Yau Tat Kwan, Jacob

 Warren E. Buffett  Jack Bogle  Bill Miller  Tony Measor

 The third on the list of the world’s richest people.  1951 – 1954 Investment Salesman at Buffett – Falk & Co.  Securities Analyst at Graham- Newman Corp.  General Partner at Buffett Partnership, Ltd.  CEO at Berkshire Hathaway Inc.

 he was named chairman of Wellington  Founder and retired CEO of The Vanguard Group  Creator of the first index fund and author of several prominent books on investing.

 Portfolio Manager of Legg Mason Value Trust (LMVTX).  Since inception, his fund has earned 15.25% average annual total returns.  Bill Miller is the only fund manager that has outperformed S&P500 for 15 consecutive years.

 Asia’s best stock commentator  Financial editor of ‘The Standard’  50 years’ experience in Hong Kong, London and Asia Pacific

 At least 70% of the time, stock price increases while cash remains unchanged.  Especially in inflation.

 Only invest in a company that you trust and know well.  The company should perform well and have a great potential in providing increasing return to stockholders.  If the operation of the company varies a lot and is so complicated to predict, then we may not have enough intelligence to predict the future cash flow.

 Read more financial reports  The more you concern, the more the prediction may be wrong  E.g. 5 variables concerned  90% x 90% x 90% x90% x90% = %  Probability to be wrong = 1 – % = %

 Simplicity is the best.  The intrinsic value (accounting value X) of a company  The stock price is fairly priced or not

 Present value of cash flow generated by the rest of the life of the company  Value is predicted differently  The more conservative, the better  The value depends on the stable and long- history operations  It depends on return of stockholders, increase in accounting value.

 Buy stocks of an incredible company with a reasonable and fair price?  Buy stocks of a normal company with a incredibly low price?  The stock price is judged to be too high or too low by comparing with other companies’ stock price.  Reason: It is difficult for companies with currently bad operations to succeed again.  Agreed by all investors

 Preference: to hold the stock forever.  Lowest cost of trade  Increasing return  Buy the stock when it is underpriced

 What customers need or desire  No other substitutes  No constraint on price  E.g. Coca Cola  680% return  Profit of 8,851,000,000 US dollars in 15 years

 Warren E. Buffett: risk adverse  Rule Number 1: Never lose  Rule Number 2: Remember rule number 1  Bill Miller: risk love  Statistically you are far better off with huge gains because you are going to make mistakes. And if you are playing small ball and you make a few mistakes, you can’t recover.  Jack Bogle: learn from mistakes

 Over-confidence  You can take control of the market.  Success is attributed to my ability, regardless of the importance of luck and opportunity.  (especially professionals)  Result: over-trade -> price increases -> loss suffer

 Over react  Depending too much on short-term information with the ignorance of long-term information.  Result  1)Stock price increases, a decrease in stock prices occur, vice versa  2) The larger the amplitude, the larger the response

 Inability to react  Lack of knowledge of the newest information  Professional investors have prejudice on bad performing companies, ignoring their growth.  Result:  Miss the chance to invest

 Effect of loss  Given a certain amount of money, effect of loss > effect of gain 250% (Kahneman and Tversky)  People prefer bonds to stocks

 Conformity  Don’t be a follower  Miller agrees with Buffett that you should be fearful when others are greedy, and greedy when others are fearful.  So when the market has been down for a while, and it looks bad, then you should be more aggressive, and when it has been up for a while, then you should be less aggressive.

 Good company = Good stock???  When a good company’s stock price is too high  bad stock  When a bad company’s stock price is too low  good stock

 Diversification???  YES  Lack of judgement ability  Lack of professional knowledge

 Investment =/= Mathematics  No correct or not  Only successful or not  Luck contributes  Hard working also contributes

 Q&A