seppo saario presentation slides

7/30/2019 Seppo Saario presentation slides

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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.

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