Sunday, April 28, 2013

Top 10 investment books for Superinvestors

There are many recommended reading list on the best investment books to read to gain a better knowledge on investing. Many of these reading lists purely just state the book title and author without telling the reader why and how these books will benefit them.  Moreover, most of these reading lists are catered for the beginner investor. To address the gap, I decided to come up with my own top 10 investment books that cater to all types of investors as well as those that are recommended by famed superinvestors such as Warren Buffett, Howard Marks, Seth Klarman and etc. I believe in Mohnish Pabrai’s idea of cloning where he said that an investor would dramatically improve their results if they simply copied what Buffett and other value investor does. We not only can copy the stock ideas of these superinvestors, we can also read the books that they read or recommended.

The selection of the books is based on the depth of investment concepts covered and recommendations of these superinvestors. The reading list has been sorted in order of difficulty. Here are my top 10 investment books.

As Warren Buffett says "In business, I look for economic castles protected by unbreachable moats". The wider the economic moat of a business, the more likely it is to stand the test of time. When Buffett purchases a business, he pay careful attention to economics of the industry and if the business has an enduring competitive advantage

This little book by Pat Dorsey explains the company’s economic moat as the measure of its ability to withstand competitive threats and tough economic times. It is a quick read and provides detailed analysis about the different types of durable competitive advantages a.k.a. moats, that a company achieves. It teaches the beginner investors how to identify business with wide moat when you see one. Some attributes to identify an economic moat include customer stickiness, intangible assets, the durability of earnings power etc. If investors can identify companies with moats and purchase their shares at reasonable prices, investors will be able to do well in their investments

  1. Moneyball: The Art of Winning an Unfair Game by Michael Lewis [Easy]
Money ball tells the fascinating tale of Billy Beane's ingenious use of statistical analysis in order to assemble a winning team without the luxury of a large payroll. The book talks about how the Oakland Athletics selected undervalued players and won its division. The book is just as much about value investing as it is about baseball. Just as Billy Beane analyze baseball players objectively based on the relationship of a player’s salary to quantitative measurements like on-base percentage, value investors analyze stocks objectively based on the relationship of a stock’s market price to quantitative measurements like its discounted cash flow.

3.       Fiasco:The Inside Story of a Wall Street Trader by Frank Parindy [Easy]

Recommended by Charlie Munger, the vice chairman at Berkshire Hathaway is known to be an intellectual man and this book is highly recommended by Charlie Munger as an essential investment book for investors. FIASCO is the shocking story of one man's education in the jungles of Wall Street. As a young derivatives salesman at Morgan Stanley, Frank Partnoy learned to buy and sell billions of dollars worth of securities that were so complex many traders themselves didn't understand them. In his behind-the-scenes look at the trading floor and the offices of one of the world's top investment firms, Partnoy recounts the macho attitudes and fiercely competitive ploys of his office mates. This book is considered to be the first on the derivatives trading industry

This is a book written by one of the superinvestors, Joel Greenblatt. He is founder and managing partner of Gotham Capital and is well known for the invention of Magic Formula Investing. This book is his first book before the now famous "The Little Book That Beat the Market". This book covers a wide range of topics, some of which might be a tad complex for the beginner investor. It focuses on special situations such as spin off, bankruptcy, restructuring and merger securities. The book is filled with case studies and examples.

Fund manager Joel Greenblatt has been beating the Dow (with returns of 50 percent a year) for more than a decade and this book is filled with his insight in areas where the individual investor has a huge advantage over the Wall Street wizards. This book is on Seth Klarman's and Dan Leob's must read list. If this book finds its place in one of the superinvestor's reading list, it should definitely be on your reading list as well.

5.       Margin of Safety by Seth Klarman [Intermediate]
This book is one of the most highly sought after investment books of all time. The title of the book suggests that it is all about value investing and how seeking a margin of safety helps to ensure positive stock market return. This hard-to-find and out-of-print book is a must for aspiring investment aficionados. It is written by one of the most successful hedge fund managers of our time, Seth Klarman. Klarman explains the value investing philosophy, the logic of the value investing strategy, and why value investing succeeds over the long term. The book is organized into three parts, namely (1) Where Most Investors stumble (2) A Value-Investment Philosophy (3) The Value-Investment Process. "Margin of Safety" is recommended by David Einhorn and is a must-read for investors.

6.       The Intelligent Investor by Benjamin Graham [Intermediate]

This book is considered as the bible of value investing and almost all superinvestors had read and benefitted from this book. Warren Buffett read the first edition of "The Intelligent Investor" early in 1950, when he was 19. To him, it was like seeing the light. He said: “I thought then that it was by far the best book about investing ever written. I still think it is.” This book is written by the "Father of Value Investing" and recommended by Warren Buffett, the greatest investor of all time. There should be no further explanation on why this is one of the top 10 books that must be found on any serious investor's bookshelf.

7.      Winning the Loser's Game: Timeless Strategies for Successful Investing by Charles Ellis [Intermediate]
Recommended by Howard Marks, this is one of the most useful investment strategy book and it provides solid and clear concepts.  Ellis explains how to avoid common traps and get on the road to investment success. After reading the book, readers will be able to create an investment program based on the realities of market. The book has since sold half a million copies and is highly recommended by late management guru Peter Drucker as one of the best book on investment policy and management.

8.       Value Investing: Graham to Buffett and Beyond [Difficult]

This is one of the best books on value investing. Bruce Greenwald is also a professor at Columbia’s Business School, and director of research at First Eagle Funds. The book is divided into three parts: an overview of what value investing is; an examination of three specific approaches to value investing; and case studies of several well-known value investors and the ways they put the tenets of value investing into practice. It explores the way value investing evolved over the years and how the basic concepts were used and modified by Graham disciples to support the present environment without letting past concepts be forgotten. Though the book provides a deep insight into value investing, it can sometimes be a bit technical and therefore reads like a college text.

9.       Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud by Howard Schilit [Difficult]
This book is highly recommend by Dan Leob, the fund manager of Third Point. This book takes an in-depth look at accounting fraud and how to identify warning signs of a company's impending problems. Obviously this book makes sense for anyone looking at balance sheets, 10-Q's and 10K's on a regular basis.  A must-read for people who like detailed analyses of companies and financials

10.   Quality of Earnings by Thornton O' Glove [Difficult]

This is a lesser known book among investors but is a great book if you want to deepen your understanding of analyzing companies and valuation. It teaches you how to understand the various financial information companies provide. Readers will learn how to interpret the financial statements from an investor point of view.  This book found its place in the top 10 list via a recommended by Bill Ackmann, who is famous for shorting Herballife

Friday, April 26, 2013

Top 7 Stocks Owned by Value Investors Every Investor Should Know

Mohnish Pabrai, one of my favourite investors, delivered a lecture on value investing at the UC Davis Graduate School of Management in 2012 where he explained his philosophy of how we can all become great investors. He introduced the idea of cloning and said that an investor would dramatically improve their results if they simply copied what Buffett and other value investor does.

What is cloning?

Based on Mohnish, cloning is a powerful concept and the best strategy.  It involves reverse engineering trades which meant applying the knowledge and expertise gained by the notable investors (the likes of warren Buffet, Charlie Munger) in our investing methodologies.

So does cloning really work? Mohnish Pabrai explained that a study by Gerald Martin and John Puthenpurackal (“Imitation is the Sincerest Form of Flattery”) had proved that if investors had just bought the stocks that Warren Buffett had bought, months after the official announcement, and at significantly higher prices than what Warren Buffett paid for them, they would have made a lot of money. Investors where Mohnish Pabrai would closely follow include Seth Klarman, fund manager of Baupost, Longleaf Partners, Greenlight Capital, Pershing Square, Third Avenue and Fairfax Holdings.
The best way to practice cloning is to keep an eye on what the big investors are buying.  This article will further extend the idea of cloning and look at the top 7 stocks bought by value investors in the Q1 2013 so that we can clone their actions and stocks bought.

1. Microsoft (MSFT)
Microsoft is currently owned by 55 gurus with some of the most notably being Donald Yacktman, David Einhorn, Mason Hawkins of Southeastern Asset Management, Ron Muhlenkamp etc. In Q1 2013, investors such as Donald Yacktman, Steven Romick (FPA Crescent Fund),  Thomas Russo added their stock holdings in Microsoft by 5% to 50%
Microsoft has been active in innovating new products, with the releases of Windows 8, Windows Phone 8 and Windows Surface tablet. Investors see Microsoft as having a dominant global franchise, an opportunity to increase its earnings in the emerging markets. The stock is selling at a low multiple of its cash flow and low multiple of earnings. Since the gurus bought it, the stock has been up 5%

2. Oracle (ORCL)
Orcale is a provider of enterprise software and a provider of computer hardware products and services. Its software, hardware systems, and services businesses develop, manufacture, market, host and support database and middleware software, applications software, and hardware systems, with the latter consisting mainly of computer server and storage products. Oracle makes hardware and software for the cloud and data centers, with 100 of the Fortune 100 as their clients. Oracle is currently owned by 34 gurus such as Seth Klarman, Lou Simpson (an investor that Warren Buffett trusts), Tom Russo, Ruane Cuniff etc. In Q1 2013, Glenn Greenberg (Brave Warrior Advisors), Lou Simpson, Thomas Gayner (Markel Asset Management) bought the stock.  Oracle’s balance sheet contains approximately $37 billion in cash, with $19 billion in long-term liabilities and debt. The company has also been generating higher annual free cash flow for a solid decade. 

3. Western Union (WU)
The Company is engaged in global money transfer and payment services, providing people with fast, reliable and convenient ways to send money around the world. Its services are available through a network of over 410,000 agent locations in more than 200 countries and territories. Western Union is owned by value investors such as John Rogers (Ariel Appreciation), Donald Yacktman etc. In Q1 2013, investors increased their holdings of Western Union between 15% to 120%. Western Union is deemed to be a cheap stock by investors where it is currently traded at about 6 times EBITDA (Earnings before Interest, Depreciation and Amortization).

4. Coca Cola (KO)
Coca Cola owns and markets four of the world's top five nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Fanta and Sprite. Though not considered a fast grower, the company gained 91% over the past 10 years, the maker of the globally beloved beverage had consistent long-term performance, pricing power and ever-increasing global consumption rates. Coca Cola is owned by 28 gurus with the most famous of them being Warren Buffett. Beside Warren Buffett, Joel Greenblatt (author of “You can be a stock genius”), Donald Yacktman, Ken Fisher, David Winters of Wintergreen Fund, Bill Gates, Jeremy Grantham also owned the stock. In 1Q 2013, Donald Yacktman, Robert Zagunia of Jensen Funds, Thomas Russo all bought the stock. Since their purchase, Coca Cola is up 10%. 

To know the rest of the stocks which the gurus are buying, please click here

Time to take a close look at Warrants

This post is a reprint of an article found in Business Times on 18th April and I find that it is a good article for sharing and also a possible way to invest to get a better returns on your capital!

Time to take a close look at warrants by Ven Sreenivasan which appear in Hock Lock Siew section of the Business Times - 18th April 2013

In 2008, shortly after Lehman Brothers collapsed, a scared Wall Street banking giant, Goldman Sachs, turned to the legendary Warren Buffett to shore up its capital and restore market confidence. Mr Buffett, the ever savvy investor, invested US$5 billion in Goldman's preferred stock and negotiated, as a sweetener, another 43.5 million Goldman warrants with five years to expiry

He redeemed the preferred shares in 2011. But Mr Buffett still holds the 43.5 million Goldman warrants. Marked to market, these warrants are now in the money to the tune of some US$1.22 billion. On conversion, he will become one of Goldman's largest shareholders - without having to incur a huge outlay.

That same year, Mr Buffett also bought into the troubled Bank of America (BOA). As a sweetener, he was issued 700 million warrants with a 10-year lifespan and a strike price of US$7.14 each. BOA last traded at US$11.97, giving him an imputed profit of some US$3.38 billion.

Warrants are commonplace in developed markets. They give the holder the right, but not the obligation, to buy the underlying stock at a certain price and quantity, within a time.

So companies often include warrants as part of a new offering to entice investors into buying the new security.

But warrants are also bull market instruments. They give holders the leverage to realise greater percentage gains than their underlying shares in a rising market. As the cost of a warrant is relatively low, the initial outlay to gain exposure to a large amount of equity can be relatively small.

On the New York Stock Exchange, whenever there are rumours, rumblings of corporate action, the first sign of activity is always on the warrant.

Alas, this is not always the case in Singapore. Though trading volumes in warrants have picked up somewhat, investors here generally regarded these instruments as a poor cousin of the underlying stock. One need look no further for proof of this than to the many in-the-money long-dated warrants trading at attractive discounts.

This problem arises because market players here tend to take a short term, trading orientated view of warrants. Also, many buy warrants to quickly convert into stock.

They should not. Rather, one has to take a longer-term, balanced view of warrants. While warrants provide an avenue for companies to raise funds in the future, investors should also see them as an opportunity to ride on the upside of the underlying stock on the cheap. Also, large amounts of early conversions cause earnings dilution to the underlying shares.

There are 42 listed warrants on the Singapore bourse. But three are worth illustrating. The first is mDr, which is the most actively traded warrant here. At the current share price, this warrant is in the money. Many buy it on expectations that the underlying stock will be propelled upwards as this company pursues its potentially lucrative Myanmar telecommunications ventures.

However, daily market filings also show a substantial amount of conversions. This is because of a quick arbitrage opportunity provided by a slight discount to the "mother" share on conversion.

Let's move from the most heavily traded warrant to the one traded at the biggest discount. Sinar Mas Land's warrant trades at 25 cents with the exercise price of 10 cents and expires at end-2015. The underlying shares is trading at around 43 cents. It doesn't take a rocket scientist to figure out the almost 20 per cent discount to be had. Sinar Mas is a property conglomerate with assets in four countries: Indonesia, Singapore, Malaysia and China. Its 49 per cent stake in Jakarta-listed Bumi Serpong Damai (BSD) alone is worth $1.8 billion or 59 cents per share. And this does not include its assets in Singapore (128,000 sq ft in Orchard Towers), Malaysia (Palm Resort at Iskandar) and China (developments in Shenyang City)

Warrants are akin to putting down an option on a house, If the price of the house (or underlying security) goes up, you should be able to either exercise your option or sell it at a gain to the highest bidder.

As one wit wrote, the world of warrants is a relatively undiscovered constellation in the universe of securities. It's about time Singapore investors use their investment telescopes to take a close look at them in this emerging bull market.

Tuesday, April 23, 2013

Invest like Benjamin Graham in Singapore stocks

Benjamin Graham is the father of  investing and his way of value investing was to search for net-net stocks where he will construct a basket of stocks as his portfolio. His method of value investing is still being widely practiced by value investors such as Seth Klarman, Third Avenue Management etc. In this blog post, I would like to refer to an article by CLSA to explore the idea of investing in Graham-like stocks in the Singapore stock market.

This is a reprint of an article from brokerage research house, CLSA. In this article, they construct a stock screen that incorporates the attributes that Ben Graham looks for in a undervalued stock and run the stock screen through all the SGX stocks to find stocks that fulfill it. The end result of this stock screen is the Ben Graham Number.

What is the Ben Graham Number?
Graham Number is a concept based on Ben Graham's conservative valuation of companies. Graham Number is calculated as follows:

Graham Number = SquareRoot of (22.5 * Tangible Book Value per Share * Earnings per Share)
= SquareRoot of (22.5 * Net Income * Total Equity) / Total Shares Outstanding

Which Singapore stocks passes the Ben Graham Screener?
The following list of stocks passes:
City Dev
Keppel Land
Parkinson Retail Asia
Singapore Airlines
ST Eng
Semb Marine
Golden Agri
Singapore Post

CLSA article below:

Finding Undervalued Singapore Stock: Ocean Sky

This is a stock that I came across while reading a stock report recommendation from OSK-DMG. The stock is called Ocean SkyOcean Sky International Limited and its subsidiaries is a one-stop fully integrated apparel service provider with global end-to-end supply chain management capabilities from design to distribution. The Company’s divisions include Corporate Services, Apparel Agency and Apparel Production Services divisions. The Company's subsidiaries include Ocean Sky Marketing (HK) Ltd, Suntex Pte Ltd, Bright Sky Pte Ltd, Suntex Investment Co. Ltd, Bloom Time Embroidery Pte Ltd and Ocean Star Apparel (Guangzhou) Pte Ltd. 

Why is Ocean Sky undervalued?
The stock is currently trading below cash and offers a dividend yield of more than 11%. The company recently sold off its core apparel business together with two properties in Hong Kong which left the company flush with cash. OSK-DMG estimated the cash to be 30-
40% higher than the entire market cap of the company. With the huge amount of cash on hand, management will be expected to be dishing out some SGD0.016 of special dividend. Together with the final dividend of SGD0.008, this would mean that the yield on the company comes up to just over 11%. OSK-DMG estimates the intrinsic value of the stock to be about SGD0.29, which represents an upside of close to 40%. 

Valuation of Ocean Sky
Below is the valuation done by OSK-DMG. 

Risk of investing in Ocean Sky
In value investing, we are always focused on the risk of losing money; the downside. The risk of investing in Ocean Sky is that management might not be able to find a good business to reinvest the excess cash. 

An update was posted on Ocean Sky in October 2013. Check out the update here

Disclaimer: This is not a buy or sell stock tip. Please do your own research. 

Friday, April 19, 2013

What Warren Buffett Can Teach Us About Position Sizing

Investing successfully requires an investor to make many decisions. The first and foremost decision is the amount of capital available for investing, the type of asset (e.g. mutual funds, index funds (link to index fund article, stocks, gold etc.) to invest in and construct an investment portfolio. Regardless whether allocators select investment managers or individual securities, optimal position sizing is paramount to portfolio success. Small allocations to prescient investments minimize their impact while large allocations to poorly performing investments leads to underperformance

Some investors use a simplified model to construct their portfolio where an equal weight allocation is given to all investments not taking into account uncertainty regarding which investments will perform best. The portfolio is then rebalanced on a regular basis to maintain the equal-weight allocation. This equal weighted strategy benefits from simplicity and it prevents the portfolio from being over-allocated to one particular stock. However, the drawback of this strategy includes underweighting exceptional investments and overweighting marginal ideas.

An alternative strategy is to allocate large amount of capitals to the ideas with the most potential upside. This strategy suggests investors should invest proportionally according to their return expectations. Portfolio constructed using this strategy will tend to be concentrated with most of the portfolio being invested in a few high conviction stocks. The advantage of this methodology is matching prospective return to investment size. Many famed value investors such as Bruce Berkowitz, Donald Yacktman, Mohnish Pabrai and Warren Buffett runs concentrated portfolio where they take up huge position in their high conviction stock picks. One method that they could use to determine the position sizing is using the Kelly Criterion. Mohnish Pabrai in his book, The Dhandho Investor (amazon link), explain exclusively on how Kelly Formula can be used for portfolio allocation and how investors can benefit from using it.

What is Kelly Criterion?
The Kelly Growth Criterion is a simple formula that determines mathematically optimal allocations to maximize long-term portfolio performance given each investment’s probability of success (“edge”) compared to the amount gained or lost (“odds”). This mathematical formula was developed by John Larry Kelly Jr 50 years ago while working at the AT&T Bell Laboratories. The formula assumes a bimodal outcome of success (“base case”) or failure (“stress case”) over a single time period:

Since the formula was developed, it has been used by bettors and investors to beat the market.
How to compute the amount to invest/bet on a stock?
Let’s assume somebody offers you the following odds on a $1 bet and your bankroll is $10,000.

 80% chance of winning $21
10% chance of winning $7.5
10% chance of losing it all

According to Kelly Criterion, the edge is equal to 80% x 21 + 10% x 7.5 + 10% x -1( because we have lost our money)=16.8+0.75-0.1=17.45

To continue to read the article, click here

Wednesday, April 17, 2013

Reit List Tracker

For those who are interested to know when the S-Reits announce their earnings, below is a consolidated view of their earnings announcement dates.

Earning Passive Income with the Click of a Mouse

This blog serves to share investment information on Singapore stocks and US stocks, how to identify undervalued stocks in the hope that readers can improve their investing knowledge so as to profit from the stock market. Beside doing that, I will also post any other good source of earning passive income. Most readers generate their passive income from dividends from stocks. I recently came across another source of generating passive income where you get paid to read emails from EmailCashPro. Though the amount earned from reading the email is not a lot but it takes minimal effort.

If readers are interested to start earning passive income, please click here.

What Value Stock Investing is Reading/Writing/Watching

Link of Interest - 17th April 2013

Value Investor Arnold Van Den Berg Explains His Version of Value Investing

Howard Marks on Level of Equities

The Simplified Guide to Investing in Index Funds

Index Fund Inventor Jack Bogle's Investing Tips

Don Yacktman Sits Down With Steve Forbes For A Lengthy Interview

Monday, April 15, 2013

Top 5 Best US Value Mutual Fund

“The most important thing is Value” says Howard Marks in The Most Important Thing. Seeking out value, in my opinion, is the best way to generate better returns in the stock market. In my previous article (link to article), I have provided steps to find undervalued stocks.
Besides seeking out undervalued equity by looking at metrics of stocks, there are other alternatives. For readers who know that value investing is the best way to invest but might not have the time or interest to research on individual stocks, a mutual fund run by a value investor might be the next best option. In this article, I will explore the option of investing in a mutual fund. For investors who might not be able to invest in US Mutual Funds, by knowing the money manager who run the funds, we can adopt the strategy of following the gurus by buying into stocks where they have the highest conviction. Of course, the purchase can only be done after sufficient research on your own.

What is a mutual fund?
As defined on Investopedia, a mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds and other assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. An advantage of mutual fund is that it gives small investor access to diversified portfolio of equities managed by famed value investors. 

Below are stocks that are held by the top 5 money managers:
1. Oracle (ORCL)
2. BAC (Bank of America)
4. Research in Motion (BBRY)
5. Procter & Gamble (PG)

To read the rest of the article, click here

Investing in Reits and Property Developers

Following my previous post on Capitamall Trust, I came across an article in the Business Times by Ronald Sim that provides required information for investors who are interested in investing in S-REITS. This is a good resource and thus I am sharing this article below and hope that those who missed out on this article can learn and benefit!

Click here to read the article!

Thursday, April 11, 2013

Singapore Stocks Near 52 Week Low

A good source of value will be to look for stocks that are near the 52 week low. Below is a list of Singapore listed stocks that are trading near their 52 week low, based on last Friday (5th April 2013) closing price

Wednesday, April 10, 2013

S-REITs: Capitamall Trust - Stability and Sustainability

This post is a follow up on my previous post on Capitamall Trust being a deep value play. Capitamall Trust is  Singapore's largest REIT and since its inception in July 2002, it has returned a total of 218.5% as of 31st December. The REIT is stable and has a distribution yield of 4.39%. The REIT has 15 properties that are strategically located and well managed. Management is also actively involved in Asset Enhancement Initative (AEI) and with the completion of Westgate in Jurong East, it looks to provide higher returns. For readers who wants to know more about Capitamall Trust and why it is a good, undervalued stock, UOB Kay Hian has a good presentation deck on Capitamall Trust. Hope this will give all readers a better understanding as investors should only invest in what we know! Have a profitable week ahead!

Saturday, April 6, 2013

Reit List Tracker

With the increased interest in SReit, I will be publishing the following SReit tracker on a regular basis. The tracker shows the brokerage house recommendations and their view of the intrinsic value.

Of the REITs listed, CapitaMall Trust is the most deeply valued. To read more about CapitaMall Trust, please refer to my previous article

Friday, April 5, 2013

S-REITs: Capitamall Trust - Deep Value at Current Price

In the past year, S-REITs have been singled out as one of the best performing sector stocks in Year 2012. Stock price of most REITS have increased 20% -50% in the past year, making it fairly valued in the market. For investors who are still interested in investing in S-REITS, OCBC has recommended Capitamall Trust as a deep undervalued S-REIT which has been a laggard as compared to the other REITS. Hope everyone will have a profitable week ahead :)

How to find value in stocks

As the oldest rule in investing advocates investor to buy low, sell high. This essentially means that the goal of all investors is to buy an asset (stocks, bonds, gold etc.) for something less than you can sell it for. In order to do that, investor will have to be able to assess the value of the stock. In this article, we’ll go over the metrics on how to identify value in stocks. Consistent increasing sales, income and cash flow The first step to identify value is to determine if the stock has a history of consistently increasing earnings, sales and cash flow over a period of 5 – 10 years. We will use Cisco as an example in our illustration below. The earnings, sales and cash flow figures can be obtained from financial websites such as Google Finance, Morningstar. Below is a screenshot from Morningstar that shows that Cisco has increasing sales, net income and operating cash flow over the past 10 years.

High Gross Margins
The second metric to look at is the gross margin. Gross margin is defined as a company’s total sales revenue minus the cost of goods sold, divided by the total sales revenue. A high gross margin provides an indication of the economic moat of the business. Cisco below has shown a consistent high gross margin above 60% which indicates that it does has some economic moat as shown by its market leader status in server and routers.

To read the rest of the article, click here
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