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Ken Chee: 3 Keys To Picking Value Stocks Despite Troubled Times
Aspire, Thought Leaders | 23 November 2015
By: Chen Xushuang
Articles (26) Profile

If you don’t really enjoy reading complex charts, statistics and looking out for trends day-to-day, fret not, because investment educator Ken Chee doesn’t either. In fact, the businessman and multi-millionaire who has attained financial freedom by age 34 prefers to adopt the style of value investing, which he finds to be a good way of earning passive income. Here are three main key points about value investing that he has shared with us through an interview.

1) Know the Value behind the Price In a nutshell, value investing is “buying something worth a dollar at only 50 cents”, says Ken. Or in other words, it is like buying a Louis Vuitton or Chanel bag at the price of Charles and Keith. “But in real life, a lot of people know the price that they pay, but they don’t know the value that they are getting,” said Ken. So how does one decide what is a good business to buy into?

Ken suggests taking the “3R approach”, i.e. choosing companies with the right business model, right management (showing that they are aligned with the minority shareholders’ interest), and the right valuation versus price. So at the end of the day, value investing is about buying into businesses with good fundamentals, especially when they are undervalued.

Ken gets his inspiration from the legendary investor Warren Buffett, whose investment strategy is seen as a long-term approach. While it may take some time for the true value of a business to show, Ken says that it does not mean that investors should “buy and never sell”. “I do liquidate some of my shareholdings too, but if the golden goose continues to lay the golden egg, we do not kill the golden goose,” he explained.

2) Value Investing Still Relevant amidst Troubled Environment It’s near the end of 2015. The market is marked by volatility, countries like China and Japan are facing economic slowdown, and the US remains uncertain about the exact time and magnitude of an interest rate hike. Financial experts are anticipating a major financial crisis in the near future. Meanwhile investors are already noticing that stock prices are not at their cheapest, and are not quite confident about how much further the bull will run. However, Ken does not see these as major concerns. Instead, he pays attention to the fundamental need of consumers.

“If we were to focus on the fundamental need of a human being, and recognise that there are businesses out there offering services and products of value that cater to these needs, then it doesn’t matter whether it’s a good time or bad time; the demand is always there,” said Ken. What one needs to do, according to Ken, is to identify the “invisible champions” that can “out-perform the market” even in a bad economy, with their competitive advantage and pricing power for example.

3) Know Your “Circle of Competence” 

Source: www.islandsofinvesting.com

The theories may sound simple enough, but actually putting money and effort into our investments is the hard part, especially if we have limited money and experience. Ken advises beginners to look within their “circle of competence”.  This means that one needs to ask himself these questions: Which products am I familiar with and consume often? And what companies do they belong under?

“Start with your own passion first, then the process will no longer be so tedious,” said Ken. Besides, based on Ken’s own investing experience, investing within one’s “circle of competence” usually turns out to be less risky. If those companies are listed, the next step is to read their financial reports to understand how they fare in the industry.

In his coming Value Growth Workshop on 5thDecember, Ken will be teaching investors the key figures to look out for in financial reports, as well as how to form a meaningful story from reading the reports. Attendees will also get a more detailed understanding of his value investment methodology, supported with real life case studies. If you are interested in the “why”, “what”, and “how” of value investing, this is where you can begin seeking answers.

As a Communications Studies graduate specialising in journalism, Xushuang is keen to observe and explore issues that readers want to know more about, and to deliver quality content through engaging writing.

Please click here for more information about this author.


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