Sunday, 16 February 2014

Return on Equity (ROE): What is it?

Return on Equity is perhaps the most important measure for finding good, well-managed companies.

Since investing is about putting your money to work, it is important to know how you’re money will be used and whether it will be used effectively. Return on Equity gives you a good indication of how well a company will use your investment money to generate profit.

The common sense investor needs to be armed with concepts that help to measure the quality of an investment. One of the most important concepts in the investing business is “return on equity” – (ROE).ROE gives you one of the best and most precise insights into how well a company will use your money. The ROE of a stock reveals how much profit a company has earned in comparison to the total amount of shareholder equity found on the balance sheet.

Shareholder equity is defined as the total assets minus total liabilities. The equity is what the shareholders own. Shareholder equity basically represents the assets that have been created by a business’ retained earnings and the owners’ paid-in capital.

In theory, a business that shows a high return on equity is likely to be more capable of generating cash internally. The general rule of thumb is, the higher a company’s return on equity is compared to its industry, the better.

Return on equity is particularly useful for the common sense investor because it can help him cut through the PR drivel and fluffed up corporate statements that are churned out by most CEOs in their respective annual reports. So when they attempt to paint a pretty picture by saying that Company A has “achieved record earnings” you can get a much more complete picture of the companies health by doing a quick computation of the return on equity. This will help you discern whether a company is actually putting its equity to good use for its shareholders.

Warren Buffett, one of the most successful investors in the world, used to say that getting higher earnings each year is an easy task. He is just pointing out the obvious. Companies who are successful generate profits. If the company management would simply institute a policy of retaining the earnings and putting it into a simple passbook savings account that earns annual interests, they already have the ingredients that will enable them to report record earnings simply for the interest they will get from the earnings. The question though is, are shareholders better off with this approach? Would the company be using your money well?

Not at all.

Shareholders would have earned more substantial returns if the earnings were paid out or reinvested for the sake of growth and production. This makes it apparent that investors must not look at rising annual per-share earnings as a sign of a company’s success. A return on equity figure, on the other hand, takes into account the retained earnings from previous years. This indicates to effectively their capital is being reinvested. Thus, it ultimately becomes a far better barometer of management’s proficiency in handling the fiscal responsibilities compared to the more commonly used annual earnings per share.

Calculating return on equity can be as detailed as you like. Most financial sites calculate return on common equity by taking the income made available to stockholders for the most recent twelve months and dividing it by the average shareholder equity for the most recent five quarters.

Source:www.csinvestor.com

Saturday, 15 February 2014

Quote for the day

“More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.” — Ray Dalio, Bridgewater

Friday, 14 February 2014

20 Rules To Stop Losing Money

1. Don't trust others opinions - 
It's your money at stake, not theirs. Do your own analysis, regardless of the information source. 

2. Don't believe in a company - 
Trading is not investment. Remember the numbers and forget the press releases. Leave the American Dream to Peter Lynch. 

3. Don't break your rules - 
You made them for tough situations, just like the one you're probably in right now. 

4. Don't try to get even - 
Trading is never a game of catch-up. Every position must stand on its merits. Take your loss with composure, and take the next trade with absolute discipline. 

5. Don't trade over your head - 
If your last name isn't Buffett or Cramer, don't trade like them. Concentrate on playing the game well, and don't worry about making money. 

6. Don't seek the Holy Grail - 
There is no secret trading formula, other than solid risk management. So stop looking for it. 

7. Don't forget your discipline - 
Learning the basics is easy. Most traders fail due to a lack of discipline, not a lack of knowledge. 

8. Don't chase the crowd - 
Listen to the beat of your own drummer. By the time the crowd acts, you're probably too late…or too early. 

9. Don't trade the obvious - 
The prettiest patterns set up the most painful losses. If it looks too good to be true, it probably is. 

10. Don't ignore the warning signs - 
Big losses rarely come without warning. Don't wait for a lifeboat to abandon a sinking ship. 

11. Don't count your chickens - 
Profits aren't booked until the trade is closed. The market gives and the market takes away with great fury. 

12. Don't forget the plan - 
Remember the reasons you took the trade in the first place, and don't get blinded by volatility. 

13. Don't have a paycheck mentality - 
You don't deserve anything for all of your hard work. The market only pays off when you're right, and your timing is really, really good. 

14. Don't join a group - 
Trading is not a team sport. Avoid stock boards, chatrooms and financial TV. You want the truth, not blind support from others with your point of view. 

15. Don't ignore your intuition - 
Respect the little voice that tells you what to do, and what to avoid. That's the voice of the winner trying to get into your thick head. 

16. Don't hate losing - 
Expect to win and lose with great regularity. Expect the losing to teach you more about winning, than the winning itself. 

17. Don't fall into the complexity trap - 
A well-trained eye is more effective than a stack of indicators. Common sense is more valuable than a backtested system. 

18. Don't confuse execution with opportunity - 
Overpriced software won't help you trade like a pro. Pretty colors and flashing lights make you a faster trader, not a better one. 

19. Don't project your personal life - 
Trading gives you the perfect opportunity to discover just how screwed up your life really is. Get your own house in order before playing the markets. 

20. Don't think its entertainment - 
Trading should be boring most of the time, just like the real job you have right now. 

Source: http://www.tradingday.com/

Thursday, 13 February 2014

13-Feb-2014 CSE Trade Summary


Following Stocks Reached New High / Low on 13/02/2014

Crossings - 13/02/2014 & Top 10 Contributors to Change ASPI
http://www.cse.lk/cmt/upload_cse_report_file/daily_report_486_13-02-2014.pdf


Top 10 Gainer / Loser / Turnover / Volume for the day


Foreign Activity for the week ending 13/02/2014


Company Fact Sheet: The Lion Brewery Ceylon PLC - LION.N0000

About the company:

Established: 1996                                 Quoted Date: 1997-01-22             Sector: Beverage, Food & Tobacco

Lion Brewery (Ceylon) PLC is a Sri Lanka-based company engaged in the manufacturing and marketing of beers, under license, for local and export markets. It also imports and markets, both locally and overseas, renowned global brands. The Company's brands include Lion Lager, Carlsberg, Strong Beer, Special Brew and Lion Stout. As of March 31, 2012, the Company's immediate parent entity was Ceylon Beverage Holdings PLC, while its ultimate parent company was Carson Cumberbatch PLC.

Chairman: Mr L. C. R. de C.Wijetunge

Deputy Chairman: Mr H. Selvanathan

CEO: Mr S. K. Shah

Board of Directors:
Mr D.C.R.Gunawardena
Mr C. P. Amerasinghe
Mr C.T. Liyanage
Mr D. R. P. Goonetilleke
Mr K. Selvanathan (Director / Alternate Director to H. Selvanathan)
Ms. S.J.F.Evans
Mr S.G.Lauridsen 
Mr H.J.Andersen 
Mr D. A. Cabraal 

Mr Y.F.Lew (Appointed Alternate Director to S.G.Lauridsen) 

52 Weeks Low: 299.00                                                         52 Weeks High: 444.00

Average Trading Volume: 7,370

Company Financial at a glance:
Click Table to Enlarge

Notes:
30,000,000 Ordinary Shares of the company were listed on October 12, 2009, pursuant to a 3:5 Rights issue.

Total shares in Issue: 80,000,000

Top 20 Shareholders as at 30/09/2013

The percentage of Shares held by the Public as at 30th September 2013 was 15.06%.


Wednesday, 12 February 2014

12-Feb-2014 CSE Trade Summary


Following Stocks Reached New High / Low on 12/02/2014

Crossings - 12/02/2014 & Top 10 Contributors to Change ASPI
http://www.cse.lk/cmt/upload_cse_report_file/daily_report_206_12-02-2014.pdf

Top 5 Gainer / Loser / Turnover / Volume for the day

Foreign Activity for the day


Company Fact Sheet: Property Development PLC - PDL.N0000

About the company:

Established: 1980                                  Quoted Date: 1981-01-01             Sector: Land & Property

Property Development PLC is a Sri Lanka-based company mainly engaged in property development. The principal activity of the Company is to own, maintain, manage, develop and sustain the utility and value of the Bank of Ceylon Headquarters Building, which the Company has rented out to the Bank of Ceylon. The Company manages and maintains the Bank of Ceylon Merchant Tower Building at Kollupitiya and Ceybank House at Kandy. Through its subsidiary Kolodeniya Hydropower (Pvt) Limited, the Company is engaged in the building, own and operation of a mini hydro power plant of 1200 kilowatt capacity and to deliver generated electricity to Ceylon Electricity Board National Grid.

Chairman: Mr R. Sivaraman


CEO: Mr G C Rajapaksha

Board of Directors:
Mr. B.M Amarasekera
Dr. M.S. Perera
Mr. L.N. De.S. Wijeyeratne (Independent Non Executive Director)
Mr. P.A. Lionel
Mr. S. De Silva 

52 Weeks Low: 40.60                                                         52 Weeks High: 75.00

Average Trading Volume: 1,120

Company Financial at a glance:
Click Table to Enlarge

Total shares in Issue: 66,000,000

Top 20 Shareholders as at 30/09/2013

The percentage of Shares held by the Public as at 30th September 2013 was 5.91%.