Dr Tee (Ein55)

Leveraging on 3 Key Buyers in Stocks (2 Case Studies on DBS & Venture)

Posted on September 4, 2018 Written by Dr Tee (Ein55)

In a practical investment world, sometimes a stock with strong business may stay undervalue for many years, while another stock with little fundamental but exciting rumors or corporate news, could double in share prices over a few days.

For high probability stock investing, a smart investor or trader would align the decisions (Buy, Hold, Sell, Wait, Shorting) with 3 key buyers in stocks: investor, traders and speculators.

1) Investors (Smart Money)

Smart investors, regardless big funds or retail investors, usually apply Fundamental Analysis to select stocks with strong business (eg. company with wide economic moats with strong and consistent growth in earning, assets, cashflow, dividend, etc), then wait patiently for a reasonable market correction to buy low. Patience is required for this strategy alone. Diversification over a portfolio of stocks is another strategy. Within a short term (weeks) or medium term (months), a strong fundamental stock price may not move up but over a longer term (years), it is more predictable, especially when entry is based on reasonable low price below the value (many types of valuation models are available), protected by a portfolio of stocks, not just 1 stock.

Many investors who have holding power, even buy a stock at sky high price, could still be a winner eventually because the investment is protected by a strong business, time will shows its true strength.

2) Traders (Mass Market)

Smart traders, either professional or amateur, learning to follow the stream of stock prices to move up or down, not only knowing the entry or exit, also know when to cut loss when the market is going against the original setup. Strong emotional control is required within the timeframe of trading (eg. days, weeks, months) to manage the expected gains and potential risks, surrounded by daily market noises (rumors and news). Successful traders also apply position sizing to reduce risk with smaller size, increase potential gain with larger capital when trend is aligned with initial setup.

A smart investor who could integrate trend-following trading into investing, the entry and exit will be smoother, having the best of 2 worlds (fundamental and technical). The probability of success would be higher with leveraging in both investing and trading strategies which form the backbone of stock market.

3) Speculators (Losers / Inconsistent Winners)

We should not be a speculator (eg. follow rumor to buy a stock based on “insider news” with 100% life saving) in stocks but we do need their help to push up the price. A speculator may not be a loser all the time, sometimes they could make some quick money as well but they are inconsistent winner, the actions are similar to gambling because a speculator could throw all the capital with past profits into the next speculative stock without any risk management, potentially could lose everything, similar to a gambler who stay in casino for long term.

A smart investor not only leverages on traders for entry/exit but also making use of speculators to maximize the return with speculation in stock prices, integrating all 3 key buyers in stocks. For example, an investor or trader may sell high to speculators but trend has started to turn bearish with declining volume at peak prices. In fact, speculation is a key contributor to form low optimism (<25% in a bearish market or stock) and high optimism (>75% in a bullish market or stock). For example, China stock market is relatively more volatile and speculative than other global stock markets, therefore even a strong fundamental stock (eg. national banks) could be speculated with cyclic stock prices. At the same time, when a rumor with negative news comes, a stock price could surge 2 times or drop to less than half of the prices within 1 day.

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Integration of Investing, Trading & Speculating

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To maximize the return in a stock with consideration of safety, one may integrate all the 3 key forces in stocks

Investors could help to support a share prices 10% yearly in a gradual way (buy low & hold) while traders could push up another 50% in a few months (Buy High Sell Higher) but speculators could help to multiply any share price (including Bitcoin) by a few times within a few weeks (Buy High & Hope).

When DBS (SGX: D05) or Venture (SGX: V03) was less than $15/share, investors start to Buy & Hold. Traders would consider to buy the same 2 stocks, riding the uptrends from $15 to $30/share with support of bullish stock market (STI) last year. Speculators who collected some tips from free investment seminars or listen to some rumors, also start to enter these stocks from more than $25/share, making peanut return of 10%, when trend is reversed since early 2018, still hold on to the same stocks with falling knifes in prices based on “investing” mindset (enter as a trader for small profit, exit as a long term investor to keep paper loss). In fact, a smart investor and trader, regardless buying at less than $15/share with undervalue price or following from $15 to $25/share with uptrend momentum, they could leverage on speculators to sell high after confirmation of ending in momentum after falling down more than 10-20% from the peak prices.

Are you investing, trading or speculating? Learn from Dr Tee free 4hr stock investing/trading course to integrate these 3 strategies of 3 key buyers in stocks to maximize the return with high probability of winning in stocks, aligned with one personality. Register Below.

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Filed Under: Fundamental Analysis, Stock Market Tagged: dbs, dbs bank, Key Buyers in Stocks, venture

Impact of Currency with Hyperinflation on Economy

Posted on August 15, 2018 Written by Dr Tee (Ein55)

If you think Venezuela hyperinflation of 1 million % is a crisis, then Zimbabwe dollar would be a disaster. Political induced crisis of Zimbabwe results in hyperinflation of 79 Billion %, Zimbabwe dollar becomes nearly worthless, a collapse of currency system. The largest note is $100 trillions Zimbabwe dollar which could probably could exchange for just a loaf of bread or just a collector item, becoming a commodity.

The Venezuela crisis remembers me of the Japanese Banana money in Singapore/Malaysia after World War II. Money could become a junk paper but asset such as property still could preserve the value during crisis.

Venezuela highly dependent on income from crude oil which price was falling down since a few years ago, resulting in country financial crisis, which now a humanity crisis with hyperinflation of 1 Million %. For a mature country, a few percentage of inflation is considered healthy for a moderate growth and steady economy but too much inflation will be a disaster. The role of central bank is critical to moderate various factors contribute to national economy.

Inflation is related to purchasing power. 100% inflation, meaning price of a product or service is 2X. 1000% is about 11X.

1 Milllion % inflation means $1 product / service now becomes about $10,001. Technically, the Venezuelan Bolivar, purchasing power with this currency has dropped by 10,001 times.

It means if a loaf of bread is $1, it would cost $10,001 now to get one. So, whoever holds cash as fortune, wealth would drop significantly with very weak purchasing power due to hyperinflation. If one owns commodity or property as wealth, then will be safer.

Lira crisis is Turkey is related to Forex + Politics + Economy, trigger point is different but results could be similar, country financial crisis.

It shows the importance of diversification in one’s wealth, not just invest or keep 1 asset class, eg cash or stock. Property is also a form of commodity, it has certain worth. In ancient time without “money”, one could use commodity/service A to exchange for commodity/service B, paper money is just an easy way to facilitate the exchange. However, there is different level of trust in each type of money in different country, i.e. currency, therefore the knowhow of forex is important, at least knowing which currency to keep.

Singapore may not be a good place to trade in stocks but it could be a good choice to invest in property for long term (island country with limited land and nearly unlimited future population), Singapore Dollar (SGD) also appreciates gradually over the decades against other major currencies under MAS long term policy, supported by long term political stability (the longest so far for 1 party to rule a country), pro-business economic policies, etc.

Remember, currency is only a piece of paper (similar to USD), it has value only because of trust and confidence of users and owners to use it for exchange of product and services. In the past before 1970s, USD was backed by gold, therefore inflation was not an issue. When USD dollar and global currencies are just a piece of paper, then the definition of value would be more complicated. A smart investor would learn to diversify wealth, not just holding to one particular currency. USD, CHF and JPY are considered safe haven currencies, usually demand is higher when global economy is uncertain, eg. since early this year, USD has strengthened against many currencies including SGD.

Currency, inflation, interest rate, stock, bond, commodity, property, economy, or even politics are inter-linked. Learn from Dr Tee free 4 hours investment course to have a holistic view of entire investment markets, understanding their inter-connections.

Filed Under: Uncategorized Tagged: Hyperinflation, Impact of Currency on Economy

Value Trap of Financial Ratios: PE, PB and DY

Posted on August 14, 2018 Written by Dr Tee (Ein55)

Price-Earning Ratio (PE), Price-to-Book Ratio (PB) and Dividend Yield (DY) are 3 common financial ratios which shows relative performance of share prices and business fundamental. A smart stock investor needs to apply these 3 financial ratios with deeper considerations, not just in a generalized way, eg. buying stocks with lower PE, lower PB or higher DY. Do not fall into value trap of stocks for these situations.

1) PE (Price Earning Ratio) = Price / Earning

– PE usually prefers a lower number to show undervalue stock with earning approach. In a practical world, usually outperforming stocks have higher PE as traders willing to pay for higher share price relative to earning. Therefore, investing in lower PE stocks should consider whether the lower ratio is a result of lower price, higher earning or both trends at the same time. Be careful of some crisis stocks which have declining earning with significant drop in share prices, resulting in very low PE. Another potential value trap is sudden surge in earning, resulting in very low PE which may not be sustainable.

2) PB (Price to Book Ratio) = Price / Net Asset Value (NAV)

– PB usually prefers a lower number to show undervalue stock with asset approach. In a practical world, usually outperforming stocks have higher PB as traders willing to pay for higher share price relative to asset. Therefore, investing in lower PB stocks should consider whether the lower ratio is a result of lower price, higher NAV or both trends at the same time. Be careful of some undervalue stocks (PB<1) which have declining NAV with significant drop in share prices, resulting in undervalue stock with more discounts each year. Another potential value trap is quality of NAV on balance sheet may be low (not property nor cash).

3) DY (Dividend Yield) = Dividend / Price

– DY usually prefers a higher number to show higher rate of return in passive income with dividend approach. In a practical world, usually outperforming stocks have lower DY as traders willing to pay for higher share price relative to dividend payment. Therefore, investing in higher DY stocks should consider whether the lower ratio is a result of lower price, higher dividend or both trends at the same time. Be careful of some high yield dividend stocks (DY>10%) which have declining dividend with significant drop in share prices, resulting in high dividend yield. Another potential value trap is company with no free cashflow but still use past saving to pay for dividend yearly which may not be sustainable.

A smart investor should avoid value trap of stocks. Learn from Dr Tee in free 4 hour stock investment course, the right way of applications for PE, PB and DY to look for growth stocks, undervalue stocks and dividend stocks, integrating with Optimism Strategies and Technical Analysis.

Filed Under: Stock Market Tagged: value trap

Trading, Investing or Gambling in Stocks?

Posted on August 10, 2018 Written by Dr Tee (Ein55)

Investing style is similar to one’s personality, sometimes it could be reshaped with lessons learned, but sometimes the habits (good or bad) is like DNA, may last for whole life. So, are you trading, investing or gambling in stocks?

There are pros and cons in each personality, therefore we usually say no one is perfect. Similarly, it is fine to have different styles for stock trading or investing, as long as one practices in the right way aligned to the personality. It is ok to be a short term trader, reacting changes in dynamic stock market, as long as it trend-following, not emotional following with herd mentality. It is also ok to a long term or even life-time investor who may buy a stock and no need to sell for whole life, provided one knows how to establish a portfolio of strong fundamental giant stocks, buying at a market low optimism with regional or global financial crisis.

Most people could learn these positive habits in life or investment, if one is given a chance to learn the right way, then practice on oneself with successes to enhance the confidence, eventually become a new habit or personality. A smoker may quit smoking naturally when knowing the statistics of better health if not smoking. Similarly, healthy diet and exercise regularly are positive habits in life but if one could not have all these good habits, at least could keep whichever positive ones remaining, eg. optimistic mindset, friendliness, etc.

For investing, we don’t have to the best in everything, eg. stocks, properties, forex, bonds, commodity, etc. Even for stocks, we don’t have to know both short term trading and long term investing. Even within investing, we don’t have to master both dividend investing and capital gains. There are hundreds of ways to make money in stocks but one has to master at least one way. This is similar to professions, there are over 1000 different types of jobs and positions, one has to master at least one job to make money.

Some people may not be suitable to trade or invest in stocks due to limitation in personality, especially on some bad habits (eg. following rumors and news to make decisions) but it is never too late to stop “investing” this way which is a gambling in stocks without an edge.

Professional gamblers in casino would not “gamble” (throw dice and wait for luck). Instead, they also apply probability (counting cards, understanding rules of game, capital allocation, etc) in gambling to enhance the chances of winning, knowing when to stop playing, when to bet more, etc. Most gamblers are retail gamblers, which are most welcomed by casino as over the time, they would lose out due to unfair design in casino games. Those professional gamblers may be blacklisted by casinos as it is harder to make money from them, especially from card games.

Are you trading, investing or gambling in stocks? Learn the right path of stock trading and investing from Dr Tee free 4hr investment course.

Filed Under: Personal Analysis Tagged: Gambling in Stocks

Stock Fair Value – Growth Stock & Undervalue Stock

Posted on August 10, 2018 Written by Dr Tee (Ein55)

There are many ways (eg. FA, TA, PA, Optimism) to define a stock fair value or price, depending on the strategies. From only FA (Fundamental Analysis) perspective, there are 2 main strategies:

1) Asset Approach (Undervalue Stocks)

– Buy a stock at price below the good asset value (eg. cash and property), waiting patiently for the recovery of share price, sell when price is above the asset value.

Recent acquisition of Wheelock Properties is a good example. The offer of acquisition requires major shareholder to pay about $600 millions cash. If successful, the company has about $900 millions cash of asset (excluding other assets such as properties), therefore the buyer actually would get $900M – $600M = $300M in return. This is similar to shopping in stock market, paying $6 cash and getting $9 cash in return.

There are 3 major constraints for this strategy:

– Assets should be high quality, in the form of cash or property

– The investor should be patient as the asset owners are usually for longer term investing, could hold the assets for years or even decades at undervalue share price.

– The company should make money with increasing asset value, otherwise the undervalue asset (eg. Price to Book ratio, PB<1) could become a value trap, buy cheap and get cheaper due to declining business.

2) Cashflow Approach (Growth Stocks)

– Buy a stock with business which assets could generate consistent cashflow each year. If the future total cash value, discounted to current value is more than the current stock price, it is a good buy. The Discounted Cashflow (DCF) model is frequently used to evaluate growth stocks.

There are 2 major constraints for this strategy:

– Cashflow generation should be consistent in future for years or even decades, therefore the economic moat should be wide.

– The company could have different growth rates, eg during IPO high-growth stategy, then slower growth, matured business or even declining one day. So, assumption of single growth rate in DCF model may not be reliable.

Optimism strategy is easier to evaluate a stock fair value or price, buying at unfair price, selling when overprice. The Optimism Strategies could be integrated with Fundamental Analysis (FA), Technical Analysis (TA) and Personal Analysis (PA) with Level 1-4 integration (business, sector, country, world) for short term / medium term / long term positioning.

Readers in Singapore may attend 4hr free stock investment course by Dr Tee, learning integrated strategies of Optimism + FA + TA + PA to evaluate a stock fair value.

Filed Under: Fundamental Analysis, Stock Market Tagged: stock fair value

Stock Strategies to Reduce Unsystematic and Systematic Risk

Posted on August 3, 2018 Written by Dr Tee (Ein55)

A smart stock trader or investor has to learn to manage the risks before one could achieve the goals of profit. There are 2 main types of risks for stocks, unsystematic and systematic risk.

1) Unsystematic Risk (Level 1-2)

This risk is related to specific stock/business or an industry/sector. For example, there could be an unexpected business scandal or company having difficulty to pay debt, etc, resulting in major correction in share prices which may not be reversible. Sometimes the scale could be for a specific industry, eg. Unsystematic and oil and gas crisis which affects more stocks with similar type of industry.

In general, diversification of investment portfolio with 10-20 stocks over 3 or more sectors / countries, could help to reduce the unsystematic risk significantly as each stock only contribute to 5-10% of portfolio. As a retail investor, due to lack of time for close monitoring, a portfolio of 10 stocks with strong fundamental in business will be sufficient.

2) Systematic Risk (Level 3-4)

This risk applies to entire stock market, affecting most of the countries, sectors and businesses globally. For example, global financial crisis (subprime crisis in year 2008, dotcom bubble in year 2000, etc) or regional financial crisis (Euro Debt Crisis over the past decade, Asian Financial Crisis in 1997).

In general, diversification could not help to minimize systematic risk since most of the stocks would be affected for this large scale of stock market risk at country or global level.

Instead, a smart investor could apply market optimism strategy to minimize systematic risk through capital allocation in different asset classes. When global stock market is at high optimism (over 75%), one could reduce the risk in stock market through progressive profit taking, converting the stocks into cash as short to medium term opportunity fund. When there is any regional or global financial crisis, the unsystematic risk would become opportunity to buy low.

An all rounded investor would combine these 2 key factors to improve the winning rate in stocks:

1) Formation of stock portfolio with 10 stocks with strong fundamental to reduce unsystematic risk

2) Follow optimism of global stock market to buy low sell high, going against the systematic risk.

The public may learn from Dr Tee 4hr free courses to establish a defensive dream team stock portfolio to reduce unsystematic risk and applications of optimism strategies to minimize systematic risk.

Filed Under: Uncategorized Tagged: Systematic Risk, Unsystematic Risk

Video on Becoming Warren Buffett – Money is just numbers

Posted on July 27, 2018 Written by Dr Tee (Ein55)

This is a short but powerful 11 min Chinese video (Becoming Warren Buffett) about Warren Buffett strength and weakness. The most touching part is final few minutes on why he decides to donate his fortune accumulated in life.
https://www.youtube.com/watch?v=0YJx2VkQPHc

For English version, you may search for “Becoming Warren Buffett” (see longer version below with 1hr 28min, thanks to suggestion by a member) but I could not find the same short and sweet version as this Chinese video.
https://www.youtube.com/watch?v=PB5krSvFAPY&feature=youtu.be

Warren Buffett initially only focused on buying undervalue stock (Buy Low) but this business partner, Charlie Munger, influenced him to buy good business at fair price (may not low price). The is the key difference of value investing vs growth investing, which Ein55 graduates have learned how to integrated with optimism strategies, including value growth investing to have the best of both worlds.

However, for investing, each of us should establish our own personalized investing styles, there is no need to follow Warren Buffett or Charlier Munger. Berkshire share price dropped by 50% during subprime crisis in 2008-2009, this max drawdown may force many investors out of the stock market, only those with strong faith, applying fundamental analysis, instead of technical analysis, still able to hold through the winter time to be the final winner.

The title of video is an important lesson for everyone: “Money is only numbers”. If we look at frugal lifestyle of Warren Buffett (eg. living in an old house, drive a small car, eating $3 McDonald burger for breakfast, etc), then we can understand money is only an indicator to show his performance in an hobby called investment. This is the same as computer gamers, scoring high from level 1 to 100 is important to their hobbies.

In fact, when we detach making money from investment, just focusing on how to push up the score of investing game with $ amount, our performance could be better.

General public can learn value investing and growth investing from Dr Tee free 4 hour course. Register here: www.ein55.com

Filed Under: Stock Market, Uncategorized, Value Investing Tagged: Becoming Warren Buffett

Analysis of 8 Giant Internet Stocks: BAT-FAANG

Posted on July 27, 2018 Written by Dr Tee (Ein55)

Ein55 graduates should know how to analyse 8 giant internet stocks when I highlighted during 5-day Ein55 course:

BAT–FAANG:

B = Baidu

A = Alibaba

T = Tencent

F = Facebook

A = Apple

A = Amazon

N = Netflix

G = Google (Alphabet)

Alibaba and Facebook are younger giant stocks, more suitable for short term momentum trading, not proven yet for longer term investing.

Other 6 internet stocks are proven giant stocks for long term but due to high price growth (faster than earning growth), need to integrate trading into investing when considering for longer term investing. For Facebook, the share price dipped more than 20% in 1 day this week, mainly due to high expectation of global investors on future growth rate. When a company is profitable, it is still in sufficient, it has to exceed the expectation of investors. Stock market is forward looking, when a growth stock or momentum stock is doing well in share prices, supported by past earning, the pressure is higher to score better in business, otherwise the stock prices would be affected. Optimism strategy will be useful to integrate Fundamental Analysis (business world) and Technical Analysis (price world).

Among all the 8 internet stocks, Google (Alphabet) is more matured, has the best balance in sustainable price and business growth. An investor may like it but a trader may not.

An investor could choose the right type of stock for trading or investing based on own personality:

1) Momentum Trading – Buy High Sell Higher

2) Growth Investing – Buy Low Hold Long Term

3) Cyclic Trading/Investing – Buy Low Sell High

Since internet stocks are based on high-end technology which is dynamic in nature, an investor may consider for short term trading or long term investing but may not be suitable for life time investing as there are few technologies could last more than 10 years without strong challenge by newcomers with disruptive technologies.

Learn from Dr Tee to position in global and local stocks for trading and investing, aligning with own personalities. Sign up for free 4 hours stock investment course for public in Singapore (meet-up Dr Tee): www.ein55.com

For overseas (outside Singapore) readers, you may consider video course by Dr Tee with 75% discount now ($25, original price is $100). Content of video course and 4 hours meet-up course is different. Register video course here.

Filed Under: Stock Market Tagged: Internet Stocks

Short Term Investing Strategy – Lion Ambush for Opportunity

Posted on July 26, 2018 Written by Dr Tee (Ein55)

There are at least 20 types of short term trading and long term investing strategies to make money in stocks (mostly covered in 5 days Ein55 class, including the Optimism + FA + TA + PA strategy):

– Swing/Cyclic Trading, Position Trading, Momentum Trading, Price Action / Breakout Trading, Shorting, Market Cycle / Long Term Cyclic Investing, Short Term Investing, Crisis Investing, Index/ETF Investing, Discounted Asset (Undervalue/net-net) Investing , Growth Investing, Value Growth Investing, Dividend Investing (non REIT), REIT investing, life-time value investing, forex-stock investing, property-stock investing, commodity-stock investing, bond-stock investing, hedging/spread trading, excluding other speculative and intra-day trading methods, etc.

Each stock trading and investing method has its own unique application, usually Ein55 graduates would form a dream team portfolio of 10 giant stocks aligned with own personality, integrating a few of these strategies as defenders, mid-fielders, strikers, in additional to cash as goal-keeper.

In the current high optimism global stock market (Level 4), for an investor who understands probability, one may adopt wait strategy for global financial crisis to buy low. However, each investor has different level of patience, some could wait only for a few months and lose the patience and confidence. Some could wait for a few years. Therefore patience is one of the unique personality to consider as it affects the timeframe of investing and holding power. This is similar to lion waiting patiently, fighting against hunger to ambush a potential prey. Remember what Charlie Munger (business partner of Warren Buffett) said: “The big money is not in the buying and selling, but in the waiting.”

Short term investing is a nice integration of investing (buy strong fundamental stocks) and trading (entry/exit in short term), suitable for current high optimism stock market, for investor who does not want to miss the possible last rally of bullish stock market. A lion could ambush for a long time but when see the golden opportunity, it will take action to strike for gain. When the prey is running too fast than expected, a lion would give up as well, reserving the energy (capital) for the next prey (stock opportunity).

3 local major banks will announce next quarterly results next week. Since the results are likely to be positive (supported by increasing interest rate), market fear on trade war is reduced, recovery of global stock prices over the past 1 week support the confidence in short term for bank stock prices, therefore some have started to go in. Position as a short term investor could leverage the uptrend in bullish bank sector while as flexible as a trader to exit when trend in global and individual stocks become bearish, more than one’s risk tolerance level.

Facebook (NASDAQ: FB) is a strong fundamental stock, also a strong momentum stock last year but a few corrections this year has affected the momentum because the global investors have higher expectation each quarter, share price dropped more than 20% yesterday when emotion turns bearish suddenly. Venture (SGX: V03) is another example, medium term business performance over the past few years have been excellent but share price has dropped from peak of $29 to $16, nearly 50% correction so far. A short term investor may also integrate optimism (short term to long term) to understand the relative risk and opportunity, not to apply pure value investing nor only on price action.

Start to learn 10 stock trading and investing strategies (including short term investing) from free 4hr course by Dr Tee. Register Here.

Filed Under: Stock Market Tagged: Short Term Investing

Actions on High Dividend Blue Chip Stocks (Example on Singtel)

Posted on July 21, 2018 Written by Dr Tee (Ein55)

The decision to buy high dividend blue chip stocks (eg. 5-6% dividend yield for Singapore Telco and REITs, etc) depends on 3 main strategies which have to be aligned to 3 personalities.

Here is an example of Singtel (SGX: Z74), a strong blue chip in Singapore, current share price at $3.31, falling nearly 25% from $4.30 / share since a few years ago, dividend yield is about 5.3%, Optimism is 28%. Let’s learn to take action (Buy / Hold / Sell / Wait / Shorting) based on different unique personality.

1) Trader for short term capital gains

– Singtel share price is still a falling knife (although not as sharp as M1 and Starhub which dropped more than 50% in share prices) in short to medium term stock prices, therefore may not yet a good buy for traders who need support of strong uptrend. Singtel share price is affected in short to medium terms by Level 4 (global stock market weakness), Level 3 (weaker Singapore STI index) and Level 2 (bearish Singapore Telco sector, including Starhub and M1), despite the Level 1 business is still strong for Singtel. Although current short term bearish stock market supports shorting (profit from falling price), usually a stable dividend stock with strong fundamental may not be a good choice for shorting.

Possible Action: Wait.

2) Investor for long term capital gains

– Possible to be a contrarian investor to buy low for Singtel (it was less than 25% Optimism when price is nearly $3, even it may get lower in share price, long term holding would have high chance of winning. The concern is more on short to medium term share prices correction, especially global / US stock market is still at high optimism, there is a potential threat of global financial crisis, it may not be wise to hold a stock unless it is defensive with high growth in nature. Singtel is considered a defensive stock but a slow growth stock.

Possible Action: Wait.

3) Investor for long term passive income

– Since the objective is to collect dividend, falling in share prices have exchanged for higher yield for Singtel (5.3% currently). Singtel fulfills the criteria of a dividend stock with stable business (despite slow growth) with stable free cashflow and consistent dividend payment. The critical consideration for passive income investor is on the overall return. If one has $100k capital, is it satisfied to get $5.3k annual return (regardless of up and down in share prices)? What if Singtel share price drops further, yield goes up to 8%, will an investor regret of not able to get $8k dividend? So, the decision depends on reward expectation or greediness of an investor. If compares with bank interest rate (1-2%), property rental (2-3%), even current moderate yield of 5-6% dividend stocks are considered better. In general, the spread between yield of blue chip dividend stocks (5-6%) and risk-free investment (eg. 4% for CPF, 2% for Singapore Saving Bond) is narrow. The trick is on capital allocation, maximize the yield by entry in phases. It means if one could not hold the capital with little return in bank deposit, it is fine for investor to consider 5-6% return (ignoring the share price could drop by the same amount in certain week) with partial capital. Bulk of capital may be reserved for higher yield return aligning to the next global financial crisis

Possible Action: Buy (partial capital only) or Wait

It is clear by now there could be different possible actions for the same stock because the right decision has to be aligned with own personality, eg. holding for short term trading or long long term investing, aiming for capital gains or dividends or both, reward expectation and risk tolerance level, etc.

Learn from Dr Tee to learn 10 different stock trading and investing strategies (including high dividend blue chip stocks as a strategy), aligning with 10 unique personalities.

Filed Under: Stock Market Tagged: Blue Chip Stocks, dividend stock, High Dividend Blue Chip, singtel, telco stocks, temasek

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