This is a stock market weekend newsflash valid as of 13th October 2008. Well, at least the research was done over the weekend anyways!
As most would know by now, the stock markets are going crazy! The entire financial market is filled with panic and fear. While everyone around you loose their heads and whines about their paper loses, keep your cool. It is times like these where bargains exists!
Under normal sane market conditions, the stocks would be priced rationally. When emotions like fear take charge, rational thinking goes right out of the window. It also means crazy prices will appear! Compounded by the fact that the US markets will be closed for their weekends, it is quite usual to feel more gloom on Mondays in Singapore due to lack of direction of how stocks should price themselves.
This is a short entry hence I will not go into the details of how I derived at my calculations save the following ideal buying prices for me:
- Singpost at $0.75
- Mobile One at $1.84
I have factored a 30% discount from fair value as buffer and also studied some of the companies’ fundamental financials. This is key to valuating any stock. No hearsay involved. If you are seriously keen on how I derived the pricing to confirm your studies, drop me a comment on this blog.
Some of the stock price is already very near my target buy price, so I will be watching the market closely. I may be labelled as crazy, but let history be the judge of me! Have fun picking bargains!
Ps. If you happen to read the Straits Times over last weekend on their recommended bargain stocks and their supposed buy price, you may wonder how they picked this basket of stocks. I did some checks on them and found them lacking in fundamentals and appalled at some of the recommendations (eg. SPH). ou be the judge of that…just don’t loose your shirts (or dresses) along the way.
Yeah.
Over the weekend the recommendations for capital land and Sembmarine. Sembmarine PE is 16 which is still over priced in this market. I cant believe what the papers recommend.
hi,
i’m interested to know how you derive the above prices for singpost and m1?
are you in for the long term or just looking for capital gains for the short term?
Hi Vin.
I used 2 methods to compare and to cross check the numbers. I used the DCF model at 6% discount, and the value investment model with 30% buffer from fair value. Frankly it is an entire spreadsheet filled with formulas and adjustments collected over various publications and tweaked over time.
I have limited space to explain them all here, but email me so I can share more.
M1 as a stock is ok with dividend and all. ROE and NPM is at healthy levels. My only concern is the negative Equity growth and its low liquidity given its Current Ratio of 0.4. Otherwise, if all else remains constant, there is good upside potential from here.
SingPost is better, but this had been an exceptional performance year compared to its historical 5 year average. However, I should still give it credit for doing so. Again, only problem I see is the liquidity of the company with Current Ratio of 0.9. Not as bad as M1 though.
I am in to invest for 5 years and beyond. As you can probably see from the tone of the articles of my blog, I don’t encourage, not interested in short term day trading gains. Too dangerous for my hard earned money…
Hi Ryan,
Interesting valuations you got there. I believe you are quite conservative risk taker? Because i consider M1 and Singpost to be slow moving stocks. They neither move up nor down too much.
You can consider to choose other growth stocks that are beaten down so much but yet financially healthy. If ever market rebound, you will stand to reap better rewards than M1 and Singpost. Just my opinion
Anyway i wonder how is your current portfolio like? Any holdings?
Hi Mike.
Sorry for the late reply. There are some rules that I abide by when it come to selecting stocks for investment. I will list them as an entry in my blog for other folks to reference them in future. But here is a short list:
1. It must have a track record of profitability
2. It must have consistent earnings across at least 5 years
3. It must be at least mid-cap in size
4. I must understand their business and like the management
Consistency is key. Like a tennis player, the world number one player is not one with sudden flashes of brilliance, and crashes in many other matches. The most consistent one is the winner and the ultimate champion. The champion still loses from time to time, but the track record of consistently winning across different challenges is key.
Like my nickname suggests, the stock market is like a buffet. You HAVE THE CHOICE. If I had the choice of a stock with inconsistent, but sometimes brilliant profits over a consistent, but slower growth stock, my choice is always clear. That is what made Warren Buffet the richest man on Earth.
My portfolio is on one of the tabs on this blog. Hope this helps!
Hi Ryan,
i have already added your blog to my friends list. see if the title is ok.
i still cant find your portfolio. isnt there a direct shortcut like stocks portfolio or something
Hi Mike.
My updated portfolio is kept at this page:
http://ryanbuffetlim.wordpress.com/portfolio/
I update it whenever I make a transaction. Using an average cost pricing to make it more comprehensive. The link is actually a tab on the top of my blog named “Portfolio”
Again, thank you so much for the cross-link. Appreciate it. Can I request to have it as Ryan “Buffet” Investment Guide? Buffet is a nick (not a name) I like when it comes to investment as the market is truly like a buffet spread.
Thanks!
ok have updated the link
now i see the portfolio tab
what do you mean by cost averaging technique? this is the first time i hear such technique. i have only heard DCA and VCA. you meant average cost of purchase? but that isnt a technique
The problem I had been facing is that I normally regret the price that I buy a stock. So, having being influence by value averaging, I decided to adopt the approach to stagger my purchase approach for any stock that I like over a pre-defined period. Hence the cost is averaged and less likely to be over paying a premium at any point.
Hi buffet
Thank you so much for your information. I am an novice investor and am really into calculating theoretical price of equity using various discount models as I have an inherent interest in mathematics.
Would appreciate it if you could email me or put a link to the spreadsheet formulas you have so that your reader can have easy access to it.
Thanks.
UncleChan
Hey. I have not been working on revising my formulas for some time now…a little lack of time on my hands. But once I get a version that I am more confident that is absolutely error free and easier to use (and understand), I will share it openly. Hope you can wait.