Investment in Giant Enterprises. But how successful are they from the standpoint of the investor?

Let us take a look at the top listed companies in the stock market with either the highest assets or highest sales.  All of these enterprises have achieved enormous size, and by that token they have presumably made a great success.

But how successful are they from the standpoint of the investor?

What do you mean by success in this context?

 "A successful listed company is one which earns sufficient to justify an average valuation of its shares in excess of the invested capital behind them."

This means that to be really successful (or prosperous) the company must have an earning-power value which exceeds the amount invested by and for the stockholder.


$$$$$$


It is evident from an analysis that the biggest companies are not the best companies to invest in, based on the percentage earned on invested capital.

It is equally true that small-sized companies are not suited to the needs of the average investor, although there may be remarkable opportunities in individual concerns in this field.

There is some basis here for suggesting that defensive investors show preference to companies in the asset range between $50 million and $250 million, although we have no idea of propounding this as a hard-and-fast rule.


Benjamin Graham
The Intelligent Investor

The excitement of blue chip value investing

The excitement behind blue-chip value investing doesn't reside in life-changing tales of a stock that moved up 800% in a year or two.

Those stories were common during the late 1990s with Internet stocks, but as we saw in 2001 and 2002, what rises dramatically and rapidly often falls with equal fury.

The excitement of blue-chip value investing comes from looking at long-term charts of what value stocks do as a group over a period of decades - or what they have done for Warren Buffett.

That extra 2 % or 3% a year in returns, multiplied over a lifetime of investing, makes for some heart-pounding piles of cash down the line.  It will give you your million-dollar portfolio - and much more.

One of the biggest dangers with Investing is Overconfidence

Quote:   

Re: uyafr selection October 2010 batch
« Reply #45 on: October 27, 2010, 10:16:15 AM »
Reply with quoteQuote
Quote from: smartinvestor on October 27, 2010, 10:09:42 AM
Agree with Uyfar...
GenY...please tell the MANY company that also doing well too...
DIGI? KPJ? Genting?
Here is the place we share information and earn $$$ together

yep, do u know how much is DIGI, KPJ Gentings ? hehehe if suddenly those counter drop.. kena kaw kaw, if go up.. the most 5-10%

BUT LCTH, I dont see how it can drop much, but if go up... even if go up 100% it is still cheap and good. So think for yourself, is it worth risking on those counter already too high up or buy a counter which is still rock bottom and rock solid.

http://www.investlah.com/forum/index.php/topic,11510.msg195753.html#msg195753


The above was a post in October 2010 in a blog that I participate.

Here are the 5 Years charts of DIGI, KPJ, Gentings and LCTH performance.



Digi Share Price
Oct 2010  RM 2.50
July 2013  RM 4.70
Capital Gain 88%




KPJ  Share Price
Oct 2010  RM 3.80
July 2013  RM 6.50
Capital Gain 71%



Genting Share Price
Oct 2010  RM 10.50
July 2013 RM 10.50
Capital Gain 0%

versus



LCTH Share Price
Oct 2010  RM 0.28
July 2013  RM 0.18
Capital Loss  - 35.7%

From October 2010 to July 2013:
1.  The prices of the shares of Digi, KPJ have performed very well.
2.  Genting share price remained relatively unchanged over this period.
3.  The share price of LCTH has tanked significantly.


Questions I pose:
1.  Are higher priced stocks more risky than penny shares?
2.  Are higher priced stocks more risky because they have a longer way to drop?
3.  Are penny shares less risky because should their prices correct, the drop will be less?
4.  Why are higher priced stocks priced such, and why are penny stocks priced such?
5.  What are the fears that kept this "investor" away from Digi, KPJ and Genting?  Are these fears rational or irrational?
6.  What drives his enthusiasm to penny stocks?  Greed?  Ability?  Confidence?  Past gains?   Are these emotions rational or irrational?
7.  What single characteristic, if any, distinguishes the gains in Digi, KPJ and no loss in Genting, compared with LCTH?


What lessons can we derive from the above observations?
Please feel free to post your comments.

How to decide what shares to buy?

How to decide what to buy?

When it comes to deciding what shares to buy, the most important thing to consider is your investment goals, in particular, the performance goals you set for the share investments portion of your portfolio.

For example, you might be aiming to achieve an average after-tax dividend yield of 4% p.a. and capital growth of 8% p.a. over the next 10 years.  In that case, you could buy some shares that provide reliable, tax-effective dividends and the expectation of solid year-on-year growth.

Alongside long term investing, there are share trading opportunities that offer the chance to grow your investment capital more quickly.  Active or daily trading carries with it certain risks that need to be considered carefully.  With this in mind, looking at the range of categories that shares fall into can be a useful place to start.

(Long term investors aim to capture an upward trend in market value.  Short term investors try to capture value from the volatility in the share market.)

Income shares - Pay larger dividends, compared to other types of shares, that can be used to generate income without selling the shares, but the share price generally does not rise very quickly.

Blue chip shares - Issued by companies with long histories of growth and stability.  Blue chip shares usually pay regular dividends and generally maintain a fairly steady price trend.

Growth shares -  Issued by entrepreneurial companies experiencing a faster rate of growth than their general industries.  These shares normally pay little or no dividends because the company needs most or all of its earnings to finance expansion.

Cyclical shares -  Issued by companies that are affected by general economic trends.  The share prices tend to fall during periods of economic recession and rise during economic booms.  For example, mining, heavy machinery, and home building companies.

Defensive shares -  The opposite of cyclical shares.  Companies producing staples such as food, beverages, pharmaceuticals and insurance issue defensive shares.  They typically maintain their value during economic downturns.


http://www.asx.com.au/courses/shares/course_01/index.html?shares_course_01

Big blue chips not always beautiful

John Wasiliev

September 28, 2010

Blue chip shares are supposed to be the best stocks an investor can own. They are regularly put forward by brokers, analysts and commentators as solid and dependable with the capacity to deliver reliable returns over the long term.
This image is helped by the fact they are mostly among the largest companies on the share market and when times get tough big can often be better. Or is it?
After the share market crashed in 2007 to 2008, it was the blue chips that were recommended as the safest options for investors or prospective share investors looking to establish a core portfolio.
Back in September 2008, for instance, the recommended blue chips included BHP Billiton and Rio Tinto, all the big four banks, gold miner Newcrest, oil giant Woodside, transport services company Brambles, the health industry twins CSL and Cochlear, retailer Woolworths, energy sector leader AGL and telecommunications leader Telstra.
It's worth looking back to see how these shares have performed. Two years ago, for example, in late September 2008, BHP shares were trading at around $35.80 and Rio shares were priced at $79.60. Newcrest shares were trading at around $21 and Woodside at $49.60 with Brambles at $8.40. Westpac shares were trading at $24 and Commonwealth Bank shares at $44.40. CSL shares were at $38.20, Woolworths at $28.10 and Telstra at $4.35.
By comparison as September 2010 comes to a close, BHP shares are trading higher at $39.20, Rio shares are lower at $76, Newcrest has soared to $41, Woodside has dropped to $44.40, Westpac is flat at $24, Commonwealth shares are better are $52.40, CSL has slipped to $33.70, Brambles is down to at $6.20, Woolworths is holding at $28.90 and Telstra has plunged to $2.70. What this performance scoreboard shows is that over this period there have been winners and losers among the blue chips.
Some investors who listened to the blue chip story would be happy, while others might regard investing in what are promoted as the best shares you can buy as being an easy way of losing money.

The lesson in this missed bag of returns, says Elio D’Amato of share market researcher Lincoln Indicators, is that just because a company is big does not guarantee its success. Big is not necessarily beautiful and because a big company is or isn’t doing as well as others often has little to do with its size.

Rather than size, he says, what determines whether a company is performing well on the share market will have more to do with factors such as the business it is in and how well it is responding to different challenges.

It is an argument, he says, in favour of investing in profitable companies of all sizes rather than just big companies. That’s not to say big companies can’t stand out at times. Gold miner Newcrest, for example, has benefited from the fact the price of gold has risen from about $US800 an ounce in September 2008 to just under $US1,300, a more than 60 per cent gain.
At the other end of spectrum, Telstra’s profit performance has been lacklustre and this is reflected in its depressed price. It’s been a similar disappointing profits story with Brambles.
D’Amato says there might be special reasons why some are lagging. For example, CSL has had to face the challenges of a rising Australian dollar because a sizeable proportion of its profits are earned overseas and must be converted back to Australian dollars when they are distributed to investors.
Two years ago the $US-Australian dollar exchange rate was US83c compared to the most recent price of US95c.

http://www.smh.com.au/money/on-the-money/big-blue-chips-not-always-beautiful-20100924-15pul.html

Stock Market Classification of Equity Shares

Stock market classification of Equity Shares

Blue chip shares: Shares of large, well-established, and financially strong companies with an impressive record of earnings and dividends.

Growth shares: Shares of companies that have a fairly entrenched position in a growing market and which enjoy an above average rate of growth as well as profitability.

Income shares: Shares of companies that have fairly stable operations, relatively limited growth opportunities, and high dividend payout ratios.

Cyclical shares: Shares of companies that have a pronounced cyclicality in their operations.

Defensive shares: Shares of companies that are relatively unaffected by the ups and downs in general business conditions.

Speculative shares: Shares that tend to fluctute wdely because there is a lot of speculative trading in them.

Note that the above classification is only indicative. It should not be regarded as rigid and straightjacketed. Often you can't pigeonhole a share exclusively in a single category. In fact, many shares may fall into two (or even more) categories.