Hi, Ethan999,
I agree with what you said. If I can buy an ongoing profitable company that enables me to get back all my capital in 3 years’ time, I believe I have made a very good investment.
With regard to your question, I am more concerned with a company’s failure to grow its revenue and profits. If a company’s profit were to increase significantly and its share price remains the same, that company is actually becoming more undervalued (if it was already undervalued in the first place). Pressure for upward revision of its share then is likely to occur. Furthermore, if a company is in a very competitive business environment and is still able to increase its profits, it reflects well of the company’s management capability. The moment a company experienced a significant profit margin squeeze, that could be a good signal to clear out of the stock.
Both Eratat & Qingmei are expected to report higher profits for May and August reporting season.
Advice from Warren Buffett, as contained in its 2009 letter to shareholders. Taken from Wallstreet.com
Stay liquid. "We will never become dependent on the kindness of strangers," he wrote. "We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses." Buy when everyone else is selling. "We've put a lot of money to work during the chaos of the last two years. It's been an ideal period for investors: A climate of fear is their best friend ... Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble." Don't buy when everyone else is buying. "Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance," Mr. Buffett wrote. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying. Value, value, value. "In the end, what counts in investing is what you pay for a business-through the purchase of a small piece of it in the stock market-and what that business earns in the succeeding decade or two." Don't get suckered by big growth stories. Mr. Buffett reminded investors that he and Berkshire Vice Chairman Charlie Munger "avoid businesses whose futures we can't evaluate, no matter how exciting their products may be."
Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. "Dramatic growth" doesn't always lead to high profit margins and returns on capital. China, anyone? Understand what you own. "Investors who buy and sell based upon media or analyst commentary are not for us," Mr. Buffett wrote.
"We want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it's one that follows policies with which they concur." Defense beats offense. "Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the eleven years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue." All timely advice from Mr. Buffett for turbulent times.
I read this morning that Genting is above pre-Jap crisis level now. and i am sure there are many other stocks like that as the market has rebounded. Morale of the story: why dump stocks when the news gets bleaker and bleaker only to see the stocks recover at some point down the road. In the next disaster/market slump, sure enough there will be people doing exactly the same thing only to see the stocks recover later.
In the case of Japan - the crisis was totally unimaginable, yet the market has recovered. The next slump may be something less dramatic ...maybe Libya war, or Portugal goes kaput in some financial way..... and stocks will fall, but will you run for your life? This assumes your stocks are fundamentally good ones
Hi observer2,
would you care to comment on the source and info you mentioned about eratat expecting higher profits? am vested in it. thanks
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[observer2 23-03-2011]:
Hi, Ethan999,
I agree with what you said. If I can buy an ongoing profitable company that enables me to get back all my capital in 3 years’ time, I believe I have made a very good investment.
With regard to your question, I am more concerned with a company’s failure to grow its revenue and profits. If a company’s profit were to increase significantly and its share price remains the same, that company is actually becoming more undervalued (if it was already undervalued in the first place). Pressure for upward revision of its share then is likely to occur. Furthermore, if a company is in a very competitive business environment and is still able to increase its profits, it reflects well of the company’s management capability. The moment a company experienced a significant profit margin squeeze, that could be a good signal to clear out of the stock.
Both Eratat & Qingmei are expected to report higher profits for May and August reporting season.
Hi, radiant_legend,
Last October, Eratat announced that it had received confirmed orders of RMB 477 Million for its 2011 Spring/Summer products for delivery from January to June 2011. See announcement in -
info.sgx.com/webcoranncatth.nsf/VwAttach...Book.pdf?openelement
The confirmed orders were 23% more than the previous year but more importantly, the ASP (Average Selling Price) of its 2 main product lines were much higher as follows –
Footwear: Increased by RMB 18 [+25%] from RMB 72 to RMB 90 per pair.
Apparel: Increased by RMB 22 [+38%] from RMB 58 to RMB 80 per piece.
According to the CEO, the increase in ASP is expected to contribute positively to the gross profit and overall gross profit margin. Hence, shareholders can look forward to a set of improved quarterly results for Jan-Mar and Apr-Jun periods.
Since the consumer market in China is said to be still challenging and competitive, it would certainly be a commendable performance, should Eratat nudge up much improved profits in such business environment.
