Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Sunday 8 August 2010
Value Investment is a Risk-Averse Approach
Conclusion
Fundamental Analysis is a structured and formal approach to research on a stock's value and its potential growth. This analytical procedure facilitates the identification of overvalued and undervalued stocks relative to their earnings potential, dividend income potential and to their asset values, against the backdrop of the economic and industry environment. On the basis of the research, investment decisions are made such that the odds are stacked in favour of the Fundamental Analyst.
FINDING INFORMATION
- There are various sources of information. The most accessible are:
- The company’s annual report
- SGX’s Pulses Magazine
- The Company’s Website
- ShareInvestor.com
- Yahoo.com
- Reuters.com
- Bloomberg.com
- Your friendly stockbroker’s research report
EVALUATING THE INFORMATION
Cash flow Evaluation – this indicates the long-term viability of a business
- Profit Growth. Can the company and its business grow revenue (sunset, star, Porter’s model)
- Managing debt and expenses e.g., Keppel Corp manages its debt well and SIA its expenses.
- Value Investing. Undervalued situations use discount to book value where share price is compared to the stock’s intrinsic value
- Cash Cow. Look for cash generating companies, and dividend policy, eg Haw Par Healthcare, SPH, Chuan Hup, SembMarine, Keppel Corp
- Management, governance, execution, good and poor (foul-up)
PER SHARE VALUATION
Often, analysts and fund managers look at stock valuation. The most common terms used are :
- Earnings per share or EPS
- Price to earnings ratio or PER
- Price earnings ratio to growth or PEG
- Net tangible asset per share or NTA
- Dividend per share or DPS
- Dividend yield per share or DPS/price
http://www.sias.org.sg/beginnerguide/03_02_Fundamental_Analysis.html
Bullbear Stock Investing Notes
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