[PloutosNX]

Here are the 6 points given by Benjamin Graham.

1) Size    
    Turnover: 100 million
    
2) Financial situation    
    Current assets = 2* Current liabilities
    Long term debt = maximum working capital requirement

    Max debt = 2*equity
    
3) Profit stability    
    Positive result (25 years)
    
4) Dividend statistics    
    Continuous payment (10 years)
    Growing dividends (according to Jerome)
    
5) Growth of results    
    Earnings per share growth min 1/3 over 10 years (calculated as 3-year average for start and end)
    
6) Moderate price/profit ratio
    Max current price = 15*average profit of the last 3 years

[PloutosNX]

Hello Jerome,

Here is an “official” link with some additional information.

https://www.kmu.admin.ch/kmu/fr/home/savoir-pratique/finances/financement/financement-par-emprunt/crowdfunding/le-crowdlending-emprunter-sans-l-aide-des-banques.html

Good day,
Xavier

[PloutosNX]

Hi,

Thank you for these remarks.
I will try to concentrate on understanding and interpreting the different values.

Good evening,
Xavier

[PloutosNX]

Good evening Jerome,

It is true that there are many large companies that have not been quick enough to change or have stuck to outdated management.

In your experience for this kind of action what would be the minimum and maximum?
It is linked to each person's capacity and the number of shares that one wishes to have in the portfolio, I know that well, but there must be a range between what is the minimum, the reasonable and the maximum not to be exceeded, either as a percentage of the capital, or in absolute value because we risk moving the market too much.

The volume was 100 (per day I guess) and the average was 500, so we have a range of 2'000USD to 10'000USD. I think that below 500USD it is not interesting to position yourself, because the fees are too high and around 20-25k we risk waiting a while to buy/sell at limit price.

By the way, do you take this kind of action through PostFinance or Interactive Brokers?

I'm trying to think whether it's better to set a percentage of capital (including rebalancing perhaps?) or a fixed value per position.

Sorry I'm straying again from the basic topic which was to be able to analyze this company and to be able to draw my own conclusions. I would say above all to understand all the different ratios and other values.

Good evening,
Xavier

[PloutosNX]

Hello Jerome,

Thank you for these details, so I am starting to better understand certain themes and mechanisms, I am going in the right direction.

This is what I always thought I understood about micro and small caps, as an individual it is an alternative and advantage in not having competition from institutions, but there is also more risk of bankruptcies if we make a bad selection I think.

A practical question, I think that in the case of a micro cap it is wrong to reason in percentage of the portfolio?
How do you go about defining an allocation at this level so as not to influence the market too strongly?

Looking forward to reading you,
Xavier

[PloutosNX]

Hi,

I'm going to digress from the basic topic, apart from the manipulations that certainly take place "internally", the risk also exists with the USA? China holds a large percentage of US bonds, right?

This reminds me of a movie (which I haven't seen yet - there are always only 24 hours in a day, to my great despair -) but which seems to be very interesting and related to the financial subject. I don't know if you've seen it yet, but the title is "The China Hustle" ( https://en.wikipedia.org/wiki/The_China_Hustle )

Good day,
Xavier

[PloutosNX]

Hello Jerome,

Yes yes, I forgot to mention that it was not Japan, but China.

If I come back to China, I read that bonds would also be a possibility there.
Have you already looked at this side to diversify those of the US Treasury (the TLT ETF)?

Good day,
Xavier

[PloutosNX]

Hello Jerome,

Thanks for the links, I will read them carefully. I had already read other documents but completely forgot! The only reason for coverage is for companies when signing a contract from what I remember, but I will delve into your explanations.

You are mostly focused on dividend stocks, but how would you analyze this company Xiaomi Corporation (1810.HK)? It also comes from the land of the rising sun and has been listed for a short time and has been losing since the beginning. I know the adage not to catch a falling knife, but I will be curious.

Good evening,
Xavier

[PloutosNX]

Hello Jerome,

Yes, it is a fact that being able to disconnect from work is not always easy for me.

A question comes to mind, do you hedge your positions against currency risk? If so I think you need a margin account with IBKR.

Have a nice end of the day,
Xavier

[PloutosNX]

Hello Jerome,

Thank you for your reply.

That's what I thought with FT, but I also changed your settings a bit to be less selective. Your article is a working basis, just like the various books I've read.

It's good to know that in 2009 it was a miraculous catch! I only have one regret, that I didn't take an interest in the markets at that time when I was finishing my studies...

It is certain that concerning the famous "GAMAF" many will have disillusionments, but the great mass of madness can push a little further I think, as in 2000 and the bubble of the "dotcom". The investment outside the value is also more subject to timing.

I think that the financial language is not the biggest problem, even if I sometimes have trouble making the connection between the French and English words, because as you say some words in French are less evocative or you need a whole sentence to describe a word in English (or in German it's the same thing from experience).
I am also more used to English terms, whatever the nature of the theme, but I tend to read works in French (B. Graham, W. Buffet, etc.) to understand better since it is an area that has never spoken to me or been clear to me.
My main problem is understanding what is behind the terms and as you say, that's where my "great void" comes from.

I have already read "The Intelligent Investor" and it is true that B. Graham's approach is very selective to ensure not to lose by investing at the wrong time. I also have the book "Security Analysis", but have not had time to read it yet. This is my main problem "time", between work and family, there is not much time and energy left. It is also very paradoxical to run after independence without being able to devote enough resources to do so...

You also mention that these works are dated, but it's in old pots that we make the best soups, right? The basis is always the same, whether it's crowd psychology or the search for yield, certain principles are timeless.

I think that understanding financial reports is the basis, because without this the different ratios and research tools do not allow for a correct approach.
I'm sure you'll find a great idea for the presentation and I'll be happy to read it. I'll also start the book "Security Analysis" since it's gathering dust at the moment.

Thanks for the two links, I'll check them out too. English or German doesn't bother me at all. I'll also be able to bounce back below to answer your last question.
I come from the canton which has more cows than inhabitants (there is a very good article if you don't know it yet on the region: https://desencyclopedie.org/wiki/Fribourg ), but I have been living for several years in the Zurich Oberland (Züri-Oberland in good local language)

Good day,
Xavier

[PloutosNX]

Thanks, that's what I thought, but I wasn't sure.
Unless I am mistaken, this comes when selecting geographic areas.

[PloutosNX]

Hello Jerome,

Yes, I am finishing reading B. Graham's works... I think a second reading will be necessary!

A question comes to mind regarding your answer on ETF evaluation.
I remember reading that you have a top-down approach to indices (therefore indirectly to ETFs), how do you evaluate this?

Have a nice end of the day,
Xavier

[PloutosNX]

Hello Jerome,

Regarding the display problem I noticed at the beginning of the week and as it was not always reproducible I had a doubt if you had already corrected it or not.

So it is not very convenient to have to come home with obligations at the moment.

So I'll just keep reading and wait for some titles to become more affordable. I'm a few months away from that.

I will enjoy continuing to ask questions!

See you soon,
Xavier

[PloutosNX]

Hello Jerome,

Momentum effect: be careful, I am only interested in this effect for three reasons:

    the stock dropped 20% or more, which makes me want to sell
    the market is below its xxx day moving average (eg 200) and I am not buying anything in this market
    A stock has excellent fundamentals and is not expensive, if it has good momentum it is the icing on the cake

I would never bother buying stocks or ETFs just because they have the best momentum at the moment. I know this strategy, it's true that it has proven itself in certain circumstances, but it is very volatile. And it is pure technique, which I hate. In my eyes, momentum is only of interest to avoid volatility (in the event of a fall) or to gain time on a cheap stock (and not have to wait 3 years for the market to realize it).

I must have misread and misunderstood what you wrote. But how and what momentum do you use to (in addition to the value aspect) find an interesting and cheap asset?

The PE ratio on stocks often doesn't mean much. On a stock ETF, it's even worse, since companies with negative PE ratios are excluded from the calculation, which totally distorts the data. As for the case you cite (TLT PE ratio), it actually means absolutely nothing. I think you saw it on a site like Yahoo Finance, but fortunately it's not indicated on iShares.

I haven't seen it anywhere, it was a question that came to me like that.

To assess whether the market value of an ETF is correct, we must compare it to its NAV (Net Asset Value), which is the sum of all the assets of the fund, minus the liabilities (and divide by the number of shares in circulation). iShares makes it easy for you by directly indicating the premium or discount of each ETF. Generally on large, very liquid ETFs, the difference is minimal and there is no need to ask yourself too much if the ETF is correctly valued. The market takes care of it all by itself!

Thanks, I didn't know this, so if the value is negative, it means that the ETF is cheap, all things considered of course.

So the question of whether the price to yield is correct is not about the ETF, but rather simply about whether US long-term bonds are expensive or not. In other words, whether long-term rates are historically low or not. And the answer is: they are miserable! (but still better than here…)

https://www.macrotrends.net/2521/30-year-treasury-bond-rate-yield-chart

I just understand that if they are miserable, the day they increase, their price will follow?

That being said, if you have read my series on diversification, you understand the important role of long bonds in a portfolio. They are the only asset class that is inversely correlated to stocks. And it is impossible to know how long these low rates will last. Maybe they can even go down further (and bonds will therefore increase in value as they have in recent months). For this reason I have decided to take a small line of around 10%, mainly for diversification purposes. But I would not venture higher as long as rates are at this level.

I have already read the various articles on your site several times, as well as other reference works, but it is not so easy to understand and I try to prevent very big mistakes.

Just ask your questions online, my liver is already saturated by the Valais Fair 🙂

I will not fail to do so. First, I need to further deepen my understanding of corporate balance sheets and the correlation with useful ratios.

Sincerely
Xavier

PS: I noticed some display issues on your site. It does not display on the full width of the screen, but on a tiny portion, it makes me think of an error between the "mobile" and "desktop" mode.

[PloutosNX]

Hello Jerome,

Thank you for your reply.

In the meantime, I saw that you were interested in the "Momentum" effect, this has been something I've been thinking about for some time, because when there is nothing to do in the value, perhaps it's better to follow the herd by choosing a pool of 10-12 ETFs covering representative geographic and industrial sectors and buying every month the 2 (finally to be defined the number) with the best momentum over 1-3-6 months for example (also to be defined and including the weighting and whether or not we take volatility into account).
There are many possibilities and I haven't been able to look into it well enough yet.

I will look at the gold ETF to see if it is of interest.

I think US bonds at +20 years (via TLT) are really high, even if they provide 2% or so. The calculation with the PE should not be valid in this case. Is there a way to evaluate if the price relative to the yield is correct?

Is the PER of an ETF also a value to take into account or is it very uncertain due to the fact that there are a large number of actions included in it, therefore each with different characteristics.

I look at your asset allocation often, but I can't see the subtleties and reasoning behind it... I must lack experience unfortunately and so for the moment I'm staying on the sidelines.

I tried to make a "screen" using your method. By the way I have many other questions that have appeared, will it be for a next post or would drinking a beer be more pleasant?

Have a nice weekend.
Xavier

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