Bershire Hathaway A stock - a simple analysis part 1

Quote of the day: "Show me a thoroughly satisfied man, and i will show you a failure." --Tomas Edison

In my earlier post on "Bershire Hathaway A stock - a simple analysis" over the weekend, i mentioned that the 50 days moving average intersect with the stock is an indication that the stock will continue in the downward trend. Indeed, as per today, the stock has drop from $93,750 to $93,500 per share.

Since now that the stock is below the 50 days moving average, there is an indication that it will drop further. Let see again.... the game is getting interesting.... we shall wait and see when the stock will rise again and what will the 50 days moving average response.... but in the meantime, i expect the stock to drop further.

The Ultimate Winning Formulae - Marketing by Giving

Quote of the day "Don't be afraid to fail. Don't waste energy trying to cover up failure. If you're not failing, you're not growing." -- H. Stanley Judo

I used to wonder why Stuart Tan setup the Internet Marketing Singapore Website and offer the services for free.... check it out at http://www.internetmarketingsingapore.com. There are forums, blog and tons of useful information for Internet marketer.. whether you are a newbie or intermediate or advanced Internet marketer. Occasionally, he will introduce free video to help newbies to jumpstart their Internet Marketing business. You can enjoy the list of compliled free video at http://internetmarketingsingapore.com/blog/category/free-video/.
The forum is attracting many like-minded Internet Marketers with different skills/knowledges set to contribute to each other needs and questions. It is a community that share and learning from each other to grow their business in Internet Marketing. I have benefited from it myself.

After reading Robert Allen book on "Multiple streams of Internet Incomes", i found the answer to Stuart Tan business strategy. Robert emphasized on Content-Traffic-Presell-Monetize, the four steps system as the key to a successful business in Internet Marketing. To be successful in Internet Marketing business, you need to setup the content, get traffic to your web site, capture the participants/viewers information to built relationship with them (Presell). The last and final showdown is to make money from them.

By setting up www.internetmarketingsingapore.com for free, he encourages MASSIVE participation from Internet Marketers all over Asia. Famous author of Rich dad, Poor dad, Robert Kiyosaki used to say that there are two type of marketing methods - marketing by giving and marketing by taking. Stuart is deploying the former, marketing by giving. He gives away valuable information, ideas, platform for interacting and communication (blog, forum) for FREE.

As the Forums and Information grow in quality and quatity, CONTENT will increased.

Not only that, many internet marketers who has benefited from the Internetmarketingsingapore will create a link to it from their own website, thus helping internetmarketingsingapore to rank top in a google search for keywords like "Internet marketing Singapore". TRAFFIC will also come not only from surfers discovering the website from Search engines, word of mouth marketing will ensure more Internet Marketers to reach out to the site for resources and information.

Through his interaction with the subscribers of the forums in the form of

• Teleseminar (at of the moment of this writing, he is organising a Teleseminar together with Great Affiliate Marketer, Shawn Collins next Wedneday. Click here to check it out. It Free! )
• Face-to-face subscriber night(where he will share useful information) and
• His participating in the forums and blog.

He has built an reputation as a giving and knowledgable top notch Internet marketer in Singapore and slowly but surely, in Asia. This is PRESELLING at the very best.

Imagine one day, he works out a product or service (Teleseminar/seminar or workshop or even ebooks related product) to help Every Internet Marketers to jumstart their Internet Marketing business. Not many will resist from buying from him. He has warm up the heart of this Internet marketers and they have trust and confidence in him after the long but useful presell process that he engage with them. Monetitize and MONETIZE. Why? After selling them one product, he can introduce subsequent new products to upsell or side-sell them. In additional, the website InternetMarketingSingapore will worth tons of million of dollars if he was to sell it off, which i bet he will not....for the sake of us and himself... looking into the potential of what Internetmarketingsingapore can do for him and Adam Khoo Learning Technologies.

By helping others to be successful, he will be more successful himself..... This is the key to success, the ultimat success formulae.

Bershire Hathaway A stock - a simple analysis

Quote of the day from Benjamin Franklin "The way to wealth, if you desire it, is as plain as the way to the market. It depends chiefly on 2 words. Industry and Frugality. That is, waste neither time or money, but make the best of both"






Take a look at the Nasdaq, Dow and S&P index for today..... they are all going down.

However, have a look at Bershire Hathaway A stock compare with the Major indexes like Dow Jones, Nasdaq, S&P500 and Amex:














For the last ten year, Berkshire Hathaway has perform much better than all the indexes except for Amex which is currently ahead of BRK.A.

Also noticed the chart in blue.. the Nasdaq index that has spike during the technology boom period from the 1999 to 2000.

Now let look at a month performance of BRK.A compare to its 50 days moving average:














At this moment, the BRK.A intersect with its 50 days moving average. Normally, from a technical analysis point of view, when a stock price is above the 50-day simple moving average, then there might be a tendency toward continued growth. Since in this case, they meet at a cross junction with the 50-day average tending up and the stock tending down, then it might goes down further. Let see.... :)



















If you look at the Net Profit margin, it is just a moderate 11.37% for an investment firm like Birshire Hathaway, so the remaining 88.63% go to COGS (which is not much for investing firm), operating expenses(OE) and non-recurring charges(NRC). You may want to take a further look why so much of sales money is spent on OE and NRC.

The Dept to Equity Ratio is moderately low, thus we can somehow conclude that it is not heavily financed. Thus Return on Equity(ROE) is good enough to measure the company performance based on the Net Worth that it is holding, no need to use ROIC. ROE of 11.18 is moderately good. However, i expect higher ROE from Bershire.









If you compare the sales revenue and EPS for the last three years, you will notice that it is pretty consistent relatively. Meaning if you take the ratio of Sales with EPS, there are almost the same for the last three year. This indicate that there are no manufactured earning through buying back of shares, large increase/decrease of non-recurring charges etc. etc., which is good.

However, please bear in mind that the EPS and sales for year 2006 has not factor in the Q3 and Q4 earning and sales. Barring unforseen circumstances, it should outperform last year EPS and Sales should outperform 2006 result.

The Back End Marketing System

Quote of the day "If many people don't understand you, then you are on the fast track to success. The reason is because the majority of those who don't understand you are not successful themselves."

In purchasing the "Secret Affiliate Weapon" program from super Internet Affiliate Ewin Chia, he mentioned "The Backend System" a number of times. As i read Allen Robert book on "Multiple streams of income", then i begin to understand why Backend system is so important, not only for Internet Marketing business but also for traditional marketing.

As an example given in the book "Multiple streams of income" by Allen Robert, he differentiates between a publisher and Infopreneur.

This is the example that he give:
A publisher publish 10,000 copies of a certain cashflow management books and sell it for an wholesale price of $12. The retail price of the book is $25. Minus off the money for author royalties, bookbinding, staff, administrative duties etc, it the earning per book is $2. Thus the net profit is $20,000. That's it. The publisher does not have a list of the customers that have purchase the book... so as to built relationship with them or even to up sell or size sell them.

For an Infopreneurs, as in this case of the author of the book, he offer a free audio clip or some value added ebook that the readers can download from his website. In so doing, the web site has a opt-in list to capture the reader username and email address before releasing the free audio clip or ebook. Suppose with some repeated mailings (pre-saleing), about 10% of the readers attend one of the seminar conducted by the author on cashflow management. That's 1,000 customers. If the seminar cost per head is about $300. That's will be a cool $300,000 for profit. And that's not all, you can continue to warm up those readers in your list who has not attend the seminar with USP. U stand for Ultimate Advantage, S stand for Sensational Offer, P stand for Powerful Promise... eg. give them value added bonuses, and offer the price of seminar to $100 with money back guarantee if not satisfy with the service. Say in this instant, 5,000 cutomers sign up and the author will have pocket another cool $100 x 5,000 = $500,000. All in all... until now.. the author has packet $500,000 + $300,00 + $20,000 = $820,000 compare to the publisher with only $20,000 to show after all the hard work.

This is amazing.. simple concept like this mean so much to the earning of the publisher and the infopreneur. In addition, the author in this example can upsell his existing customers with a advanced cashflow seminar and can do all sort of innovative methods to make his existing subscribers list to buy from him. Selling to existing satisfy customer is easier than to sell to a complete stranger... especially on the Internet.

Indeed, Google has raised the fees for its adwords advertising program on the internet as a result of smart Internet marketers who use opt-in list together with google adsword to minimize the acquisition dollars. What do i mean? Give you an example to illustrate my point.

An Internet marketer can use www.pixelfast.com/overture to select a list of lowest cost or under-bid keywords and bid your advertisement on them via google adwords. In our example, let say that PPC (price per click) is 10 cents. If 30,000 surfers click on from google link to your web site and suppose you are able to capture the information of 10,000 of them on your website opt-in list, then essentially, you are spending (30,000*0.1)/10,000 = $0.3 per captured subscriber list. This is the acquisition cost in marketing term. In tradition advertisement on the paper, for $30,000 advertisement fee, you may only capture less than a hundred people. The acquisition cost in this case will be $30,000/100 = $300. So which method would you like to choose for advertisement?

As you can see, Internet is a good media for advertisement. With Opt-in list, the Internet marketer will not need to go back to google for advertisement if he is satisfy with the subscriber base that he has captured. This is bad news for google. That's the reason why google has since raised it fees for google adword advertisement.

The power of Compound Interest

About two week ago, my good friend Samuel become the first time father of a healthy baby boy. Congradulation to him! :-)

Well, surely Samuel will want to provide for the best for his boy... a good education, fathery love... etc. One factor that need to address is the child finances. Some parent believe that it is the job of child to grow up and make a living for themself. As a parent, giving them a good education is the best they can provide. This is excellent except that there is another area that need to be address in planning for the finance of a child.

If Samual was to invest $1 a day (finance call it Dollar cost avearaging) in the US Index fund which gives a average of 12% return in the long term... say let we factor in a 2% margin of safety which give us 10% return, then in 54 years time, the money will compound to be $1 million dollars. Bring that to present value given discount rate due to inflation, it will be $200,000.
Not a lot of money? Well let say Samual was to invest $10 a day for the child in a investment that give 10% return, then in 54 years time, it will be $10m dollars. Bring it to present value with 3% discount rate, it will be $2m. Think about it... if you are to retire at age 55 with $2m net worth now, how will you feel? That is excluding your other long term assets that you own like a car etc. Will you not want this to happen to your child when he reach 55?

Of course, parent may not live another 54 years to put in money for the child. However, parent can first learn to invest for the child, built a stable investment system and cultivate in the child a habit of putting money in the system when they are old enough to make a living for the power of compounding to work in the child favour.

Just another illustration, if you can find an investment system which can generate %15 return yearly, for every $1 put in to the system everyday, the child will get $5m in 54 years. For $10, the child will get $50m.

Qoute of the day: Baron de Rothschidl was once asked to name the seven wonders of the world. He replied "I cannot, but i know that the eighth wonder of the world is compound interest."

Just what is Buffet up to now???

Just look at this chart..... the 10 years performance of Berkshire Hathaway (BRK.A) A stock... now it is trading in the market for usd96,400 per share.. My goodness, one share can actually buy a very luxurious car. I can't beleive it.

Where is Warren Buffet and what is he doing at the moment.... below is the report from Coattail Investor:
Warren Buffett is expected to be flying into Israel later this week to visit one of his most recent acquisitions, Iscar Metalworking Cos. The company specializes in manufacturing precision metal working tools, and it is the first company purchased by Berkshire Hathaway based solely outside of the United States. Buffett purchased Iscar in May for $4 billion without having ever seeing the company.

As part of his two-day stay in Israel, Buffett will visit the Iscar’s headquarters at the Tefen industrial park. The Tefen region was one of the areas hit particularly hard by rockets during the recent conflict with Lebanon. Buffett will spend his remaining time in Israel visiting a local hospital, and meeting with Prime Minister Ehud Olmert.

Generating Traffic to your web site

Why do we want to bring traffic to your website? More traffic to your website mean more potential customer for your Internet Business.
Other than directing traffic to your site via Search engine, there are other ways to get traffic to your site.
There are:

• Article Directory/Marketing: You can subsmit article to Article Direcectory site. Of course, your article should have a byline with your name and a link to your website. This is where you can bring traffic to your site. Ezine owner or webmaster will come to the Article Direcectory site to look for reprintable material. If your article is of good value, it increase your chance of selection and also increase your target audiences coming to visit your site after reading your articles. Article is truely viral- it spread like a word of mouth in the traditional business concept. I have read from www.adam-khoo.com that his "I am gifted, so are you" book have been pirated in China. You would assume that he will be annoy. However, he see the "Big Picture" for the Adam Khoo Learning Technologies brand to penetrate in China through "Word of mouth" or in internet term "virus mkting". You can learn to write a professional Internet article here! one of the article directory sites are http://www.articlesbase.com/. You can find more of them simply by searching for "articles directory" at google search site.
• ezine paid advertisement. You can increase your taffic via ezine adverstisement. This type of advertisement is quite effective as it is focus on your targetted customers or "hungry fish" as described by Allen Robert in his book "Multiple streams of Internet Icomes". You can have solo, classified or sponsor ads. Of the three, solo adv is the most efficient and also the most expensive. Basically, it sents email to your targetted subscribers list of the ezine site to advertise your product and solution.
• Traffic Exchange. You can advertise your website URL in traffic exchanges sites. Your URL will be displayed in rotation to other members advertisement of the traffic exchange. Some of the traffic exchange site is www.instantbuzz.com and http://MyViralads.com/index.php?affiliate=10163. The later, Myviralads, have a very interesting and powerful concept where it generate an ads popup whenever visitors exit from the member websites.
• Blog and Forum. You can popopulate your blog site and link it to your web page so that it can help you to draw traffic to your home page. In the other mean, you can join a forums and contribute your knowlege, helping others and in the process direct them to your web site after gaining their trust and confidence.

If any of you have any other idea to increase your traffic, do drop me your comments. Thanks

Investment in Index Fund or Index ETF

Index fund is mutual fund that track an Index eg. S&P 500 index, STI index etc. As for Index ETF (Exchange Traded Fund), it also design to track an Index but but operate more like a stock. In essence, Index fund is open-end fund while Index ETF is close-end fund. For open-end funds, the Mutual fund company can sell as many shares as investor want (as per demand). As for close-end funds, it closely resemble stocks in that they were only a fixed number of the shares and are often traded on an exchange.

Benjamin Graham and Warren Buffet have praised index fund/ETF and think that an average investor can profit from buying into the market in the long run. The fact that the market keeps going up in the long term but is highly volatile in the short term provide an great incentive for average investor to buy Index fund/ETF( for the long term ... > 10 years at least). Historically figures indicate that the average annual return of STI index is 8.6% for STI and 12% for S&P 500.

The primary reasons for the the strong growth if you buy into the market is bacause of inflation and increase in world population. With inflation, you will need to pay more for the same stock in the future. An increase in world popluation will increase the demands for goods and services thus injecting growth in the overall stock market in the long run.

Inflation is not avoidable after the Bretton Woods system collapse in 1973, it facilitate the development of worldwid credit bubble. What this mean is that the US was no longer required to pay for its imports with gold, or rather with dollars backed by gold. In real sense, US could pay for its imports with us dollars with no backing of any kind. That where money become currency.. As a result, the US dollars in circulation began to explode since 1973 till now.
This will also push inflation up year after year. With more and more US dollars in circulation in the future, the market will definately grow upward in the long run.

However, this investment strategy of buying into index fund/ETF will collapse if the US dollar credit bubble burst. The market will move down with little or no chance of recovery depending on how the Fed reserve reaction to the crisis. Aside from this extreme condition, the market will always move upward in the long term with some down trend in the short term. If you stay invest in a index fund/ETF for more than 10 years in S&P 500 and STI, statistic reveal then you will 100% change o f winning.

One reason why the US S&P index outperform other index in the long run is as follow: much of the world has grown dependent on exporting more, than importing from the US, thus rapidly increase the indebtedness of the US to the rest of the world. However, credit contraction and economic depression did not occur in major deficit US becuase it was not required to settle its current account deficits in gold, but to pay with debt instruments instead. As you can see, who will want to debt instruments from US if it does not maintain as the world leader of the world. As you can see, from US point of view, with more importing and the demand for goods and services from the rest of the world continue to grow, US market will definately grow along with it.

Hope someone can contribute to this post and correct me if i am wrong... as the content is purely my own opinion and ideas.

SEO Vs Google Adwords advertisement

In order for your website link or URL to be display on the first page of a google search rersult page, there are two option. You can use SEO, which stand for Search Engine Optimization(Free) and Google Adwords (PAID) advertisement.

For Search Engine Optimization technique, you must know the techniques on how to rank your Website link for a particular keyword search. There is a competition going on now orgainised by Ambatch.com to rank the keyword "ambatchdotcom seocontest". You can check the competition out here [click here]. If you want to know who is the winner now... simply go to www.google.com and type in the keyword "ambatchdotcom secontest". The link at the very top of the search has a very good chance of winning first price. :-) You can increase your chance of ranking higher for a keyword search in google by increasing your incoming links count to your site. One way to to publish your content rich article (with link to your hard page) to article Directory. The other way to increase your search engine ranking is to strategically place the keyword in your web pages. You can learn some of the technique for search engine optimization at Killer SEO SiteBuilder Website. Alternatively, you can get a software package to massage yur your web site so that the link will come in on the first page of a search.

As for Google Adwords advertisement, you can simply go to http://adwords.google.com to register keywords advertisement on google. Essentially, you are paying google to advertise for you for the list of keywords that you subsmit. In addition, you will need to bid for the keywords to be able to get your link advertise on google. Some keyword has higher bid price than others because of popular demand. If the keyword that you subsmit has successuful win the bid, then the next time someone in the internet search for the keyword that you have subsmitted, your link will be display (just like classified ads) on the right of the page. However, before you subsmit your list of keywords to google adwords for bidding.. you may want to seize your competitors by checking out how much are the bidding for the keyword that you will be subsmitting at http://www.pixelfast.com/overture/. To optimize your selection from your list of keywords to advertise in google, you can use this Keyword Elite tools. Click Here!. It can help you to bid for the right keywords so that you can extract maximum search benefit with minimal bidding price (less exposure to competition in bidding for keyword).

Option Trading - get leverage on Derivatives

Just communicate with a friend via email on Option trading.... Option trading is the same as Contract for Difference (CFD) purchase... they are derivatives. In both case, you do not own the underlying stock. Therefore, you will not receive the dividents of the stock if it is given out.

Both exercise Margin to leverage on the purchase. With Margin purchase, you can make very high percentage return or loss a lot of money, if you do not know how to handle the derivatives.

Let look at option for a start. For option, there are basically call or put option.

For call option, it gives you the right to buy a stock a strike price. Good for Bull market as you can resell the stock purchase it a lower price for a bigger profit.

As for put option, it gives you the right to sell a stock at a strke price. Good for Bear market as you can purchase a stock at a lower price and sell it (by exercising the option) for high price, therefore profiting from the difference.

There are Many differences strategies that you can deploy in a bull, bear or side market.



Bullish Option Strategy

• Buying a call
• selling a puts
• Bull call spread
• Bull Put spread

Bearish Option Strategy

• Buying a puts
• Selling a calls
• Bear Call Spread
• Bear Put Spread
• Put Hedge

Side/Neutral Option Strategy

• Selling Covered Calls
• Sell Straddle/Strangle
• Calendar Spread

In my opinion, to succeed in option trading, you need education because it is a zero sum game. either you win and someone out there lost OR you lost and someone out there win.

Some of the option education cost is quite expensive.. costing about Singapore dollars of 3,000 or more. For a start, i would suggest that we learn from e-course from the Internet. You may want to try out this Option Trading ecourse. The steps are map out clearly and it is easy to follow.

Buying in the Market or Company fundamental?

Many people monitor the Stock prices of those stock that they have brought everyday...

Why? They are buying into the Stock Market... which mean that they buy stock based on hot tips, CNN expert opinion, their friends comments etc etc... However, Mr Market is not so predictable. He can has mood swing very fast.... Sometime he can behave like a BULL.. sometime he will behave like a BEAR... other time, he is neither here or there.....

Buying into the Stock Market in this way is know as Speculation, not investing....

To invest is to study and understand the company fundamentals and buy the company stock at the right price. Let me illustrate slightly more....

• Do your homework to read the financial report of the companies of the past few years. Work out the ROE or ROIC, ROA, Net return, Free Cashflow in comparation to Sales etc etc.. to make sure that the company will have a higher possibility of growing in the future.
• Check and determine if the company has wide economic moat.
• Check the Financial health of the Company... just like what we do in our regular checkup at the clinic. Look for the Interest coverage ration, quick ratio, current ratio, debt to Equity ratio.
• Walk to the street to find out how the company is preforming. Eg. If consumer business...check out if Merchants are keen on stocking up the products from the company that you are thinking of buying.
• Read the released articles of the company from the press, or from the company directors to find if there are any abnormalities.
• Understand the company business... if you cannot understand it, don't buy. For example, if the company is in Pharmaceutical business... then it can have very good financial report for the last 5 years but it will lost patent protection on one of it major product that has generate more than 50% sales for them last couple of years... then beware.
• Calculate the Intrinic value of the company and factor in a margin of safety based on inflation rate, the risk in the industry and your own safety net.
• Buy when the Market valuation of the company is lower than your calculated Intrinic Value. In this way, with the Intrinic value on hand, you will have the confidence to buy more of the company stock even when it continue to rise but is below your calculated intrinic value.
• Sell when any of the investment criteria is broken or when the maket valuation of the stock is many times more than the intrinic value or that you need the money to invest in more profitable investment.

Most people enter into the market to buy stock when it is rising and nearing it peak driven by GREED. When the stock drop drastically in value, they start to PANIC. They will hold on to the stock and praying for better tomorrow. They will wait and wait... until when the stock is nearing to start picking up again, then they Sell. In summary, it is buy high and sell low situation... sigh!

To avoid it, i would suggest that you try out this e-course to improve your education in stock picking. In addition, upgrade yourself by reading book on value and grow investing.

....... Hope to hear of your comment.. i also need to learn from you.

Quote of the day: Only when the tide is down, then we know who are swimming nake.

My opinion on how to accumulate Wealth

I have read alot on Wealth creation books... from Buffettology, The Five Rules for Successful Stock Investing, The secret of self made Millionaire, Multiple source of Internet Incomes..... the list go on.

In my own opinion ... after much thought on all the inputs i have read, i summarized wealth creation in this few steps

1) Dare to dream on how much money you want to make.
2) Define the goal on when you want to achieve it.
3) Get leverage by listing down the pains you will suffer if you do not achieve your dream. Put it on black and white and sign it!
3) Look for Strategies to achieve it. The easiest is to find someone who has already achieve the dream that you desired in the time frame that you have set in you goal.
4) Take action to adopt the strategies once you have found it.
5) Evaluate the result if the strategies give you the desire result. If not, make changes to the strategies or even find new strategies.
6) Be persistent until you are successful. If at any time you are demoralised, take out the list of pains you list down on step 3, read it many times until it internalised into your being.. This will provide you with the momentum to move forward again.

Finally, i would like to end my first posting on my blog with this quote of the day:
"If you dare for nothing, you should hope for nothing."