seppo saario presentation slides
TRANSCRIPT
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Stop dreaming!Learn, act and invest.
,put money work for you.
Seppo Saario
Tallinn, October 24, 2010
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How to be a millionaire like
Eino Jutikkala, professor (history)
When he died unmarried at the age of 99 in 2006,
his portfolio was worth 22 m and he receivedannually 1 m in dividend income.
His portfolio: Fortum (energy), Huhtamki
(packaging), Kemira (chemicals), Kesko (retail),Metso (machinery & engineering), Neste Oil(refinery), Orion (pharmaceuticals) Outokumpu
(stainless steel), Sanoma (publishing), UPMKymmene (forest industry & energy) and Wrtsil(machinery & engineering)
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What Eino Jutikkala did:
He saved always part of his income, he didnot spend it all.
He invested his savings in publicly tradedcompanies on the Helsinki Stock Exchange.
He bought continously a little. Thus he
vers e s nves men s or a ong meperiod. At good times he received lessshares, at bad times more shares. When the
prices went up, he had more shares at lowercost in his portfolio.
He diversified his holdings in companies
representing different industries and services.
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Eino Jutikkala (cont.)
He invested only in market leaders. Normallymarket leader makes more profit than smaller
competitors. He invested in companies paying dividend.
H didn ll. H nl b h . N ax !
He enjoyed compounding interest! As timegoes by his dividend income increased rapidly.
By owning companies directly, he kept hisexpenses low. If you have to pay to money orfund managers, you give up the major part of
your gains during the years.
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Benjamin Graham(1889-1976) professor
The real money ininvestment will be made
not out of buying andselling, but owning andholding securities.
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Experts are generally more
confident than rest of us Terrance Odean & Brad Barber (Trading is
Hazardous to Your Wealth) studied 66 000accounts in 1991-1996.
The found out that investors who traded
frequently averaged 12% return p.a. Those investors, who had lowest turnover
earned 18% p.a.
Women had much less turnover than men,but they ended with higher returns!
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Market share (%) and Return on Invested Capital (%)
25
30
35
40
45
italbeforeta
xes(%)
05
10
15
20
under 10 10-20 20-30 30-40 40-50 over 50
Market share (%)
Retu
rnonivestedc
a
Boston Consulting Group
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Poman tuotto 30 vuodessa
80
100
120
140
Tuottoasteen parannuksella voidaan luoda merkittv varallisuus vuosien kuluessa.
Jo muutaman vuoden kuluttua korkeampituottoinen sijoitus karttuu yhdess vuodessa
enemmn kuin matalatuottoinen sijoitus 30 vuodessa.
18%
0
20
40
60
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31
Vuosia
15%
12%
9%
6%
3%
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Stocks, Bonds, Bills and Inflationin the U.S. 1926-2008
Small stocks 11,7 9 549
Annual return % Growth of $1
arge s oc s , Long-term Govt bonds 5,7 99 Treasury bills (
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The expected gain owning stocksfor a long-time is around 10% p.a
The long-term earnings growth of a majorlisted company is expected to be around6% (Gross Domestic Product 3% +
Inflation 3%). The long-term average dividend yield has
been around 4%.
With 10% average annual growth it takesseven years to double your capital.
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Jeremy SiegelStocks for the long run
The price of a stock is equal to the
dividends and not the present valueof future earnings.
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A successful investor is like a
waits the crops to grow.
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Long-term investing is likeflying to New York.
You may encounter some air
turbulence over Iceland, but there isno reason to bail out.
You will reach your destination
safely.
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Dangers of Market Timing $1 invested in Standard &
Poors 500 index for 80 years1925-2005 grew to $2 658.
If you missed 39 best months(of 960 months) or 4 % of the
time, your investment wouldhave grown only to $18.
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Avoid big losses Biggest losses to investors
come from the purchase of-
of favourable businessconditions.
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Focus on numbers that really matters!
Valuation.How is the company valued?
1. What is the stock Price compared toEarnings/Share this and next year?
If P/E is less than 10, then it looks cheap.2. Compare the stock Price to the Book
Value (shareholders equity, omakapital)of the stock. Be interested if P/BV is lessthan 1,5, preferably less than 1.
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Helsinki Stock Exchange
78 most valuable companiesPrice/Book Value vs Price/Earnings 2011e
20
25
30
011e
0
5
10
15
0 1 2 3 4 5 6 7 8
Price/Book Value
Price/Earning
s
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Selected Tallinn listed companies
Price/Book Value vs P/E 2011e
20
25
30
011e
Express GroupTallink
Tallinna Kaubamaja
Olympic Entertainment
Arco Vara
Baltika
0
5
10
15
0 1 2 3 4 5 6 7 8
Price/Book Value
P
rice/P
E
ViisnurkTallinna Vesi
Silvano FashionPremia
Merko EhitusNordecon
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Tallink vs. Viking LineTallink Viking Line
Net Sales (mill.) last 12 months 791 471 x 1,7
Sales growth (%) 1 2
Number of shares (mill.) 669,9 10,8
Stock Price () 0,66 32,50
Market Value of the company (mill.) 442 351 x 1,3
Shareholders Equity (Book Value, mill.) 624 142 x 4,4
Price to Book Value 0,7 2,5
Net Debt (mill. ) 1 093 49
Cash flow from operations (last 12 mo., mill.) 105 42
Enterprise Value (Mkt Value+ Net Debt, mill.) 1 535 400 x 3,8
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Prefer companies that have
a strong balance sheetand pay dividends
Balance sheet is strong, if the company hasmore cash than interest bearing debt (=
negative gearing). Try to avoid companies,where net debt is more than companys equity.
Income. Be interested in the companies thatpay dividend and will raise it next spring!
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Helsinki Stock ExchangeDividend Yield (%) 2010e vs. Net Debt Q2
6
7
8
9
)2010e
0
1
2
3
4
5
-150 -100 -50 0 50 100 150 200
Net Debt to Equity (Gearing)
Dividendyield
(
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Bail out of a business that
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If a stock is grossly overvalued
and its stock price crashes,
will regain its former inflatedvalue.
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The world is changing rapidly
A major part of world industrial production hasmoved to China. North America and Europe arelosing well and regularly paid industrial jobs.
New service jobs cannot fully compensate thelosses of industrial jobs.
Western countries to fall in heavy debts. Theworld financial system will be tested again infuture.
Three central banks US Fed, BofE and ECB arebuying Government bonds of their own countries.That is printing money. It can also be called
doping. $, and are losing value.
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Gold related internet addresses www.gold.org World Gold Council www.kitco.com Gold price
www.goldprice.org Gold price $/oz, /g
http://finance.yahoo.com Gold-ETF, NYSE. - = ,
www.spdrgoldshares GLD-funds home page
ETFs of goldmining companies: GDX ja GDXJ
www.deutsche-boerse.com: Xetra-Gold (symbol:4gld) gold in grams and euros
www.goldmoney.com physical gold
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Benjamin Graham (1889-1976), professor
Characters a successful investor:
Reasonable good intelligence
Focus on the investment process
Firmness of character
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Strong International companies in Finland
Amer Sports (sportinggoods))
Cargotec (machinery)
Fortum (energy) Kemira (chemicals) Kesko (retail)
Nordea (banking) Orion (pharmaceuticals) Outokumpu (stainless
steel) Rautaruukki (steel) Sampo (financial,
Konecranes (liftingequipment)
Metso (machinery) Nokia (mobile phones) Nokian Tyres (winter
tyres)
Sanoma (publishing) Telia Sonera (phones) UPM Kymmene (forest,
energy)
Wrtsil (marinemachinery)
YIT (construction)
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Gold holdings (tonnes)
September 2010 USA 8 133
Germany 3 406 IMF 2 966
Japan 765
Russia 668 Netherlands 612
France 2 435
SPDR (GLD) 1 301
China 1 054 Switzerland 1 040
ECB 501
Taiwan 423
Finland 49
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What industries to avoid? Avoid companies that are subject to
technological obsolescence (consumerelctronics)
Avoid com anies that cannot control their
most basic costs (airlines cannot controlfuel prices)
Stiff foreign price competition. Highly
profitable industries attract newcompetition
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The common opinion ofa stockbroker
All news is ood news
Everything is always
cheap
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Buy low, sell high The time of maximum
pessimism is the best time
. The time of maximum
optimism is the best time tosell
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Miten akateemikko Eino Jutikkala (1907-2006)
toimi tullakseen miljonriksi?- Ssti osan tuloistaan, ei kuluttanut koko palkkaansa
- Uskoi, ett prssiosakkeet ovat hnelle tuottoisin
sijoituskohde. Osti suoraan yhtiit piten kulut alhaisina.- Osti osakkeita jatkuvasti eli hajautti sijoituksensa ajallisesti
- Hajautti sijoituksiaan ostamalla eri toimialojen yhtiit
- Sijoitti suuriin markkinajohtajayhtiihin- Sijoitti yhtiihin, jotka maksavat osinkoa
- Ei myynyt osakkeita. Hn vain osti. Kun ei myy, ei maksaveroa
- Pitkn sijoittajauransa aikana hn psi nauttimaan korkoakorolle-tekijst. Poma karttuessa osinkojen rahamrkasvaa nopeasti.