Case Fingerprint Cards

Hi,

I don’t know what to say, except ARRRGGHH! 😈 Okey, this was a learning experience and in the end, I managed to get out quite cheap. This a good example of diversification and importance of it.

So, today I will talk about a company called fingerprint cards. It is a tech company which manufacturers fingerprint readers for the cell phones (Huawei, Oneplus, and other android devices) and lately also for computers. It also bought an iris scanning company few months ago. Revenue was growing quite nice and company had a good margin with sensors and everything looked good what comes to figures and future.

It was discussed that due to management issues (inside trading and some other reasons) the company valuation was drop to p/e of 8. This was a cheap price when compared to the competitors which were trading +30 p/e values. I also thought you can rely to figures and estimates and due to the management issues and some challenges in today’s market the company value was pushed down.

Few days ago, Fingerprint made an announcement and oh boy was I wrong. Only few days left the first quarter they come out with news that the revenue will drop more than 50% and they will cancel the dividend payment which was planned to happen in May. How incompetent and lying the current management can be?! 

This week the value of Fingerprint stock has dropped around -35%. After the first drop (around -25%) I decided to sell all the Fingerprint stocks that I had and decided I will never touch to this stock again. Off course it is possible that the company recovers from this situation, but it will recover it without me. 😀

So, what we can learn about this case. It is wise to buy stocks which are pushed down for other reasons than financial reasons. In this case I really thought that the company products, financials and estimates were fine and the price was pushed down due to reasons reported earlier. Also, there was a large hype around this company in Nordic countries. Okey, there is still a large hype around this company, but this time the reasons are different. 😀 Now I know, don’t go with the hype, make your own study about the company situation and direction and the most important one, check who is running the company and their competence to run it.

And last, please remember to use diversification. The fingerprint had something around 5-6% role in my portfolio, so the total losses were around 1 to 1,5%. I also sold 1/3 of the FING stocks I had when those were up around +10%, mainly because those were having too big role what comes to diversification. I have seen many only having FING BULL X3 in their portfolio and due to Tuesday’s morning drop of -40%, they lost it all.

Regards,

CVM

Stock Investing For Dummies - My TOP5 investing rules

Hi,

This time I will talk about a little bit about my investing rules. I try to avoid investing mistakes by any means and this is the main reason why I have created these rules to myself. Also, these rules will keep me and my investing strategy discipline and perseverance. If the investor does not have any investing rules, it is quite clear he or she will not reach the full potential of the portfolio.

My first and probably the most important rule is to pay to myself first and then use the rest of the money to other costs (food, car and etc.). This rule comes from the book called “The richest man in Babylon”. The basic idea is to invest first 10% of your net income to stocks, etf’s, funds and etc and use 90% income to other stuff. People has a bad habit to use everything what they have in their bank account and by doing this (pay first to yourself and then to others) you will automatically adjust your spending into right level and your keep your savings.

My second rule is: Don’t fear the loosing of the money:

The longest time-period has been around 20 years the stock full cover from the recession. This happened a long time ago and cover periods of the last four recessions has been much shorter (around 5 years). Even if the recession would start tomorrow I know that "soon" my stock values will be at same level than today. Also, this recession would be a great time to buy stocks due to low valuation levels.

Third rule: Please remember to use diversification when creating your portfolio.

The max for one stock sector (example finance) is 20% and 5% of one stock. Okey, this “5%” rule applies when your portfolio grows to 6 digits, but when you are dealing with 5 digits or even smaller portfolio, try to remember this 20% rule what comes to sector picking.

Fourth rule: Create a rule(s) for valuations.

Investor should create the rules what he or she will use when picking the stock. For example; stock value should be under 16 p/e or dividend yield should be over 2% and etc. I will share my stock picking rules in coming posts.

The last one: Trust yourself!

When you made the study about your stock and you chose the one to invest, trust yourself and please keep the stock in your portfolio more than one year. After one year, investigate what has happened. You will learn a lot of yourself as an investor and about your investing strategy. Please remember, as daily basis, only 1% of stock owners will decide the stock price. Like Warren Buffett has said; “The stock market is a device for transferring money from the impatient to the patient.”

Please use the comment section below and tell me what are your rules what comes to investing. And off course, you are always welcome to copy my rules.

Regards,

CVM

Stock Investing For Dummies - Compound Interest Made Simple

Impact of Compound Interest

Hi,

Today I will talk about one of my favorite topics, the compound interest. Even Albert Einstein has said that this is the 8^th wonder of the world! Albert was a very clever man and that’s the main reason why his quote about this topic can be found from my blog (and off course because the quote is true). The quote goes:

" Compound interest is the 8th wonder of the world. He who understand it, earns it... He who doesn't, pays it."

In theory, compound interest means “interest on interest” and this is calculated by multiplying the amount by one plus the annual interest rate raised to the number of compound periods minus one. Too scientific? No problem 😀 I will make an example.

Let’s think about a situation where “John” invest 1000 dollars to a stock. The stock pays dividend of 5% for the investment annually. So, let’s check what has happened to investment in 1, 5, 10 and 20 years. The value of the stock hasn’t changed during the years (yeah, I know, this will change (on an average of +7%) but not in this example, for the sake of learning 😀).

	once time investment	Compounding dividends	Without compounding	Compounding benefits	total amount compounded
year 1	1000	50	50	0 %	1050
year 5	1000	276,2815625	250	11 %	1276,281563
year 10	1000	628,8946268	500	26 %	1628,894627
year 20	1000	1653,297705	1000	65 %	2653,297705

Like you can see from the example above, the impact of compounding investment always needs to be done long-term, in this cases it means +10 years. The benefit of compounding increases when the investment time gets longer. 

Unfortunately, nobody didn’t teach me the compound effect 20 years ago, but this is something which I can teach to my kids and I can use this wisdom when I make investment plan for them and for myself.  

But hopefully this simple example gives you a understanding what compound interest is and how you can benefit from it. Please tell me if you want to see an example(s) where the stock growth, dividend re-investments, monthly purchases, etc. are included.  

Regards,

CVM