About

The Editor of this blog when he lived with cannibals in Irian Jaya (West Papua New Guinea).

Radio Interview here, InterviewWithJohnChew with http://classicvalueinvestors.com/i/2013/05/interview-with-john-chew-from-csinvesting-org/

How I became a value investor and my background:

In my peripatetic life I have been a ruby smuggler, commodity trader, securities analyst, investment banker, and entrepreneur. Each role taught me more about value investing.

As a ruby smuggler, I moved product to where demand was greatest. I operated in the world of supply and demand which translates into reversion to the mean for an investor. For example, I would buy rubies for x and sell them for 2x. The market naturally brings in capital until the opportunity vanishes. I learned not to mindlessly extrapolate current results into the future.

Commodity trading taught me that the role of the marginal buyer and seller sets the price: “Mr. Market” at work. When bond traders at the CBOT wade into the soybean pit because that is where the “action” is (high prices and volume), then I saw the most anxious buyer set the highest prices. Prices often diverge widely from value because people just can’t help themselves; they go crazy sometimes.

Later, I found myself at an obscure securities firm writing reports and raising money for companies. Brokers were desperate to sell stories to gullible investors. Action and excitement ruled and incessant activity was the lifeblood of the firm, but where were the customers’ yachts?

I was a pimp with tasseled-loafers when I sold the firm’s over-hyped merchandise to institutional investors who rarely did their own work. In my reports I predicted next quarters’ earnings. A fool’s game. Even if by some miracle my guess was close to actual results, it didn’t matter if the expectations were even higher. Ah, the danger of momentum investing.

If I ran naked onto Cramer’s Mad Money show while waving a shrunken head, ripped the mike from his clenched fist and predicted the direction of the market, my predictions would be just as prescient as his. Predictions are the sound and fury of Wall Street predicting nothing. Experience taught me to focus on business value.

There had to be a better way. I had been reading about this guy in Omaha, but the lessons didn’t really sink in until I left Wall Street in disgust to start several businesses. As a businessman I had to worry about hiring, firing, generating sales and strategy. Buffett’s focus on business, competitive analysis and management started to resonate: the right people are everything, operational efficiency is a constant task, capital allocation is tied into strategy and management incentives matter a lot. Businesses usually don’t fit neatly into spread sheets or our assumptions. Becoming a rational businessman is quite different than gazing at flashing stock prices.

Rationality and knowledge will eventually triumph over fear, euphoria and emotionalism. Try going into your local store and offering the owner half the cash in his till, then tell him to get out because you own the business now. Crazy? Mr. Market offered some Internet companies at half their cash value in 2002/2003. That is what I call a margin of safety!

Once a value investor, you never go back.

I hope to share my reference library of readings, videos, case studies and lectures to help other self-directed, avid investing students. To have access to the Value Vault which has over 40 video lectures–including books and other materials just type in VALUE VAULT in the search box in the upper right hand corner of this blog, then follow links to the Cloud Folders. Please use the materials for your own use.

Becoming a successful, knowledgeable investor is a long arduous journey, but worth the effort.  As a former private pilot, the training is applicable to learning how to invest.  First, you must understand the theory of flight, weather and navigation, then you practice in a controlled environment–either in a trainer or in good weather with an instructor–before you fly solo.

As a beginner, you will need to understand accounting, corporate finance and business strategy. Then you must practice the application of theory in a controlled environment–think case studies which this blog will introduce. Finally, you must apply your principles, knowledge and personal characteristics to the opportunities in front of you.  Be the best you can be not a follower or mimic. Finally, be a skeptic and prove everything for yourself.

Travel safely and enjoy your trip,

John Chew

32 Responses to About

  1. I think Kbalb is one of the good bargin at the moment.

  2. Hey John your doing a fantastic job…..
    I appreciate your work…..
    Keep posting investment ideas which will help the mass to study and learn….

    Regards,
    Mayur Jain

  3. I just wanted to say: excellent blog you have.

  4. Thanks Mark and Mayur for your kind comments. I don’t think this blog will appeal to most investors–only those dedicated to learning the craft on their own.

  5. Beautiful blog! Thank you!

  6. I took that photo of the editor and he was NOT in New Guinea!!! We were in the garden of a posh hotel in California at so called value investing conference. Many of the attendees were actually making trades on their Blackberry’s as their guru spoke in tongues of sub prime lenders with supposed “moats” (durable competitive advantages) Finally, after 2 1/2 hours Chew lost his mind and after savagiung the false profit, began eating his young wannabe’s. John is an amazing teacher with an amazing blog…just be careful not to set off “the switch” by aping some “great” investor rather than doing your own work

  7. Hi John,

    Just wanted to commend you on the site and say that i am impressed by the quality material posted.

    I will be sure to recommend others who are just beginning to understand the underlying fundamental principles of investing as strictly educational sites such as this are rare.

  8. John,
    I just stumbled upon your site and the content is great. However, the way the content is laid out is very clunky. I find it incredibly difficult to navigate and find the entries I want to read. It seems like I have to scroll through every post to find the ones I want to read! Have you thought about categorizing your posts? Just something that I know all of your readers would appreciate! Keep up the good work

    • Yes, I definitely need to reorganize the material better. My first concern was getting the main body of material up.

      Unfortunately, I am waiting for a lull in the storm to rebuild the site. I need to place categories and cross references to posts. The week before Christmas, I will work on doing this.

      Hang in there and thanks for your patience.

  9. Hi John,
    Your blog looks very interesting. I was wondering if there is a way to subscribe to an RSS feed? Many blogs have a button at the bottom. Please forgive my technological ignorance if there is already an easy way to do this.
    I’m looking forward to exploring your material over the Holidays!
    Cheers,
    Tom

  10. Just wanted to say that I am very impressed with the quality of this site and your generous sharing. I know I have learnt a lot and I’m looking forward to your blog every day – though I must say there’s a lot of material for me to catch up.

  11. Excellent site. Indispensable resource for any value investor…

    Keep up the good work John !

    Cheers !
    Abhishek

  12. Hi John I tried emailing you at aldridge56@aol.com for access to request access to your value vault but got a permanent delivery failure. I really appreciate your generosity in sharing your learning materials. Pls let me know how to access them. Thanks.

  13. John, the link for your background is no longer active. I was hooping to read your bio. Will this link be back up anytime soon?

  14. OK, I inserted my background. Please don’t hold it against me.

  15. Hi John,

    I am follower of you website. you are doing awesome work. i was looking Morning star report on CGI (NYSE:GIB).

    I see from reading your blog you have access to Morning star report. I am employee of CGI company and have been accumulating the cgi shares for the last years from one of the company plan.

    the company recently going up cause of the acquisition of Logica.bu currently i see no much increase in earnings.

    Thanks,
    Shivprakash H

  16. Good for you. Now you need to dispassionately value the combined company. If you still have a margin of safety then hold and if not, then sell.
    If the new business is unrelated then that is a red flag and/or especially if the market price has moved up in anticipation of success. I don’t know enough to imply that is the case here.

  17. I read this section of the blog every time I feel down and need some inspiration!

  18. Sir, The Scribd link – cannot be asked. They asked to create an account or log in via Facebook. What is your benefit of using Scribd. Can’t you please put a PDF doc. or any other DOC directly on your site. Scribd is really not good, waste of time. I would like to know why people put stuff on Scribd.

  19. Is there any chance to have the back issues of The Outstanding Investor Digest? I heard they are really good!

    Thanks,,

  20. Thoughts on the book, “Special Situation Investing: Hedging, Arbitrage, and Liquidation” by Stark? I can’t find a copy anywhere and not ready to pay $150 for a used copy on Amazon. Thanks much. – A

  21. I got referred to your blog by a fellow linkedin Group member, and I have really enjoyed reading it. Hope you like my blog on value investing in India at http://www.igvalue.com . Would be obliged if you gave comments!

Leave a Reply