Investment, Coding and Actuary

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Trading as part of the spiritual practice

I was reading something very classic and inspiring on the Fool. The following contents is partially quoted from the website.

2 must have traits to be successful

Timeline

Investing in stocks requires a minimum five-year time horizon. It can be hard to be a long-term investor in a short-term world — which brings us to the second secret ingredient for investing greatness.

Temperament

Successful investors have the ability to remain calm and levelheaded when everyone around them is freaking out. That mindset makes the difference between investors who consistently outperform the market and investors who get lucky for a while. When a group of business-school students asked Buffett why so few have been able to replicate his investing success, his reply was simple: “The reason gets down to temperament.”

But how? The article goes on and give us some advice on how to keep a cool head. Continue reading


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Picking my first stock

I couldn’t recall the last time I look forwarded to Monday as much.

Monday is coming and the money start rolling! After register for an app called StockWars, I am ready to buy in my first virtual stock.

I decided to started with the area that I have most familiar with: insurance industry. Although many successful insurance companies are not public companies (in fact, a lot are private/mutual companies), there are a number of possible picks. With a focus on Property/Casualty side, I have my eyes on Traveler (TRV). Continue reading


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Ratios rattle: Price to Book, DSO and Turns

Price to Book is probably the less value ratio, with many companies nowadays do not need a lot of land and factories to make a very high-margin product. But here’s how we can do the ratio nevertheless:

EV/SE = ((Shares Out x Price) + Debt-Cash) / Shareholders’ equity

As a rule of thumb, some value investors will shun any companies that trade above 2 times book value or more.

DSO: Days Sales Outstanding is a measure how many days worth of sales the current accounts receivable (A/R) represents.

A company with a lower amount of days worth of sales outstanding is getting its cash back quicker and hopefully putting it immediately to use, getting an edge on the competition.

Step 1: Calculate Accounts Receivables Turnover

A/R Turnover = Sales for period / Average A/R for period Continue reading


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Working, working, working Capital!

The Working Capital, as is commonly known as “the capital that actually gets to work” (James, 2014), is simply the current assets minus current liabilities.

It’s the best way to judge how much a company has in liquid assets to build its business, fund its growth, and produce shareholder value.

We can divide Working Capital by the market capitalization (outstanding shares * share price – long-term debt – preferred shares). If the ratios is greater than 50% then the company is in great shape. However for some retailers it is better to take inventories from working cap before doing the ratio.


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Ratio Rattles: Current Ratio and Quick Ratio

Let’s look at two very easy ratios to detect the short term liquidity of the company: Current Ratio and Quick Ratio.

Current Ratio = Current Assets / Current Liabilities

As a general rule of thumb from The Morley Fool:

As a general rule, a current ratio of 1.5 or greater can meet near-term operating needs sufficiently. A higher current ratio can suggest that a company is hoarding assets instead of using them to grow the business — not the worst thing in the world, but it’s something that could affect long-term returns.

The information should be used again its competitors.

Since companies can manipulate and often bloat the inventory book value, I can use a second ratio:

Quick Ratio = (Current Assets – Inventories) / Current Liabilities

Most people look for a quick ratio greater than 1.0 to be sure there is enough cash on hand to pay bills and keep going.

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