The Top Ten Attributes of Great Fundamental Investors by Michael J. Mauboussin.
The following is an excerpt of the full report:
“Perhaps the single greatest error in the investment business is a failure to distinguish between the knowledge of a company’s fundamentals and the expectations implied by the market price.”
The world of investing and business has seen a great deal of change in the past 30 years.
This report shares thoughts on the ten attributes of great fundamental investors. Accounting is the language of business and you need to understand it to appreciate economic value and to assess competitive positioning. Investors face a slew of psychological challenges.
Perhaps the most difficult is updating beliefs when new information arrives. Position sizing and portfolio construction still do not get the attention they warrant. The substantial shift from active to passive management has profound implications for the investment industry.
I started on Wall Street 30 years ago today…”
Read the full report [PDF] here.
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But first, what exactly is a corporate action? And why does it matter?
According to Investopedia,
A corporate action is any activity that brings material change to an organization and impacts its stakeholders, including shareholders, both common and preferred, as well as bondholders.
Photo: Hyflux AGM
Corporate actions includes:
- Stock Split and reverse split (consolidation)
- Dividend Payouts
- Mergers and Acquisitions
- Bonus Issue
- Rights Issue
- Share buybacks
Corporate actions are important source of indicators for the retail investors to monitor the company’s direction and effectively, the share price. There are some rules that investors and traders have to take note of, according to Li Guang Sheng (a top tier remisier and veteran community member):
- Officers and employees of the Company two weeks before the announcement of the Company’s financial results for the first three quarters and one month prior to the announcement of the full year results (“Black-out Period”). Usually there will be internal memo to notify and remind all Directors, officers and employees of the Company on compliance with the best practices on dealing in securities pursuant to Listing Rule 1207(19)(c), in not dealing with the Company’s securities during the Black-out Period. The Company, its Directors and officers should be aware that the Company should not deal in its own securities (including undertaking any share repurchases) during the Black-out Period. Therefore, the Company would wish to complied with the Listing Rule 1207(19)(c) and not run foul with SGX.
- If the players of the company shares belong to insiders, then during this period there may be less buyers and harder for you to run or sell your shares. Also if the company is undergoing share buyback and supporting the share prices through daily share buy back, the price may tank during the 2 weeks of no buying from the company or 4 weeks if it is the full year listing result period. So for those who trade heavy, be prepared to reduce your position 2 weeks prior to quarter result announcement due to less liquidity.
- Also take note on listed company share buy back rules,
- a) on-market purchases should not exceed 5% above the average closing market prices of the share over the last five market days;
- b) details of purchases to be released to the SGX-ST, if it is non-market purchases, by 9am on the next market day, or, if an off-market acquisition, by 9am on the second market day after the close of acceptance.
Watch this quick video of Guang Sheng where he explains why corporate actions are so important:
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