Familiar breeds complacency. It is always the neighbor/best friend/parents of the criminal who say “he was such a nice guy”. · U.S bankruptcy law entitles bondholders to a much stronger legal claim than shareholders … Thus the bonds of a troubled company can perform almost as well as the common stock of a healthy company (p156). · Characteristics for bull market (p193) 1. a historically high price level 2. high P/E value 3. low dividend yields as against bond yields 4. much speculation on margin 5. Many IPOs of poor quality. · Gain 50% and lose 33% standard (p196) · 35 years economy cycle of insanity, next is 2030 (p236n) · A large part of value found for a high P/E growth stock is derived from future projections which differ markedly from past performance (p282). The higher the growth rate you project, and the longer the future period over which you project it, the more sensitive your forecast becomes to the slightest error (p282n). If, for instance, EPS is $1, estimation of profit is 15% a year for the next 15 years. If the market values the company at 35 P/E, the price would be $285. if the growth rate is 14% and P/E is 20, the stock would end up around $140. · Chapter 11 and 12 are very important Strategy · Practices for the defensive investor (p29): Purchase of the shares of well-established investment funds. Common trust funds/commingled funds operated by trust companies and banks. Dollar-cost averaging. 25%~75% p22, p89, p91 ex. P104 details: rebalance every 6 months in your 401k. and the chief advantage of such a formula will give you something to do . · Argument of why the following ways are not good for defensive investor (p30): Trading in the market. Short-term selectivity Long-term selectivity · Four formula to fiasco (p41) Cash in on the calendar: January effect. The foolish four and stock name with no repeating letters (p45,p46) · Alternatives to common stocks as inflation hedges Gold: avoids investing in gold directly, seek out a well-diversified mutual fund specializing in the stocks of precious-metal companies and charging below 1% in annual expenses. Limit your stake to 2% of your total financial assets (p56n). · Two ways to defenses against inflation (p63) 1. REITs: Real Estate Investment Trusts. REITs as of Real Estate is much like Mutual Fund as of Stock. 2. TIPs · P/E ration below 10 is considered low, between 10 and 20 is considered moderate, and greater than 20 is considered expensive (p70n). Strategy for Defensive Investor · Defensive investor should buy only tax-free (municipal) bonds outside your retirement account (p106); Buy intermediate –term bonds maturing in 5 to 10 years; buying individual bonds makes no sense unless you have at least $100k to invest.(the only exception is bonds issued by the U.S. Treasure), for most investors, bond funds beat individual bonds hands down (the main exceptions are Treasury securities and some municipal bonds). Web links for online bond calculators, introduction to bond investing, and bond funds. · The Wide World of Bonds table (p108) provides analysis for all kind of bonds for defensive investor . · Mortgage securities / Annuities / Preferred stock (p110) MS bonds are not backed by the U.S. Treasure, so they sell at higher yields. Mortgage bonds generally under perform when interest rates fall and bomb when rates rise. Annuities are not attractive for investors under age 50. Preferred shares are a worst-of-both-worlds investment. · Rules for the common stock component for defensive investor (p114). 1. There should be adequate though not excessive diversifications. 10~30 Online broker and tax tracking tool (p128); web sites for buying individual stocks straight from the issuing company. They are cheaper. Web sites to help determine wheather the stocks you own are sufficiently diversified. 2. Each company selected should be large, prominent, and conservatively financed. Today Large means stock value (market capitalization) of at least $10billion. 3. Each company selected should have a long record of continuous dividend payments ( 10 years) 4. Purchase only with 7 years average P/E 25 and 12 months average P/E20. 5. Index funds are defensive investor’s dream come true (p130, 249). And the ideal way to dollar-cost average is into a portfolio of index funds for U.S. stock market, bonds, and foreign stocks. Some list in p369 6. I do not know and I do not know is the best response (p131) · Growth stocks as a whole as too uncertain and risky a vehicle of defensive investor (p116). · Good web links for “portfolio trackers” (p117n). Strategy for Enterprising Investor · The most useful generalizations for the enterprising investor are of a negative sort. Let him leave high-grade preferred stocks to corporate buyers. Let him also avoid inferior types of bonds and preferred stocks unless they can be bought at bargain levels-which means ordinarily at prices at least 30% under par for high-coupon issues, and much less for the lower coupons. He will let someone else buy foreign-government bond issues, even though the yield may be attractive. He will also be wary of all kinds of new issues , including convertible bonds and preferred that seem quite tempting and common stocks with excellent earnings confined to the recent past . For standard bond investments the aggressive investor would do well to follow the pattern suggested to his defensive confrere and make his choice between high-grade taxable issues and good –quality tax-free bonds (p134,p134n for updated yields) · Second-Grade Bonds and Preferred Stocks (p134) Corporations with relatively poor credits standing have found it virtually impossible to sell “strait bonds” — i.e., nonconvertibles—to the public. Hence their debt financing has been done by the sale of convertible bonds (or bonds with warrants attached). Virtually all the nonconvertible bonds of inferior rating represent older issues which are selling at a large discount. Convertible bonds can be converted into shares of stock in the issuing company, usually at some pre-announced ratio. High-yield bonds = second grade = lower grade bonds = junk bonds (p145) are too costly and cumbersome for an individual investor to diversify away the risks of default. · The main difference between first and second grade bonds is usually found in the number of times the interest charges have been covered by earnings (p135, p284). It is unwise to buy a bond or a preferred which lacks adequate safety merely because the yield is attractive. · New Issues Generally: These should be subjected to careful examination and unusually severe tests before they are purchased (p139). There are two reasons: 1. New IPO have special salesmanship behind them, which calls therefore for a special degree of sales resistance. New IPOs normally are sold with an “underwriting discount” (a built-in commission) of 7%. By contrast, the buyer’s commission on older shares of common stock typically ranges below 4%. Whenever Wall Street makes roughly twice as much for selling something new as it does for selling something old, the new will get the harder sell. 2. Most new issues are sold under “favorable market conditions” – which means favorable for the seller and consequently less favorable for the buyer. (Often when the stock market is near a peak). The over supply of IPOs helped create the bear market and the undersupply, in turn, helped feed the bull market. · New Common-Stock Offerings (p141). Common-stock financing takes two different forms. 1. Rights offerings (fen chai quan qian) have become rare in the U.S., except among closed-end funds. 2. Placement with the public of common stock of what were formerly privately owned enterprises. (Initial Public Offering).(original common-stock flotation). One fairly dependable sign of he approaching end of a bull swing is the fact that new common stocks of small and nondescript companies are offered at prices somewhat higher than the current level for many medium-sized companies with a long market history. In Graham’s day, the most prestigious investment banks generally steered clear of the IPO business, which was regarded as an undignified exploitation of naïve investor. · Dying a trader’s death (p149) The extra higher bid/ask cost is called “Market impact”. Buying or selling a hot little stock can cost 2% to 4%. When you trade instead of invest, you turn long-term gains into ordinary income (tax). Add it all up, and a stock trader needs to gain at least 10% just to break even. · Operations in Common Stocks for enterprising investor (p156): 1. Buying in low markets and selling in high markets. 2. Buying carefully chosen “ growth stocks” Can assemble outperformed the averages stocks list from morning star Stock Quickrank tool, www.quicken.com/investments/stocks/search/full , and http://yahoo.marketguide.com (p157n); To update fund performance by type, check “Category Returns in morning star (p159n). There are two concerns: the first is that common stocks with good records and apparently good prospects sell at correspondingly high prices. The second is that his judgment as to the future may prove wrong. Rapid growth cannot keep up forever (p158). Graham insists on calculating the P/E ration based on a multiyear average of past earnings (p159n). The striking thing about growth stocks as a class is their tendency toward wide swings in market price. Consider the 22% drop for Intel after a 5% growth quarterly report (p160n). The faster these companies grew, the more expensive their stocks became. And when stocks grow faster than companies, investors always end up sorry (p181). The bigger they get, the slower they grow. The market is unkindest to rapidly growing companies that suddenly report a fall in earnings. More moderate and stable growers as Anheuser-Busch and Colgate-Palmolive tend to suffer somewhat milder stock declines if they report disappointing earnings. Great expectations lead to great disappointment if they are not met. Thus, one of the biggest risks in owing growth stocks is not that their growth will stop, but merely that it will slow down. And in the long run, that is not merely a risk, but a virtual certainty (p321n). 3. Buying bargain issue of various types p196: From the “Money Investing” section in Wall Street Journal, find the lists of stocks that have hit new lows for the past year. Or Morningstar à Stocks à New Highs and Lows. You may find a stock with market capital less than net working capital (current asset – total liabilities) 4. Buying into “ special situation ” · The Recommended Fields for Enterprising Investor (p162). Policy required: (1) It must meet objective or rational tests of underlying soundness; (2) it must be different from the policy followed by most investors or speculators. 1. The Relative Unpopular Large Company (p163) The large companies have a double advantage over the others. First, they have the resources in capital and brain power to carry them through adversity and back to a satisfactory earnings base. Second, the market is likely to respond with reasonable speed to any improvement shown. “Dogs of the Dow”: the strategy of buying the cheapest stocks in DJIA (p164n). Each year buy 10 issues in the DJIA which were selling at the lowest P/E of their current or previous year’s earnings. Buy stock in a low P/E list by requiring also that the price be low in relation to past average earnings or by some similar test (p165 table). 2. Purchase of Bargain Issues: Bonds and preferred stocks selling well under par, as well as common stocks (p166). There are two test First is by the method of appraisal. This relies largely on estimating future earnings and then multiplying these by a factor. If the price is higher than market price, you can say it is a bargain. Second test is the value of the business to a private owner. Pay more attention on the realizable value of the assets, with particular emphasis on the net current assets or working capital. We should require an indication of at least reasonable stability of earnings over the past decade or more—i.e., no year of earrings deficit—plus sufficient size and financial strength to meet possible setbacks in the future (p168). The idea combination here is thus that of a large and prominent company selling both well below its past average price and its past average P/E ratio. The most identified bargain issue is a common stock that sells for less than the company’s net working capital alone (net working capital is current assets-total liabilities including preferred stock and long-term debt p169n). 3. Bargain-issue Pattern in Secondary Company (p172). A company is not a leader in a fairly important industry. Reasons to believe a secondary issue is undervalued: First, the dividend return is relatively high. Second, the reinvested earnings are substantial in relation to the price paid and will ultimately affect the price. Third, a bull market is ordinarily most generous to low-priced issues. Forth, even during relatively featureless market periods a continuous process of price adjustment goes on, under which secondary issues that were undervalued may rise at least to the normal level for their type of security. Fifth, the specific factors that made for a disappointing record of earnings may be corrected by the advent of new conditions, or the adoption of new policies, or by a change in management. 4. Special Situations, or “Workouts” (p174) à Arbitrages and workouts such as acquisitions of smaller firms by large ones. This is not applicable for normal investor. à Breakup of public utility companies. à Lawsuit. 5. final conclusion: do not buy at “full prices” of (1) foreign bonds, (2)ordinary preferred stocks, and (3) secondary common stocks. Enterprising investor only buy them when prices not more than 2/3 of the appraisal value of the securities. · How to handle Market Fluctuations Ø There are two possible ways of profiting: timing and pricing. By timing we mean the endeavor to anticipate the action of the stock market — to buy or hold when the future course is deemed to be upward, to sell or refrain from buying when the course is downward (X). By pricing we mean the endeavor to buy stocks when they are quoted below their fair value and to sell them when they rise above such value (p191). Ø Why Dow Theory sucks? (p192) First, the passage of time brings new conditions which the old formula no longer fits. Second, in stock-market affairs the popularity of a trading theory has itself an influence on the market’s behavior which detracts in the long run from its profit-making possibilities. Ø The average investor cannot deal successfully with price movements by endeavoring to forecast them. It is impossible for average investor to buy low and sell high (p192). Ø In general, the shares of second-line companies (companies not included in SP500) fluctuate more widely than the major one (P196). Ø The stock-market contains a built-in contradiction (p198). The better a company’s record and prospects, the less relationship the price of its shares will have to their book value. The better quality of a common stock, the more speculative it is likely to be. It might be best for him to concentrate on issues selling at a reasonably close approximation to their tangible-asset value – say, at not more than 1/3 above that figure. Ø Single most important paragraph (p203) Ø The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that the price is favorable enough to justifying selling the stock, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into back disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment. Ø The brilliant Mr. Market metaphor (p204). Ø A long term bond could vary widely in market price in response to changed in interest rates (p207). Bond yields move inversely to prices, low yields meant that prices had risen – making investors most eager to buy just as bonds were at their most expensive and as their future returns were almost guaranteed to be low. This provides another proof of Graham’s lesson that the intelligent investor must refuse to make decisions based on market fluctuations (p208). · Handicaps mutual fund managers and other professional investors are saddled with (p218): 1. Billion dollars of management push them to gravitate toward the biggest stocks. Thus many funds end up owning the same few overpriced giants. 2. Investors tend to pour more money into funds as market rises. The managers use that new cash to buy more of the stocks they already own, driving prices to even more dangerous heights. 3. If fund investors ask money back when the market drops, the managers may need to sell stock, with a market cheaper price. 4. Many managers obsessively measure their returns against benchmarks like SP500 due to bonuses. If a company gets added to an index, hundreds of funds compulsively buy it. 5. Increasingly, fund managers are expected to specialize. They have to buy only “large blend”, “small growth”, or only “mid-sized value” stocks. And sell a company if it gets too big/small/cheap/expensive – even if the manager loves the stock. · You can not control the stocks/funds you buy will outperform the market. But you can control (p219): 1. Your brokerage costs, by trading rarely, patiently, and cheaply. 2. Your ownership costs, by refusing to buy MF with excessive annual expenses. 3. your expectations 4. your risk, by how much to put in market, by diversifying, and by rebalancing 5. your tax bills, by holding stocks for at least one year 6. your own behavior · The intelligent investor should be perfectly comfortable owing a stock or MF even if the stock market sopped supplying daily prices for the next 10 years. · Closed-End versus Open-End Funds and the math about them p238, p239. Closed-end stock funds are not popular. But there are many closed-end bond funds. The ETFs can be worth exploring as well. However, they are generally not suitable for investors who wish to add money regularly (p252). · Buying funds based purely on their past performance is one of the stupidest things an investor can do (p243): Ø The average fund does not pick stocks well enough to overcome its costs of researching and trading them; Ø The higher a fund’s expenses, the lower its returns. Ø The more frequently a fund trades its stocks, the less it tends to earn; Ø Highly volatile funds, which bounce up and down more than average, are likely to stay volatile’ Ø Funds with high past returns are unlikely to remain winners for long. · Why don’t more winning funds stay winners (p245)? Ø Migrating managers: Every one wants them—including rival funds Ø Asset elephantiasis: Huge amount of money pouring in to high return funds leaving managers with few bad choices. He can put the new money into the stocks he already owns which would be overvalued already. He can buy new stocks he didn’t like well enough to own already. Ø No more fancy footwork: some companies specialize in “incubating” their funds-test-driving them privately before selling them publicly. They can work best with small sums of money, like buying truly tiny stocks or rapid-fire trading of IPOs. The fund can lure public with the result. In other cases, the fund manager “waives” (or skips charging) management fees, raising the net return—then slaps the fees on later after the high returns attract plenty of customers. Ø Rising expenses: it often costs more to trade stocks in very large blocks than in small ones. With operating expenses averaging 1.5%, and trading costs at around 2%, the typical fund ($10 billion) has to beat the market by 3.5%. Ø Sheepish behavior: once a fund become successful, its managers tend to become timid and imitative. So the biggest funds resemble a herd of identical and overfed sheep, all moving in sluggish lockstep, all saying “baaaa” at the same time. · What, then, should the intelligent investor do (p248)? Index fund will beat most funds over the long run. Vanguard Total Stock Market. · What qualities do the funds beat the index have in common (p250)? Ø Their managers are the biggest shareholders (at least 1%). You can find the information from EDGAR database at www.sec.gov. Ø They are cheap. Research has proven that funds with higher fees earn lower returns over time. Ø They dare to be different. Compare the holdings listed in its latest report against the roster of the SP500 index. Ø They shut the door. The best funds often close to new investors—permitting only their existing shareholders to buy more. But the closing should occur before—not after—the fund explodes in size. Ø They don’t advertise. Some good funds name (p251) · What else you should watch for (p251)? 1. Fund expenses: Since they are far more predictable than its future risk or return, you should make them your first filter. Annual operating expenses should less than the following lists: Taxable and municipal bonds: 0.75% U.S. equities (large and mid-sized stocks) 1.0% High-yield (junk) bonds 1.0% U.S. equities (small stocks) 1.25% Foreign stocks 1.50% Easily to find in money.cnn.com or www.morningstar.com 2. Evaluate risk. In its prospectus (buyer’s guide), every fund must show a bar graph displaying its worst loss over a calendar quarter. Make sure you can stand losing at least that much money in three months. Do the quality check home work (listed in the previous paragraph). Then, and only then, consult their Morningstar rating. 3. Finally, look at past performance; remember that it is only a pale predictor of future returns. Stupid investors looks at those same things—but in the opposite order. · When should you sell a fund? The standard advise is to ditch a fund if it underperforms the market for one—or is it two?—or is it three?—years in a row. Here a few definite red flags (p254): Ø A sharp and unexpected change in strategy, such as a “value” find loading up on technology stocks in 1999 or a “growth” fund buying tons of insurance stocks in 2002; Ø An increase in expenses, suggesting that the managers are lining their own pockets; Ø Large and frequent tax bills generated by excessive trading; Ø Suddenly erratic returns, as when a formerly conservative fund generates a big loss (or even produces a giant gain) · If you are not prepared to stick with a fund through at least three years, you shouldn’t buy it in the first place. · The investor and his advisers: suggestions, websites (p257 Chapter 10) · Bond analysis: the chief criterion used for corporate bonds is the number of times that total interest charges have been covered by available earnings for some years in the past. In the case of preferred stocks, it is the number of times that bond interest and preferred dividends combined have been covered (p283). Today you should use mutual funds invest in corporate bonds (p283n). Table of Recommended Minimum Coverage" for Bonds and Preferred Stocks (p284). Other generally applied tests include: (1) size of enterprise; (2) stock/equity ratio; (3) property value. · Common stock analysis (p288). The ideal analysis leads to a valuation of the issue which can be compared with current price to determine whether or not the security is an attractive purchase. This valuation , in turn, would ordinarily be found by estimating the average earnings over a period of years in the future and then multiplying that estimate by an appropriate “capitalization factor”. Though average future earnings are supposed to be the chief determinations of value, there are also some other factors affecting capitalization rate. Thus, although two companies may have the same figure of expected EPS, say $4, the analyst may value one as low as 40 and the other as 100. (p290) 1. General Long-Term Prospects: no one really knows anything about what will happen in the distance future. History proves Wall Street’s “experts” forecasters are equally inept at predicting of 1) the market as a whole, 2) industry sectors, and 3) specific stocks. From commentary (p303): you should download at least 5 years’ worth of annual reports (Form 10-k) from EDGAR database at www.sec.gov to help answer two major questions. What makes this company grow? Where do and where will its profits come from? Among the problems to watch for: à The company is a “serial acquirer”. An average or more than two or three acquisitions a year is a sign of potential trouble. Watch out firms that wolf down big acquisitions, only to end up vomiting them back out. Other firms take chronic write-offs, or accounting charges proving that they overpaid for their past acquisitions. That is a bad omen for future deal making. You can usually find details on acquisitions in the “Management’s Discussion and Analysis” section of Form 10-K; cross=check it against the footnotes to the financial statements. à The company is an OPM addict, borrowing debt or selling stock to raise boatloads of Other People’s Money. Read the “Statement of Cash Flows”. This page breaks down the cash inflows and outflows into “operating activities”, “investment activities”, and “financing activities”. If cash from operating activates is consistently negative, while cash from financing activities is consistently positive, the company has a habit of caving more cash than its own businesses can produce—and ou should not join the “enablers” of that habitual abuse. à The company is a Johnny-One-Note, relying on one customer (or handful) for most of its revenues. As you study the sources of growth and profit, stay on the lookout for positives as well as negatives. Among the good signs: à The company has a wide “moat”, or competitive advantages such as a strong brand identity (Harley Davidson, whose buyers tattoo the company’s logo onto their bodies), a monopoly or near- monopoly on the market, economies of scale, or the ability to supply huge amounts of goods or services cheaply (Gillette, which churns out razor blades by the billion), a unique intangible asset (Coca-Cola ), a resistance to substitution (most businesses have no alternative to electricity so utility companies are unlikely to be supplanted any time soon). à The company is a marathoner, not a sprinter. From income statement, you can see whether revenues and net earning s have grown smoothly and steadily over the previous 10 years. The fastest-grown companies tend to overheat and flame out. If earnings are growing at a long-term rate of 10% pre tax (6~7% after tax), that may be sustainable. But the 15% and even higher or sudden burst of growth in one or two years—is all but certain to fade. à The company sows and reaps. No matter how good its products or how powerful its brands, a company must spend some money to develop new business. Check its research and development spending. 2. Management: On Wall Street a great deal is constantly said on this subject, but little that is really helpful. The management factor is most useful in those cases in which a recent change has taken place that has not yet had the time to show its significance in the actual figures. From commentary (p305) à Read the past annual reports to see what forecasts the managers made and if they fulfilled them or fell short. à Managers should forthrightly admit their failures and take responsibility for them,, rather than blaming all-purpose scapegoats like “the economy”, or “weak demand”. à Check whether the tone and substance of the chairman’s letter stay constant, or fluctuate with the latest fads on Wall Street. à Are they looking out for No.1? A firm pays its CEO $100 million/year had better have a very good reason. Otherwise, this suggests that the firm is run by the managers, for the managers. à If company re-prices / re-issues / exchanges its stock options for insiders, stay away. In this switcheroo, a company cancels existing (and typically worthless) stock options for employees and executives, and then replaces them with new ones at advantageous prices. If their value is never allowed to go to zero, while their potential profit is always infinite, how can options encourage good stewardship of corporate assets? à “Option overhang”: AOL Time Warner, for example, reported in annual report that it had 4.5 billion shares of common stock outstanding, but a footnote in the bowels of the report reveals that the company had issued options on 657 million more shares. So AOL’s future earnings will have to be divided among 15% more shares. à “From 4” (EDGAR from www.sec.gov ) shows whether a firm’s senior executives and directors have been buying or selling shares. Repeated big sales are a bright red flag. A manager can’t legitimately be your partner if he keeps selling while you are buying. à Are they managers or promoters? Executives should spend most of their time managing their company in private, not promoting it to the investing public. They should not 1) complain that their stock is undervalued no matter how high it goes; 2) give earnings guidance or guesstimates of the company’s quarterly profits; 3) constantly spewing forth press releases boasting of temporary, trivial, or hypothetical “opportunities”. 8-K filings made by Expeditors International of Washington periodically post its superb question-and-answer dialogues with shareholders there. à Whether the company’s accounting practices are designed to make its financial results transparent—or opaque? The followings are not good: “nonrecurring” charges keep recurring, “extraordinary” items crop up so often that they seem ordinary, acronyms like EBITDA take priority over net income, or “pro forma” earnings are used to cloak actual losses. 3. Financial Strength and Capital Structure: With same EPS, it is clearly a better purchase for a company with a lot of surplus cash and nothing ahead of the common than another one with large bank loans and senior securties. A modest amount of bonds or preferred stock, however, is not necessarily a disadvantage to the common, nor is the moderate use of seasonal bank credit. (Incidentally, a top-heavy structure—too little common stock in relation to bonds and preferred—may under favorable conditions make for a huge speculative profit in common. This is the factor known as “leverage.”) From commentary (p308): the most basic possible definition of a good business is: it generates more cash than it consumes. à First check from cash flows whether cash from operations has grown steadily throughout the past 10 yeas. à Further for Warren Buffet’s concept of “owner earnings” owner earnings = net income + amortization +depreciation – normal capital expenditures As xxx puts it, “if you owned 100% of this business, how much cash would you have in your pocket at the end of the year?” It adjusts for accounting entries like amortization and depreciation that do not affect the company’s cash balances. You should also subtract from net income for fine-tune the definition of owner earnings: Any costs of granting stock options, which divert earnings away from existing shareholders into the hands of new inside owners Any “unusual”, “nonrecurring”, or “extraordinary” charges. Any “income” from the company’s pension fund. If owner earnings per share have grown at a steady average of at least 6% or 7% over the past 10 years, the company is a stable generator of cash, and its prospects for growth are good. à Next, look at capital structure 1) Long-term debt should be under 50% of total capital 2) In the footnotes to the financial statements, determine whether the long-term debt is fixed-rate or variable (with payments that fluctuate, which could become costly if interest rates rise). 3) Look “ration of earnings to fixed charges”. Amazon’s earnings fell $145million short of covering its interest costs. In the future, Amazon will either have to earn much more from its operations or find a way to borrow money at lower rates. Otherwise, the company could end up being owned not by its shareholders but by its bondholders. 4. Dividend Record: continuous dividend payment for the last 20 years or more is an important plus factor. From commentary (p308): à The company should show how well they use cash if not pay dividend. à Companies that repeatedly split their shares treat their investors like dolts. à Companies should buy back their shares when they are cheap—not when they are at or near record highs. It is a waste of company’s cash since the real purpose of that maneuver is to enable top executives to reap multimillion –dollar paydays by selling their own stock options in the name of “enhancing shareholder value” 5. Current dividend rate: Percentage companies distribute of their earnings. In 1969 it was 59% for DJIA 30, 55% for all companies. In 2000, it was only 25.3% for SP 500. · Capitalization Rates for Growth Stocks (p295) Value = Current (Normal) Earnings * (8.5 plus twice the expected annual growth rate) The growth figure should be that expected over the next 7 to 10 years. Investor should introduce a margin of safety into the calculation. · A Two-Part Appraisal Process (p299) 1. The past performance value. This would indicate what the stock would be worth—absolutely, or as a percentage of DJIA/SP500—if it is assumed that it’s relative past performance will continue unchanged in the future. This process could be carried out mechanically by applying a formula that gives individual weights to past figures for profitability, stability, and growth, and also for current financial condition. 2. Consider to what extent the value based solely on past performance should be modified because of new conditions expected in the future. Such a procedure would divide the work between senior and junior analysts (p300). Example p321. · Groups in which the future appears reasonable predicable. They are ideally, would not be overly dependent on such unforeseeable factors as fluctuating interest rates or the future direction of prices for raw materials like oil or metals. Possibilities might be industries like gaming, cosmetics, alcoholic beverages, nursing homes, or waste management (p301n). · Things To Consider About Per-Share Earnings (p310) 1. Don’t take a single year’s earning seriously. Use 7 to 10 years average earnings. It will solve the problem of what to do about nearly all the special charges and credits (p319). Also, the growth rate itself should be calculated by comparing the average of the last three years with corresponding figures then years earlier. Average earnings 1968-1970 $4.95 Average earnings 1958-1960 $2.08 Growth 141.0% Annual Rate (compounded) 9.0% (p320) 2. If you do pay attention to short-term earnings, look out for booby traps in the per-share figures (p310). It is necessary for investors to be on their guard against accounting factors that may impair the true comparability of the numbers (p316): à The use of special charges , which may never be reflected in the per-share earnings. Charge –offs a huge amount of money / per share. Be careful of companies that chronically exclude bad news from their financial results on the pretext that negative events are “extraordinary” or nonrecurring”. They should not charge the loss off as a “special item” (p312). à The reduction in the normal income- tax deduction by reason of past losses. Say nothing about the future tax savings from these losses (p314); Federal tax law allows corporations to “carry forward” their net operating losses. These losses can be carried forward for up to 20 years, reducing the company’s tax liability for the entire period (and thus raising its earnings after tax). Therefore, investors should consider whether recent severe losses could actually improve the company’s net earnings in the future (p318n). à Dilution factor implicit in the existence of substantial amounts of convertible securities or warrants. Large amounts of convertible debt or multiple offerings of common stock (p311). à By anticipating future losses the company escapes the company escapes the necessity of allocating the losses themselves to an identifiable year. They may show up in the year 20xx, but they don’t belong in that year. They won’t be shown in the year when they are actually taken, because they have already been provided for. à To charge off as much as possible to the bad year, which had already been written off mentally and had virtually receded into the past, leaving the way clear for nicely fattened figures in the next few years (p314). à Set up “contingency reserves” out of the profits of good years to absorb some of the bad effects of depression years to come (p315). It mistakes the true EPS. à Treating depression—chiefly between the “straight-line” and the “accelerated”. A example company report 20% increase in EPS—but half of this came from returning to the older straight-line depreciation rates, less burdensome on earnings than the accelerated method used the year before. à The choice between charging off research and development costs in the year they are incurred or amortizing them over a period of years. à Choice between the FIFO (first-in-first-out) and LIFO (last-in-first-out) methods of valuing inventories. à “Pro forma” or “as if” financial statements, which report a company’s earnings as if Generally Accepted Accounting Principles (GAAP) did not apply (p316n). Example could be found in p322: what a company would have earned over the past year if another firm it just acquired had been part of the entire 12 months; if it had not paid $xxx in preferred-stock dividends; if it had not paid $xxx in payroll taxes on stock options exercised by its employees; if had not lost $xxx investing in lousy stocks; if it had not incurred $xxx in charges related to mergers and goodwill. The only thing you should do with pro forma earnings is ignore them (p323). à Dilutive effect of issuing millions of stock options for executive compensation, then buying back millions of shares to keep those options from reducing the value of the common stock (p316n). à Unrealistic assumptions of return on the company’s pension funds, which can artificially inflate earnings in good years and depress them in bad (p316n). Is the “net pension benefit” more than 5%of the company’s net income? If so, would you still be comfortable with the company’s other earnings if those pension gains went away in future years? Is the assumed “long-term rate of return on plan assets” reasonable? (p328) à “Special Purpose Entities” or affiliated firms (son company) of partnerships that buy risky assets or liabilities of the company and thus “remove” those financial risks from the company’s balance sheet (p316n). à Treatment of marketing or other “soft” costs as assets of the company, rather than as normal expenses of doing business. (p316n). Global Crossing spent more than $600M to construct its optical web. That year, nearly a third of the construction budget was charged against revenues as an expense called “cost of capacity sold”. The next year, says a bland footnote in the 1999 annual report, Global Crossing “initiated service contract accounting.” The company would no longer charge most construction costs as expenses against the immediate revenues it recei9ved from selling capacity on its network. Instead, a major chunk of those construction costs would now be treated not as an operating expense but as a capital expenditure—thereby increasing the company’s total assets, instead of decreasing its net income (p325). P325n has more. Capital expenditures are an essential tool for managers to make a good business grow bigger and better. But malleable accounting rules permit managers to inflate reported profits by transforming normal operating expenses into capital assets. The intelligent investor should be sure to understand what, and why, a company capitalizes. à Aggressive Revenue Recognitions (p324) is often a sign of dangers that run deep and loom large. A communication company Qwest decided to recognize the revenues from its telephone directories as soon as the phone books were published—even though, as anyone who has ever taken out a Yellow Pages advertisement knows, many businesses pay for those ads in monthly installments (p323 p324n). You can find annual report from 8K and 10-K. The company’s stock price dropped sharply and it is not the only cost associated with bogus earnings. The company had overpaid $320million in Federal income tax. Although much of that money will eventually be refunded by the IRS, most shareholders are unlikely to stick around to benefit from the refunds. à Inventory: Micro Technology was hit so hard by the plunge in demand that it had to start writing down the value of its inventories—since customers clearly did not want them at the prices Micron had been asking. Micron booked further inventory write-downs in every one of the next six fiscal quarters. Was the devaluation of Micron’s inventory a nonrecurring event, or had it become a chronic condition? (p327) à How to read financial report? (p328) Read back wards: start reading on the last page and slowly work your way toward the front. Read the notes: Usually labeled “summary of significant accounting policies” (a good example in p328n). In the other footnotes, watch for disclosures about debt, stock options, loans to customers, reserves against losses, and other “risk factors” that can take a big chomp out of earnings. Be careful of technical terms like “capitalized”, “deferred”, and “restructuring”—and plain English words signaling that the company has altered its accounting practices, like “began”, “change”, and “however.” None of those words mean you should not buy the stock, but all mean that you need to investigate further. Compare the footnotes with those in the financial statements of at least one competitor. Three good books are on financial statement analysis. · Chapter 13: A Comparison of Four Listed Companies (p333) 1. Profitability. à Earnings / book value; Net per share / book value, which measures the companies’ net income as a percentage of their tangible book value. Shareholders’ equity also includes intangible items such as brand names, reputations. à Profit (net income) /sales; ration of operating income to sales. 2. Stability. à Measured by the maximum decline in EPS in any one of the past ten years, as against the average of the three preceding years. 3. Growth. à Average 1968-1979 vs. average 1963-1965 à It often proves much more difficult to continue to grow at a high rate after volume and profits have already expanded to big totals (p335). 4. Financial Position. à Current assets / current liability should 2. à Working capital / debt à Long-term debt à Dilution: treating the preferred as if converted into common. 5. Dividends. à What really counts is the history of continuance without interruption. à Dividend yield: dividend/ price. 6. Price History. à 1936-1968 low and high. à Last two year’s low and high · Chapter 14: Stock Selection for The Defensive Investor (p347) The defensive investor will purchase only high-grade bonds plus a diversified list of leading common stocks. 1. Adequate size. à Not less than $2 billion as of 2003. Index fund list (p369). 2. A sufficiently strong financial condition. à Current assets / current liability should 2. à Long term debt net current asset (working capital). 3. Earning stability. à No earnings deficit in the past ten years 4. Dividend record. à Continued dividends for at least the past 20 years à Half of the SP500 companies have met this criteria (p371) 5. Earnings Growth. à A minimum increase of at least 1/3 in EPS in the past 10 years using three-year averages at the beginning and end. Among SP500, 264 met 33%, 245 met 50%, 198 met 100% (p374). 6. Moderate P/E Ratio à 15 (average of the past 3 years). à The forward P/E is non sense. 59% of Wall Street’s “consensus” earnings forecasts miss the mark by a mortifyingly wide margin. 7. Moderate Ration of Price to Assets. à P/E * P/Book value 22.5. (15*1.5) In recent years, an increasing proportion of the value of companies has come from intangible assets like franchises, brand names, and patents and trademarks. Since these factors (along with goodwill from acquisitions) are excluded from the standard definition of book value (???), most companies today are priced at higher price-to-book multiples than in Graham’s day (p374). à In early 2003, the yield on 10-year, AA-rate corporate bonds was around 4.6%, suggesting that a stock portfolio should have an earnings-to-price ratio at least that high. Than P/E should 100/4.6%=21.7. Graham recommends that the “average” stock be priced about 20% below the “maximum” ratio. That means stocks P/E 17 here. As of December 31, 2002, 40% of SP 500 had three-year average P/E ratios 17.0 or lower. Updated AA bond yield can be found at www.bondtalk.com (p350n) Yahoo also has. 8. An easy-to-use online stock screener www.quicken.com/investments/stocks/search/full. 9. Institution ownership percentage can be found in http://quicktake.morningstar.com , yahoo, quicken. Anything over 60% suggests that a stock is scarcely undiscovered and probably “over-owned". (When big institutions sell, they tend to move in lockstep ( 密集，连锁步伐 ), with disastrous results for the stock. Those websites will also tell you who the largest owners of the stock are. If they are money-management firms that invest in a style similar to you own, that’s a good sign (p375) 10. Table of “good” companies as of December 31, 2002, should do more research (p370) · Public utility stocks. Utility stocks are vastly more volatile than they were in Graham’s day, and most investors should own them only through a well-diversified, low-cost fund like the Dow Jones U.S. Utilities Sector Index Fund (IDU) or Utilities Select Sector SPDR (XLU). Some websites (p356n) · Financial Enterprises stocks Today the financial-service industry is made up of even more components, including commercial banks; savings loan and mortgage-financing companies; consumer-finance firms like credit-card issuers; money managers thrust companies; investment banks and brokerages; insurance companies; and firms engaged in developing or owning real estate, including real-estate investment trusts. Although the sector is much more diversified today, Graham’s caveats about financial soundness apply more than even. · The future it self can be approached in two different ways, which may be called the way of prediction (or projection) and the way of protection (p364). All investors labor under a cruel irony: We invest in the present, but we invest for the future. And, unfortunately, the future is almost entirely uncertain. Inflation and interest rates are undependable; economic recessions come and go at random; geopolitical upheavals like war, commodity shortages, and terrorism arrive without warning; and the fate of individual companies and their industries often turns out to be the opposite of what most investors expect. Therefore, investing on the basis of projection is a fool’s errand; even the forecasts of so-called experts are less reliable than the flip of a coin. For most people, investing on the basis of protection -from overpaying for a stock and from overconfidence in the quality of their own judgment-is the best solution. · Chapter 15: Stock Selection for The Enterprising Investor (p376) 1. Mutual Fund, on average, under-perform the market by a margin roughly equal to their operating expenses and trading costs (p377n) why? à The work of the security analyst—however intelligent and thorough—must be largely ineffective, because in essence he is trying to predict the unpredictable. With hundreds, even thousands, of experts studying the value factors behind an important, it would be natural to expect that its current price would reflect pretty well the consensus of informed opinion on its value. Those who would prefer it to other issues would do so for reasons of personal partiality or optimism that could just as well be wrong as right (see EMH). à You are betting for the growth. à As discussed in the commentary of Chapter 9, there are other reasons: low returns on the funds’ cash balances and the high costs of researching and trading stocks. Also, a fund holding 120 companies (a typical number) can trail (behind) the SP500 if any of the other 380 companies in that benchmark turns out to be a great performer. 2. A Summary of the Graham-Newman Methods. à Arbitrages: the purchase of a security and simultaneous sale of one or more other securities into which it was to be exchanged under a plan of reorganization, merger, or the like à Liquidations: purchase of shares which were to receive one or more cash payments in liquidation of the company’s assets. à Related Hedges: the purchase of convertible bonds or convertible preferred shares, and the simultaneous sale of the common stock into which they were exchangeable (p382). An “unrelated” hedge involves buying a stock or bond issued by one company and short-selling ( or betting on a decline in) a security issued by a different company. A “related” hedge involves buying and selling different stocks or bonds issued by the same company (p382n). 3. Secondary Company Stock Guide. à P/E 10 at 1970 à Price is no less than $1 à Financial condition: (a) current assets / current liabilities 1.5; (b) debt 110% net current assets. à Earnings stability: No deficit in the last 5 years à Dividend record: some current dividend. à Earnings growth: Last year’s earnings more than those of 4 years ago. à Price: less than 120 % net tangible assets. à Issue ranked by Standard Poor’s as average or better in quality. · Things about good will In Graham’s terms, a large amount of goodwill can result from two causes: a corporation can acquire other companies for substantially more than the value of their assets, or its own stock can trade for substantially more than its book value (p389n). if the market does not like a company, not only renowned trade names but land, buildings, machinery, and what you will , can all count for nothing in its scales (p392). · Special Situations or “Workouts” (p393). Three cases: 1. B announced a plan to acquire control of K by giving 4/3 shares of its own stock in exchange for one share of K. On the following day, in active trading. B closed at 26 and K at 28. If an “operator” had bought 300 shares of K and sold 400 B at these prices and if the deal were later consummated on the announced terms, he would have had a profit of 24%. 2. NB offered to buy control of APC at $11 in cash. The stock was selling at about 8.5; it closed the month at 9. Here the gross profit indicated was originally about 25%. 3. UMC, which had ceased its business operations, asked its shareholders to ratify dissolution of the concern. The treasurer indicated that the common stock had a book value of $28.5/share, a substantial part of which was in liquid form. The stock closed 1970 at 21.5, indicating a possible gross profit here, if book value was realized in liquidation, of more than 30%. · Merger arbitrage is wholly inappropriate for most individual investors (p394). An increasing proportion of the mergers announced failed to be consummated. Reasons include antitrust intervention, shareholder opposition, change in “market conditions,” unfavorable indications from further study, inability to agree on details, and others. · Looking Under The Right Rocks Many of the best professional investors first get interested in company when its share price goes down, not up. Look at the daily list of new 52-week lows in the WSJ or similar table in the “Market Week” section of Barron’s. · Return on Invested Capital (ROIC) p398 Net income / EPS have been distorted by factors like stock-option grants and accounting gains and charges. ROIC = Owner Earnings / Invested Capital Owner Earnings = Operating Profit + Depreciation + Amortization of good will – Income tax (paid at the company’s average rate) – cost of stock options – “Maintenance” (or essential) capital expenditures – any income generated by unsustainable rates of return on pension funds (as of 2003, anything greater than 6.5%) Invested Capital = Total Assets + past accounting charges that reduced invested capital – Cash (as well as short-term investments and non-interest-bearing current liabilities) ROIC has the virtue of showing, after all legitimate expenses, what the company earns from its operating businesses—and how efficiently it has used the shareholders’ money to generate that return. An ROIC of at least 10% is attractive; even 6% or 7% cab be tempting if the company has good brand names, focused management, or is under a temporary cloud. · What a company’s parts are worth? Check “comparables”, or the prices at which similar businesses have been acquired over the years. It is painstaking and difficult work: start by looking at the typically lists the industrial sector, revenues, and earnings of each subsidiary (the “Management Discussion and Analysis” may also be helpful.) Then search a news database like Factiva, ProQuest, or LexisNexis for example of the other firms in the same industries that have recently been acquired. Using the EDGAR to locate their past annual reports, you may be able to determine the ratio of purchase price to the earnings of those acquired companies. You can then apply that ratio to estimate how much a corporate acquirer might pay for a similar division of the company you are investigating. By separately analyzing each of the company’s divisions this way, you may be able to see whether they are worth more than the current stock price. · Make sure the company is leading by people who “think like owners, not just managers” (p399). Two simple test: 1. Are the company’s financial statements easily understandable, or are they full of obfuscation? 2. Are “nonrecurring” or “extraordinary” or “unusual” charges just that , or do they have a nasty habit of recurring? Look for managers who are “good partners”—meaning that they 1. Communicate candidly about problems 2. Have clear plans for allocating current and future cash flow 3. Own sizable stakes in the company’s stock (preferably through cash purchases rather than through grants of options). But do not talk more about the stock price than about the business. Some funds favors firms that limit issuance of stock options to roughly 3% of shares outstanding. Check the back page of the company’s annual report, where the heads of its operating divisions are listed. If there’s a lot of turnover in those names in the first one or two years of a new CEO’s regime, that’s probably a good sign; he’s cleaning out the dead wood. But if high turnover continues, the turnaround has probably developed into turmoil. · Warren Buffett’s approach (p401): He looks for what he calls “franchise” companies with strong consumer brands, easily understandable business, robust financial health, and near monopolies in their markets, like HR Block, Gillette, and the Washington Post Co. Buffett likes to snap up a stock when a scandal, big loss, or other bad news passes over it like a storm cloud—as when he bought Coca-Cola soon after its disastrous rollout of “New Coke” and the market crash of 1987. he also wants to see managers who set and meet realistic goals; build their businesses from within rather than through acquisition; allocate capital wisely; and do not pay themselves hundred-million-dollar jackpots of stock options. Buffett insists on steady and sustainable growth in earnings, so the company will be worth more in the future than it is today. · Chapter 16: Convertible Issues and Warrants (p403) Ø The convertible issues rank as much more important than the warrants. Convertible issues are claimed to be especially advantageous to both the investor and the issuing corporation. The investor receives the superior protection of a bond or preferred stock, plus the opportunity to participate in any substantial rise in the value of the common stock. The issuer is able to raise capital at a moderate interest or preferred dividend cost, and if the expected prosperity materializes the issuer will get rid of the senior obligation by having it exchanged into common stock. Thus both sides to the bargain will fare unusually well. But in exchange for the conversion privilege the investor usually gives up something important in quality or yield, or both. Conversely, if the company gets its money at lower cost because of the conversion feature, it is surrendering in return part of the common shareholders’ claim to future enhancement. Convertible bonds do not automatically offer “the best of both worlds.” Higher yield and lower risk do not always go hand in hand (p404n). Ø As Graham warns, convertible securities always come out of the woodwork near the end of a bull market. Ø Convertible preferred stock now accounts for only 1/8 of the market (p406n). Ø A convertible preferred is safer than the common stock of the same company. It carries smaller risk of eventual loss of principle. But in most cases the common would not have been an intelligent purchase to begin with, at the ruling price, and the substitution of the convertible preferred did not improve the picture sufficiently （ common stock 本身就不咋地） . Furthermore, a good deal of the buying of the convertibles was done by investors who had no special interest or confidence in the common stock but who were tempted by what seemed an ideal combination of a prior claim plus a conversion privilege close to the current market. In a number of instances this combination has worked out well, but the statistics seem to show that it is more likely to prove a pitfall. Even when a profit appears it brings a dilemma with it. Should the holder sell on a small rise/ should he hold for a much bigger advance; if the issue is called—as often happens when the common has gone up considerably –should he sell out then or convert into and retain the common stock? (p407 with a example) Ø The soundness of investment in convertible issues can only be tested by their performance in a declining stock market—and this ahs always proved disappointing as a whole. In recent years, convertibles have tended to outperform the SP500, but they have typically underperformed other bonds. Ø The real point is that some of the original purchasers converted their bonds into the stock and held the stock through its great decline. In so doing they ran counter to an old maxim of Wall Street, which runs: “Never convert a convertible bond.” Because once you convert you have lost your strategic combination of prior claimant to interest plus a chance for an attractive profit. You have probably turned from investor into speculator, and quite often at an unpropitious time because the stock has already had a large advance (p409). Ø Our general attitude toward new convertible issues is thus a mistrustful one. If a new issue is a really strong one, it is not likely to have a good conversion privilege (p409). Ø The convertible bonds had the important advantage to the company of bringing in a much wider class of buyers since the bonds were popular with many financial institutions which possess huge resources but some of which were not permitted to buy stocks (p410). · Effect of Convertible Issues on the Status of the Common Stock In a large number of cases convertibles have been issued in connection with mergers or new acquisitions. Typically the transaction results in a pro forma increase in the reported earnings per share of common stock; the shares advance in response to their larger earnings. But there are two offsetting factors. 1. Dilution of the current and future earnings that flows arithmetically from the new conversion rights. This dilution can be quantified by taking the recent earnings, or assuming some other figures, and calculating the adjusted EPS if the entire convertible shares or bonds were actually converted. In recent years, convertible bonds have been heavily issued by companies in the financial, health-care, and technology industries. · Switches from Common into Preferred Stocks: profit sometimes (p411) · Stock Option Warrants: we consider them as a near fraud (p413) not common now (p413n) They are unities of an equal number of common shares and warrants to buy additional common shares at the same price. Ordinarily, a common-stock issue has the first right to buy additional common shares when the company’s directors find it desirable to raise capital in this manner. This so-called “pre-emptive right” is one of the elements of value entering into the ownership of common stock—along with the right to receive dividends, to participate in the company’s growth, and to vote for directors. When separate warrants are issued for the right to subscribe additional capital, that action takes away part of the value inherent in an ordinary common share and transfers it to a separate certificate. The company does not derive an advantage (additional capital) from the creation of these warrants. Ordinary there is no way in which the company can require the warrant-holders to exercise their rights, and thus provide new capital to the company, prior to the expiration date of the warrants… large issues of stock-option warrants serve no purpose, except to fabricate imaginary market values (p415). When calculate the P/E, we should combine the value of warrants per share of common stock with price of common stock alone. Will someone soon invent and sell on installments a right to buy a right to buy a share, and so on (p432)? · Commentary for the convert (p418) If you own a convert, you also hold an option: you can either keep the bond and continue to earn interest on it, or you can exchange it for common stock at a predetermined ratio . (An option gives its owner the right to buy or sell another security at a given price within a specific period of time.) Because they are exchangeable into stock, convertibles pay lower rates of interest than most comparable bonds. Example (p418n): 4.75% convertible subordinated notes issued by DC. They pay $47.5 in interest per year and are each convertible into 24.24 shares of the company’s common stock, a “convertible ratio” of 24.24. As of 2002, DC stock was priced at $5.66/share, giving each bond a “convertible value” of $137.2 ($5.66*24.24). Yet the bonds traded roughly 6 times higher, at $881.30—creating a “conversion premium”, or excess over their conversion value, of 542%. (881.30-137.2) / 137.2 = 542%. If you bought at that price, your “break-even time,” or “payback period,” was very long. It going to take (881.30-137.2)/47.50 = 16 years to earn back that conversion premium. From 1957 through 2002, convertible bonds earned and annual average then return of 8.3%—2% below the total return on stocks, but with steadier prices and shallower losses. Note: 8.3% does not include any management fees or trading costs. In the real world, the return would have been roughly 2% lower. Convertibles offer less income and more risk than most other bonds. They act more like stocks than bonds. Most converts are now medium-term, in the 7-10 year range; roughly half are investment-grade; and many issues now carry some call protection. All these factors make them less risky than they used to be. However, most convertible bonds remain junior to other long-term debt and bank loans—so, in a bankruptcy, convertible holders do not have prior claim to the company’s assets. And, while they are not nearly as dicey as high-yield “junk” bonds, many converts are still issued by companies with less than sterling credit ratings. Finally, a large portion of the convertible market is held by hedge funds, whose rapid-fire trading can increase the volatility of prices. List of good convertible bond fund (p420). Never buy it with annual operating expenses exceeding 1.0% · Chapter 17: Four Extremely Instructive Case Histories (p422) 1. Penn Central: an overpriced “tottering giant” with big financial weakness à The interest charges of the PC system are shown to have been earned 1.91 times. It had been paying income taxes for the past 11 years. The coverage of its interest charges before taxes was less than two times—a totally inadequate figure against the conservative requirement of 5 times. à The tact that the company paid no income taxes over so long a period should have raised serious questions about the validity of its reported earnings. à The bonds of the PC could have been exchanged in 1968 at no sacrifice of price or income, for far better secured issues (?) à P/E is about 24, but any analyst worth his salt would have wondered how “real” were earnings of this sort reported without the necessity of paying any income taxes thereon. à In 1966 the newly merged company had reported lovely earnings, but those earnings are before a special charge of $12/share to be taken in 1971 for “costs and losses” incurred on the merger. à The operating picture was very bad in comparison with other company. 2. Ling-Temco-Vought. (p425): an empire building conglomerate; an Serial Acquirers à Quick and unsound “empire building”, become 14th biggest firm with 14 years from a million dollar firm. à Pilling up every possible chare in one year is sometimes called “big bath” or “kitchen sink” accounting. This bookkeeping gimmick enables companies to make an easy show of apparent growth in the following year. à If we deduct the preferred stock at full value an exclude the good-will items and the huge bond-discount “asset,” there would only a much less EPS than reported. The “bond-discount asset” means the LTV had purchased some bonds below their par value and was treating that discount as an asset, on the ground that the bonds could eventually be sold at par. à The debt is extremely high. à The losses in 1969 far exceeded the total profits 3. NVF (p429): an merger in which a tiny firm took over a big one à An extreme example of one corporate acquisition, in which a small company absorbed another seven times its size, incurring a huge debt and employing some startling accounting devices. à The take over terms per share were $70 face amount of NVF junior 5%bonds, due 1994, plus warrants to buy 1.5 shares of NVF stock at $22 per share of NVF. NVF issued $102 million of its 5%bonds and warrants for 2.2 million of its shares. Had the offer been 100% operative the consolidated enterprise would, for the year 1968, have had $163 million in debt, only $2.2 million in tangible stock capital, $250 million of sales. à The Accounting Gimmicks I can not understand (p431) à In 1969, NVF bought in 650k warrants at a price of $9.38 when NVF had only $700k in cash and had $4.4M of debt due in 1970. It was buying in this warrant “paper money” at a time when its 5% bonds were selling at less than 40cents on the dollar—ordinarily a warning that financial difficulties lay ahead. à Changed its method of arriving at its pension costs, and also adopted lower depreciation rates. These accounting changes added about $1/share to EPS. à The market price of the stock and warrants was about $14m against a bonded debt of $135m. 4. AAA Enterprises (p433): an IPO of shares in a basically worthless company à an extreme example of public stock-financing of a small company; its value based on the magic word “franchising” à After IPO, it was selling at 115 P/E or 10 times of its book value. à During 1999 and 2000, many IPOs were deliberately under-priced to “manufacture” immediate gains that would attract more attention of the next offering. 5. Lucent (p438): another huge company à Purchased a company for $4.8 billion—of which $4.8 billion was “good will” though the company had 150 employees, no customers, and 0 revenues. à Lent $1.5 billion to purchasers of its products. It also on hook for $350 billion in guarantees for money its customers had borrowed elsewhere. The total of these “customer financings” had doubled n year—suggesting that purchasers were running out of cash to buy Lucent’s products. What if they ran out of cash to pay their debts for Lucent? à Treated the cost of developing new software as a “capital assets”. 6. Tyco: the acquisition magician à Acquired approximately 200 companies. If Tyco’s strategy of growth-through-acquisition was such a great idea, how come it had to spend an average of $750 million a year clearing up after itself? Tyco called them “merger” or “restructuring” or “other nonrecurring” costs. à Tyco was not in the business of making things—but rather in the business of buying other companies that make things 7. AOL took Time Warner. à This “merger of equals” was designed to give AOL’s shareholders 55% of the combined company—even though Time Warner was five times bigger. à For the second time in three years, the SEC was investigating whether AOL had improperly accounted for marketing costs. 8. eToys à eToys had produced total sales of $30.6m, on which it had run a net loss of $30.8m—meaning that eToys was spending $2 to sell very dollar’s worth of toys. · Chapter 18: A Comparison of 8 Pairs of Companies (p446) Please check the book, some good points listed below. 1. A company can be a giant, or it can deserve a giant P/E ratio, but both together are incompossible (p475). 2. Adding a company to SP 500 would make it compulsory holding for index funds and other big investors—and that sudden rise in demand was sure to drive the stock even higher, at least temporarily. With some 90% of Yahoo’s stock locked up in the hands of employees, venture-capital firms, and other restricted holders, just a fraction of its shares could trade. So thousands of people bought the stock only because they knew other people would have to buy it – and price was no object (p476). 3. In the last five months of 1999, the stock price of CMGI zoomed up to $138, CMGI spent $4.1 billion on acquisitions. Virtually all the “money” was CMGI’s own privately-minted currency: its common stock, now valued at a total of more than $40 billion. It was a kind of magical money merry-go-round. The higher CMGI’s own stock went, the more it could afford to buy. The more CMGI could afford to buy, the higher its stock went. And then, quite suddenly, everything went into reverse. 4. Nortel’s accounts receivable—sales to customers that had not yet paid the bill—had shot up by $1 billion in a year. The company said the rise “was driven by increased sales in the fourth quarter of 1999”. However, inventories had also ballooned by $1.2 billion-meaning that Nortel was producing equipment even faster than those “increased sales” could unload it. Meanwhile, Nortel’s “long-term receivables”—bills not yet paid for multi-year contracts-jumped from $519 million to $1.4 billion. And Nortel was having a hard time controlling costs; its selling, general, and administrative expense (or overhead) had risen from 17.6% of revenues in 1997 to 18.7% in 1999. All told, Nortel had lost $351 million in 1999. · Chapter 19: Shareholders and Managements: Dividend Policy (p487) 1. Share holders are justified in raising questions as to the competence of the management when the results: à Are unsatisfactory in themselves à Are poorer than those obtained by other companies that appear similarly situated à Have resulted in an unsatisfactory market price of long duration. à You should judge the efficiency of management by comparing each company’s profitability, size , and competitiveness against similar firms in its industry (p499) 2. Generally, poor managements are not changed by action of the “public stockholders,” but only by the assertion of control by an individual or compact group. 3. If its operating results and the resulting market price are highly unsatisfactory, it may become the target of successful take-over move. 4. Dividend Policy: in the 1990s, the stronger the company was, the less likely it was to pay a dividend—or for its shareholders to want one. The “payout ratio” (dividends/net income) dropped form 60%~70% in Graham’s day to 35% ~40% by the end of the 1990s (p489n). The company wants to keep the money for growth purpose, the shareholders want to get it. 5. Stock split: its purpose is to establish a slower market price for the single shares. Today, virtually all stock splits are carried out by a change in value. In a three-for-one split, one share becomes three, each trading at a third of the former price. Only in rare cases is a sum transferred “from earned surplus to capital account,” as in Graham’s day (p493n). 6. Subscription rights, often simply know as “rights” 配股 . They confer upon an existing shareholder the right to buy new shares, sometimes at a discount to market price. A shareholder who does not participate will end up owning proportionately less of the company, thus, as is the case with so many other things that go by the name of “rights,” some coercion is often involved. Rights are most common today among closed-end funds and insurance or other holding companies (p495n). 7. A good example: The Enron End-Run (p500). Always read the proxy statement before (and after) you buy a stock. In its proxy statement, which it sends to every shareholder, a company announces the agenda for its annual meeting and discloses details about the compensation and stock ownership of managers and directors, along with transactions between insiders and the company. Share holders are asked to vote on which accounting firm should audit the books and who should serve on the board of directors. If you use your common sense while reading the proxy, this document can be like a canary in a coal mine (p501). 8. While some companies put their cash to good use, many more fell into two other categories: those that simply wasted it, and those that piled it up far faster than they could possibly spend it. 9. A study found that from 1995 through 2001, 61% out of more than 300 large mergers ended up destroying wealth for the shareholders of the acquiring company—a condition known as “the winner’s curse” or “buyer’s remorse”. A similar academic study found that acquisitions of private companies and subsidiaries of public companies lead to positive stock returns, but that acquisitions of entire public companies generate losses for the winning bidder’s shareholders. (p505n) 10. Many companies don’t know how to turn excess cash into extra returns. With interest rates near record lows, such a mountain of cash produces lousy returns if it just sites around. Statistical evidence tells us that when current dividends are low, future corporate earnings also turn out to be low. And when current dividends are high, so are future earnings. In short, most managers are wrong when they say that they can put your cash to better use than you can. Paying out a dividend does not guarantee treat results, but it does improve the return of the typical stock by yanking tat least some cash out of the managers’ hands before they can either squander it or squirrel it way (p506n). 11. What about the argument that companies can put spare cash to better use by buying back their own shares? (p506) When a company repurchases some of its stock, it reduces the number of its shares outstanding. Even if its net income stays flat, the company’s EPS will rise, since its total earnings will be spread across fewer shares. Better yet, unlike a dividend, a buyback is tax-free to investors who don’t sell their shares. And if the shares are cheap, then spending spare cash to repurchases them is an excellent use of the company’s capital. The stock options granted by a company to its executives and employees give them the right (but not the obligation) to buy shares in the future at a discounted price. Because hundreds of millions of options may be exercised in a given year, the company must increase its supply of shares outstanding. Then, however, the company’s total net income would be spread across a much greater number of shares, reducing its EPS. Therefore, the company typically feels compelled to buy back other shares to cancel out the stock issued to the option holders. In 1998, 63.5% of CFO admitted that counteracting. So, it is often: “Sell low, by high.” Other two factors: à Companies get a tax break when executives and employees exercise stock options. Incredibly, although options are considered a compensation expense on a compensation expense on a company’s tax returns , they are not counted as an expense on the income statement in financial reports to shareholders. à A senior executive heavily compensated with stock options has vested interest in favoring stock buybacks over dividends. Why? For technical reasons, options increase in value as the price fluctuations of a stock grow more extreme. But dividends dampen the volatility of a stock’s price (p509n). So if the managers increased the dividend, they would lower the value of their own stock options. · Chapter 20: Margin of Safety (p512) 1. Margin of safety for bonds: à A railroad should have earned its total fixed charges better than 5 times (before income tax), taking a period of years, for its bonds to qualify as investment-grade issues. à Margin of safety for bonds may be calculated, alternatively, by comparing the total value of the enterprise with the amount of debt (A similar calculation may be made for a preferred-stock issue.) If the business owes $10 M and its fairly worth $30M, there is room for a shrinkage of 2/3 in value—at least theoretically—before the bondholders will suffer loss. The amount of this extra value, or “cushion,” above the debt may be approximated by using the average market price of the junior stock issues over a period of years (not using book value). 2. Margin of safety for common stock (p514): à In the ordinary common stock, bought for investment under normal conditions, the margin of safety lies in an expected earning power considerably above the going rate of bonds. Assume in a typical case that the earning power is 9% on the price and that bond rate is 4%; then the stock buyer will have an average annual margin of 5% accruing in his favor. Some of the excess is paid to him in the dividend rate; even though spent by him, it enters into his overall investment result. Over a ten-year period the typical excess of stock earning power over bond interest may aggregate 50% of the price paid. This figure is sufficient to provide a very real margin of safety. à The chief losses to investors come from the purchase of low-quality securities at items of favorable business conditions ( 好年景的滥股 ). The purchasers view the current good earnings as equivalent to “earning power” and assume that prosperity is synonymous with safety. It is in those years that bonds and preferred stocks of inferior grade can be sold to the public at a price around par. à Coverage of interest charges and preferred dividends must be tested over a number of years. So does common-stock earnings if they are to qualify as indicators of earning power. 3. The philosophy of investment in growth stocks parallel in part and in part contravenes the margin-of-safety principle. à The growth-stock buyer relies on an expected earning power that is greater than the average shown in the past. à The average market level of most growth stocks is too high to provide an adequate margin of safety for the buyers, and then a simple technique of diversified (expected) buying in this field may not work out satisfactorily. 4. Diversification is an established tenet of conservative investment (p518). 5. Distinction between conventional and unconventional investments (p520). à Conventional investment portfolio: US government issues and high-grade, dividend paying common stocks; state and municipal bonds for those who will benefit sufficiently by their tax-exempt features; first quality corporate bond when yield sufficiently more than US savings bonds. à Unconventional investment portfolio is suitable only for the enterprising investor. It covers a wide range: undervalued common stocks of secondary companies, which we recommend for purchase when they can be bought at 2/3 or less of their indicated vale; medium-grade corporate bonds and preferred stocks when they are selling at such depressed prices. 6. A sufficiently low price can turn a security of mediocre quality into a sound investment opportunity provided that buyer is informed and experienced and that he practices adequate diversification (p521). There is no such thing as a good or bad stock; there are only cheap stocks and expensive stocks. Even the best company becomes a “sell” when its stock price goes too high, while the worst company is worth buying if its stock goes low enough (p521n). 7. To sum up (p523): Investment is most intelligent when it is most businesslike. Here are the business principles if it is to have a chance of success. à Know what you are doing – know your business: do not try to make “business profits” out of securities—that is, returns in excess of normal interest and dividend income—unless you know as much about security values as you would need to know about the value of merchandise that you proposed to manufacture or deal in. à Do not let anyone else run your business unless (1) you can supervise his performance with adequate care and comprehension or (2) you have unusually strong reasons for placing implicit confidence in his integrity and ability. à Do not enter upon an operation—that is manufacturing or trading in an item—unless a reliable calculation shows that I has fair chance to yield a reasonable profit. à Have te courage of your knowledge and experience. If you have formed a conclusion form the facts and if you know you judgment is sound, act on it—even though others may hesitate or differ. 8. Commentary: à Losing some money is an inevitable part of investing, but you must take responsibility for ensuring that you never lose most or all of your money. Following Graham’s “margin of safety” by refusing to pay too much for an investment, you minimize the chances that your wealth will ever disappear or suddenly be destroyed. à Concludes Bernstein: “In making decisions under conditions of uncertainty the consequences must dominate the probabilities. We never know the future.” Thus, as Graham has reminded you in every chapter of this book, the intelligent investor must focus not just on getting the analysis right. You must also ensure against loss if your analysis turns out to be wrong—as even the best analyses will be at least some of the time. · Appendixes for Important Rules Concerning Taxability of Investment Income and Security Transactions (P561). Glossary: · Hedge fund (p13n): Pool of money, largely unregulated by the government, invested aggressively for wealthy clients. · Gordon equation (p25n): stock market’s future return is the sum of the current dividend yield plus expected earnings of growth.( should also plus inflationary growth see p 85 1.5%to 2.0%+2.4%+1.9%=5.8% to 6.3% Growth + inflation + dividend yield) · TIPS (p26n): bond rises in value if the CPI goes up. · SP (p27n) 500: roughly 70% of the total value of the U.S. equity market. · Selling Short (p32n) · Ticker symbol (p40) · CPI and website (p58) · Municipals (p92) · Moody’s or Standard Poor’s rating (p95) · A bond’s coupon (p98) is its interest rate. A low-coupon bond pays a rate of interest income below the market average. High-coupon 8%, or preferred stocks paying large dividend yields (10%). If a company must pay high rates of interest in order to borrow money, which is a fundamental signal that it is risky. · Bond yield: the market price of a bond may include the accrued interest since the last coupon date. The interest rate adjusted for the current price of the bond is called the current yield or earning yield (this is he nominal yield multiplied by the par value and divided by the price) (wiki). · Bond par value (p136n): bond prices are quoted in percentages of “par value”, or 100. A bond priced at “85” of is selling at 85%of its principal value. · Preferred stocks (p98~99) · Growth stock: the stock has increased its per-share earnings in the past at well about the rate of common stocks generally and is expected to continue to do so in the future (p115). · Emerging markets bond and websites (p158) (foreign bonds) · Control persons (p162n) who have a close relationship with the particular company – senior managers or direcotors. · Net asset value = book value = balance-sheet value = tangible-asset value is total assets-total liabilities (p198). Also suggest to use share holders’ equity subtract all soft assets such as goodwill, trademarks, and other intangibles. · Fund / closed-end fund / open-end fund / balanced / funds / stock-funds / hedge funds / load funds / no-load funds /. Website to find major types of MF (p226, p227) · Regulated investment company or RIC, every mutual fund is taxed as RIC, which is exempt from corporate income tax. · ETF exchange-traded index funds (P253n) · Investment bankers: a firm that engages to an important extent in originating, underwriting, and selling new issues of stocks and bonds. (To underwrite means to guarantee to the issuing corporation, or other issuer, that the security will be fully sold.) Investment banking is perhaps the most respectable department of Wall Street community, because it is here that finance plays its constructive role of supplying new capital for the expansion of industry (p268). The relationship between the investment banker and the investor is basically that of the salesman to the prospective buyer. · Junior / Senior stock issues (p285n): Junior means shares of common stock. Preferred stock is considered “senior” to common stock because the company must pay all dividends on the preferred before paying any dividends on the common. · Dilution (p312n): a stock with high trading volume is said to be “liquid”. When a company goes public in an IPO, it “floats” its shares. A company drastically diluted its shares (with large amounts of convertible debt or multiple offerings of common stock) was said to have “watered” its stock. · Efficient markets hypothesis (EMH) The price of each stock incorporates all publicly available information about the company. With millions of investors scouring the market every day, it is unlikely that severe mis-pricings can persist for long (p363n). The problem with stock market today is not that so many financial analysts are idiots, but rather that so many of them are so smart. As more and more smart people search the market for bargains, that very act of searching makes those bargains rarer—and, in a cruel paradox, makes the analysts look as if they lack the intelligence to justify the search. The market’s valuation of a given stock is the result of a vast, continuous, real=time operation of collective intelligence. Most of the time, for most stocks, that collective intelligence gets the valuation approximately right. Only rarely dose Graham’s “Mr. Market” send prices wildly out of whack. (p380n) · Working Capital = current assets - current liabilities · Net Working Capital = current assets – total liabilities · Long-term debt includes preferred stock, excludes deferred tax liabilities. · Strait Preferred Stock: it issued in perpetuity and pays the stipulated rate of interest to the holder. · A bond is “called” when the issuing corporation forcibly pays it off ahead of the stated maturity date, or final due date for interest payments (p407n). · Profit margin: net earnings / net sales (p484). Net sales is gross sales less returns, allowances, freight, and cash discounts. · “Earning power” is Graham’s term for a company’s potential profits or, as he puts it, the amount that a firm “might be expected to earn year after year if the business conditions prevailing during the period were to continue unchanged”. Graham intended the term to cover periods of 5 years or more. You can crudely but conveniently approximate a company’s earning power per share by taking the inverse of its P/E ratio. A stock with 1 P/E ratio of 11 can be said to have earning power of 9%. Today earning power is often called “earning yield.” (p514n)
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齐若散 2012-2-11 22:55
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热度 26 赫然 2011-11-11 01:27
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