Michael Liew's Blog

I have just read finish one of John Mak's publications 'Kao Ba Fei Te Zhi Fu' (Taiwan Version).

So far I have read 3 of his publications (1 is still reading):
1) Investing, Berkshire & Buffett I
2) Investing, Berkshire & Buffett II
3) 'Kao Ba Fei Te Zhi Fu' (Taiwan Version)
4) Strategies for the Intelligent Investor (Reading)

These are the summaries (or important points that I feel):

1. The power of compounding: Knowing the power of compouding is still not enough; must bear in mind the importance of the power of compounding. Never and ever invest if never think to invest in a company for at least 10 years (15 years is better).

2. There are 2 kinds of companies what intelligent investors would invest:
a. The brand-name companies: The companies that the consumer would always think to buy because of the quality of product/service and/or the feeling of importance after they have bought the product/service or etc.
E.g. Coca-Cola company, Wal-mart has done an experiment before to ask the consumers to drink Coca-cola, Pepsi Cola and a soft drink, Sam's Choice which is produce by Wal-mart itself. After the experiment the consumers cannot differentiate which soft drink brand they are drinking. After that Wal-mart has put their own soft drink, Sam's Choice nearer to the entrance of their thousands of shops with the price only 50 per cent of the other 2 brands. But the consumer still choose to buy Coca-cola instead of others! This, is the company that intelligent investors like to invest.

b. High-productive/Low-cost operator companies: Warren Buffett always like to invest in the companies which are low-cost operator, e.g. GEICO, Borsheim's, Wal-mart etc. Low-cost operator companies are always the companies which are the most competitive in the industry and contribute the most for the society. When the economy circumstance is good, this kind of companies may not earning the most, but when the economy is bad, everyone can sees the difference! This, again, is the company that intelligent investors like to invest.

3. Intelligent Investors are those who are patience: to wait for the best timing for investments, to wait the companies that Intelligent Investors like to invest have a very low P/E ratio. The amount of money that intelligent investors invest will affect the result after the power of compouding.

4. Real estate is not the best choice for intelligent investors: In stock market, intelligent investors invest the companies have 24 per cent return on investment, which means 11 years will have 10 times, 22 years will have 100 times, 33 years will have 1,000 times, 44 years will have 10,000 times! Real estate is nearly impossible to increase its value in such a speed, if they do, the persons who would cry are the residents in that area/country.

5. Never and ever invest in computer-related companies, either hardware or software:
a. No matter how strong or how old the computer-related companies are, it may end up one day defeated by some young teenagers who are playing computer in their homes! Only invest in the companies that have long-term competitiveness in their industry.

b. For the computer companies which produce hardware products, when the economy circumstance is good, either the production companies or their 'mother' companies are very happy. But when the economy is bad, the computer companies are those who will suffer, because they have invested a lot of hardware machines in their companies. ("A horse that can count to ten is a remarkable horse - not a remarkable mathematician." by Warren Buffett)

How do you feel about these points? Welcome any comment! Thanks!