Chroma Investing

Value Investing for beginning & small time investors and the value investing strategies of Graham & Klarman

Investing Risks – What is Risk?

Looking at the risks of an investment is vital to understanding whether or not it is a sound investment. In a speech Alice Schroeder, author of Snowball, said that Warren Buffett starts his examination of a potential company by looking at the risks involved. If the risk is too high, he won’t go any further. We would be wise to follow this example.

Beginning Investor Terms – Quick Ratio or Acid Test

The Quick Ratio, also known affectionately as the “Acid Test” is a metric used to measure short term solvency. In non jargon it is a formula used to figure out whether or not a company can meet its short term obligations.

MNDO – Mind C.T.I. Why you must mind the details

I was reviewing a stock, Mind C.T.I. Ltd (MNDO), because it came across a screener as a Net Net opportunity. I wondered why it had so recently turned up.

MNDO is an Israeli company that, “a leading provider of convergent end-to-end billing and customer care product based solutions for service providers as well as telecom expense management (call management) solutions.”

Return on Equity (ROE) – Investing Terms

Return on Equity (ROE) is one of those fundamental concepts of investing. The principle is simple. What is the return on the stock holders equity invested in a company. As with almost everything else, there is an equation involved. ROE=Net Income/Shareholder’s Equity. Net income in this case is after Preferred shareholder’s dividends have been paid but before common stockholders dividends. Shareholder equity is common shares only, not preferred shares.

Solitron Devices (OTC:SODI) A Net Net Stock added to Portfolio

Today I bought 1500 shares of Solitron Devices (OTC:SODI) at $2.22/share with a $4.95 brokerage fee for a total of $3334.95 investment. For someone maintaining a small portfolio this is a large investment.

Is Diversification still Prudent?

I have never bought into the whole diversify across asset classes theory. It’s one of those dumb ideas that sounds good theoretically, but doesn’t pass the common sense rule, but I will get to that later. I am not much of an economist. Most of them use too much math in an inappropriate way, that does not reflect the real world that I live in.

VaxGen (VXGN) Closed Position

I have sold my position in VaxGen at $.64/share. I originally opened my position in VXGN in August for $.54share because it was a Net Net stock whose potential was actually in the $.78-$.90 share range. Actually I sold out on November 18th, using a limit order at $.64 my return was about 18% in a little over three months.

Discounted Cash Flow (DCF) Spreadsheet for Mac

Strangely, it never it occurred to me that anyone would be interested in a Mac spreadsheet for valuating a company based on DCF. I created my own because I could not find one on the internet, so I incorrectly figured no one really used a Mac in this world, but me. Where as the entertainment business is a Mac dominated industry, finance seems to be PC dominated industry and for good reason. Microsoft sucks ( I am not being harsh) at porting Office for Mac. It stripped out some of the most useful features in the excel version for Mac and has no intention of adding them in the future.

Free Cash Flow – Beginning Value Investor Terms

This is the latest in my on going series of Beginning Investor Terms. Free Cash Flow (FCF) is a similar concept to Warren Buffett’s idea of “owner earnings.” It is an important concept in value investing largely because it is often a preferred bit of a financial data to Earnings.

Beware of Brokerage Costs

The more money you spend earning your money, the less you keep. This includes premium services, taxes, transaction costs, brokerage fees. Anything that keeps your dollars from compounding in the future. In general this concept is pretty easy to grasp but in particular small money and beginning investors need to know that there is a difference between paying $10/trade and $5/trade.

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