Investing Strategy in Monopoly Stock Exchange – SGX Stock (S68)

Posted on March 14, 2019 Written by

Stock exchange is a monopoly business, sponsor usually is by the government of entire country because stock market is an engine to provide capital for growth in business (Level 1 – individual company) and economy (Level 3 – country).  At the same time, stock exchange usually is a profitable business for major economy, growth depends on trading volume of stocks and other derivatives, number of stocks listed and new IPO yearly, etc.  Let’s learn the monopoly stock strategies (Optimism with FA + TA + PA) to profit from global stock exchange stock, using SGX stock (S68) as an example:


1) Personal Analysis (PA)
SGX has strong sponsor of Singapore government which is AAA credit rating.  Not all the monopoly stocks are good choices for investing, especially for declining industry.  SGX is a reflection of Singapore economy through stock market, a growing financial industry.  Liquidity is a major constraint for SGX, therefore SGX has to collaborate with regional stock exchanges to promote flowing of investing funds globally.

2) Fundamental Analysis (FA)
Buy a stock means one is in partnership with someone doing business together.  It is meaningless to buy cheap (common mistake for a beginner investor) for a stock if one does not know the value in business.  SGX stock has over 30% ROE for the past 13 years, a strong growing company with stable positive operating cashflow generated each year.  It is also a stable income generator (due to stable positive free cashflow) with yearly dividend yield of about 3-4% for the past 10 years (except for 7.5% dividend in year 2008 during subprime crisis due to drop in share prices with stable dividend).

3) Technical Analysis (TA)
SGX stock has been oscillating +/-30% between a tight price range of $6+ to $8+ for the past 10 years (correlating well with stable STI within 3000 +/- 300 points), a simple investing + trading strategy could be buying SGX share just above $7 while it is uptrend, shorting just below $8 while it is downtrend, collecting about 3-4% dividend along the way during the holding period (as if a fixed deposit in stock market with 3-4% “interest” if one ignore the little movement of share prices, double of 1-2% bank interest rates over the past 10 years).

SGX is a monopoly stock with strong fundamental (FA), protected indirectly by trusted sponsor, the Singapore government (PA), therefore a giant stock. A trader could simply apply optimism & TA to buy low sell high while it is moving in a cyclic way.    

4) Optimism Analysis
Long-term Optimism of SGX stock is about 10% currently, considering an investing opportunity to invest at low optimism <25%.  However, there are different qualities of low optimism or “crisis” stocks (price is much less than value), SGX low optimism at Level 1 (company) is not aligned with optimism at Level 2 (Financial Sector), Level 3 (country level, STI which is at mid optimism level of about 45%) or Level 4 (world level which is about 70% optimism for global stocks).  Therefore, SGX is more suitable for swing trading (within $7-$8 share price range) in short term and/or dividend investing in medium term (collect 3-4% dividend yearly), instead of investing for long term (a global financial crisis is required to correct the share prices, only then one could invest to buy low and hold long term).
Interested readers may study other global stock exchanges, selecting a suitable one for possible investment, ideally aligning with Levels 1-4 crisis to buy low. FA performance and credit rating of sponsor (respective country) for different exchange could vary, do your own studies to compare with global stock exchanges, eg. Bursa, HKEx, etc.

There are other much better global monopoly stocks in the world, especially in private sectors which can have control over the prices of products or services to generate enormous profits. Another close example is ICBC (HKEx: 1398), world largest bank, a cyclic trading stock protected by FA & PA, similar strategy as SGX may be applied.

Interested readers may learn from 4hr free stock investment course by Dr Tee to learn the complete 10 strategies, including discussion of many local and global giant blue chip stocks with potential.  Register Here:  www.ein55.com

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Filed Under: Stock Market, Stocks A-Z, Uncategorized

Best World Stock – To Invest or to Trade?

Posted on February 27, 2019 Written by

Before Best World stock announces FY 2018 results, Ein55 students could project this positive results many months in advance as the company hassustainable growing business. So, Best World management is smart to announce the corporate news (reply to Business Times) before good 2018 corporate results. When the fear is gone, as long as global stock market is strong, Best World stock has chance to recover again above $3/share as most people are greed & fear driven in stock market.

Valuation of Best World stock is not so much based on asset approach (unlike property or bank stocks), it is more on future earning capability, as well as 10X market potential in China. Currently both China and Taiwan markets contribute to bulk of earning.


Best World stock has recovered in share prices back to above critical support of $2.70, to the level before the trading halt. Temporary, the Level 1 (company) crisis is relieved unless the Business Times could find more negative points.

The main question mark on Best World may be still the “secret” of business model driving the sales, how it could make money in a sustainable way. Although investors may not have full info on direct customers (final users of beauty products), Best World management might know the estimated numbers or trends which could be a trade secret from competitors.

In this beauty industry, Ein55 coaching homework (see sample attached) shows that Best World has the highest profit margin but share price growth is much faster than the earning growth. If one could trust the auditor E&Y, this is a strong growth stock but at speculated high prices (more than 10 times growth in share prices over the past few years).

In conclusion, Best World may be more suitable for trading, not for investing as the stock is at high optimism. When price is recovering well, it could be a momentum stock as well, one could buy high sell higher. When price momentum is lost or there is a higher level (L3 country or L4 world) crisis, one may need to exit as a trader as well.

Global stock market has turned bullish over the past few months. Readers may learn from Dr Tee free 4hr stock investment course to learn various global giant stocks for long term investing or short term momentum trading. Register Here: www.ein55.com

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Filed Under: Fundamental Analysis, Stock Market, Stocks A-Z

Key Learning Summary of Ein55 Business Analysis Course: Business Valuation

Posted on February 17, 2019 Written by

Ein55 Business Analysis Course - Business Valuation

The Ein55 students have learned the details of Business Analysis Course #2 (Business Valuation) from Ein55 Mentor Kean Lim, understanding how to evaluate values of a company with stock, as well as avoiding accounting traps.  Here is the key summary:

1) Check what is the Auditor’s Opinion

– Unqualified / Qualified / Adverse / Unable to give an opinion (Disclaimer)

2) Know why ROE is rising or falling, high or low

– Net profit margin, Asset turnover, Financial leverage

3) Check whether a company uses Aggressive Accounting

– Aggressive revenue recognition

– Days Sales Outstanding

– Days Inventory

– Large changes in operating expenses

– Over-dependence on acquisition

– Quality of earnings

4) Derive the intrinsic values based on

– asset value

– earning value

– growth value

5) Combine various valuation methods with Optimism Strategies

– buy at price below the value, selling at price above the value.

6) Investor can purchase the best stock in the world, but if one buys it at a high premium, it can be a bad investment.

– Valuation is important and is a huge part of the game.

Investing in a company is akin to being in partnership with its business. It is therefore crucial for investors to possess the ability to analyse and make sense of the businesses of interest. The beauty of investment is that one can be selective to only invest in businesses that are profitable and therefore can bring about considerable capital gains in future.

Dr Tee provides free high-quality investment education regularly to the general public, including Business Analysis (BA), Fundamental Analysis (FA), Technical Analysis (TA), Optimism Analysis (OA) and Personal Analysis (PA). The knowledge could help a person for a lifetime, after mastering the right skills of stock investment.  Register Here.

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Filed Under: Fundamental Analysis, Stock Market Tagged:

How to Buy Stock as If Driving Investment Car?

Posted on January 23, 2019 Written by
How to Drive Investment Car
Stock trading is similar to driving a car.  The driver should have obtained a license to drive. An experienced driver could drive safely even using one eye or one hand holding the steering wheel. If the car is given to a 8 years old kid, this could be a disaster. Similarly, a stock trader should master the skill to trade, a licence to drive the investment car.  A beginner who starts stock trading or investing without proper knowledge is considered risky while an experienced investor is used to the thunderstorms (financial crisis) in stock market, knowing when to slowdown or speed up.
The driving skill would give the driver a good start but it could not guarantee safety all the time as car condition could be different. A strong car is similar to strong fundamental stock, even when there is an unexpected accident (financial crisis), it could protect the driver (investor).  In the world of stock market, an investor could even diversify the risks with 10 stocks, as if having 10 different cars driving at the same time, even when one breaks down, there are other 9 other choices to move on, journey of financial freedom is not affected.
For additional safety, besides wearing safety belt, a driver could buy comprehensive insurance coverage to protect against unforeseen accidents. Similarly, an investor could consider low-debt strong cash company for investment as safety belt, following price trend with breakout for confirmation as premium for insurance.
Some drivers (traders) like a fast Ferrari (short term trading) while others prefer slower antique car (long term investing), there is no right or wrong in the choice. Each driver has to operate the car within safety margin under own’s control.  Beyond the limitation, accident could happen which is beyond driver’s tolerance level.  Similarly, a stock trader or investor has to know the risk tolerance level and reward expectation.  Alignment of personality with own investment strategy is the key for success. A good driver would find own’s favorite car which matching own needs: price, color, speed, functions, etc.
So, have you found your desired car (stocks) for investment? Learn from Dr Tee through 4hr free high-quality stock investment course to learn how to form a strong investment portfolio with 10 dream team stocks globally.  You will master What To Buy, When to Buy/Sell through Fundamental Analysis (FA), Technical Analysis (TA), Personal Analysis (PA), integrated with Optimism Strategies. Register Here: www.ein55.com
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Filed Under: Personal Analysis, Stock Market Tagged:

Cigarette Stock – Unhealthy Business for Investment

Posted on January 13, 2019 Written by
With increasing health conscious and anti-smoking campaigns since young, tobacco / cigarette companies may not have bright future for investing. Percentage of smokers in populations of most countries (including US, Japan, Europe, Singapore, etc) are declining over the past decade with higher taxes (expenses) by local government, resulting in lower earning of tobacco / cigarette companies, therefore weaker share prices.
 
Philip Morris (NYSE: PM), owner of Marlboro Cigarette, is a crisis giant stock at low optimism (<25%), a low quality investing opportunity induced by declining earning over the past 5 years. Parent company of Philip Morris is Altria Group (NYSE: MO), also a crisis giant stock at low optimism but having much stronger fundamental, therefore a better choice for cigarette stock investing.
 
British American Tobacco (Bursa: 4261), owner of Lucky Strike cigarette, was a value investing stock in the past but with declining business and share prices, it may not be not suitable for long term investing again despite a low optimism share price.
 
“Buy Low Sell High” is an universal secret of making money in stocks, main condition is the business has to be strong and sustainable, then each price correction is an opportunity to buy at discounted price. However, “Buy Low” may “Get Lower”, “Buy Cheap” may “Go Bankrupt”, if buying crisis stock with high debt, declining business (earning, cash flow, asset values, etc). So, do not fall into value trap by blindly “Buy Low”. Integration with Fundamental Analysis (FA) is required.
 
Buy a stock implies being a business partner. If uncomfortable in supporting “unhealthy” businesses (eg. tobacco, gambling, alcoholic drinks, etc), there are many other healthy businesses (eg. healthcare / hospital stocks) for stock investment.
 
Learn from Dr Tee in free 4hr stock investment course for public on various healthy businesses of giant stocks. Register Here: www.ein55.com
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Filed Under: Market Optimism, Stock Market Tagged:

Red River for Global Stock Market (满江红)

Posted on November 20, 2018 Written by

Red River for Global Stock Market
Bearish stock market today with all major stock markets in red. As mentioned before, when short term trends are bearish in global stock market, probability is higher for the share prices to go down further.

The main worry now, even US S&P 500 is below 2700 points, if falling further to below 2600 points, then it will follow the short term bearish trend of global stock market, then the risk of global financial crisis will be greater, unless US-China trade war could see light at the end of tunnel.

Based on Trump’s strong actions so far, the deadlock likely will continue until year 2020, second term of US presidential election. The House of Congress dominated by Democrats may also create new variables such as investigation of Trump or slowdown his future actions.

Market fear could be contagious, if US (contributes to about 50% of world stock value) stock market is also falling down, even strong fundamental stocks could have capital loss in stock market.

Take actions now:
1) If you have stocks, do Spring Cleaning (what to hold or sell)
2) If you don’t have stocks, aim for Dream Team stocks (what to buy, when to buy)

Spring Cleaning could be painful for some people. Ideally, cut loss should be integrated into earlier strategy when price drops by 10%. If the price drops more than 20% or even 50%, most people would simply ignore the losses, changing from a short term trader to a “long term investor” to hold on to paper loss.

Spring Cleaning does not mean it is a sell. It could be a hold. In general, perform spring cleaning this way:

1) Strong Fundamental Stocks vs Weak Fundamental Stocks
– Keep Strong One, Sell Weak One

2) If Strong Fundamental: Cyclic vs Growth Stock
– For Cyclic stocks (eg. banking finance, property, technology sector, airline), even if fundamental is good, if trend is down, need to consider to sell first, one could buy back in future.

For growth stocks, it is possible to hold with condition that the entry price last time was a low optimism price, otherwise it could still be a loss by now as entry / buying price is too high.

You may learn 10 strategies (Optimism + FA + TA + PA) to make money in stocks with Market Outlook 2019 from Dr Tee free monthly workshop, register in www.ein55.com
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Filed Under: Stock Market Tagged:

Key Learning Summary of Ein55 Business Analysis Course

Posted on September 22, 2018 Written by

Business Analysis Course

The Ein55 students have learned the details of Business Analysis Course #1 from Ein55 Mentor Kean Lim, understanding how to choose a giant stock with strong business fundamental with sound management.  Here is the key summary:

Master 4 Steps of Business Analysis Course:

Step 1: Know the company core business:

  • Business model
  • Business history
  • Business diversification
  • Geographical presence

Step 2: Check whether the business has a durable competitive edge (economic moats)

  • Intangible Assets – Brands, Patents or Licenses
  • Consumers’ Switching Costs
  • Cost Advantage – Process, Location or Unique Asset
  • Efficient Scale
  • Network Effect

Step 3: Know the business risk and investment bear case

  • Company Factors
  • Industry Factors
  • Valuation Factors
  • Market Factors

Step 4: Know the company future growth drivers

(Price x Volume) – Costs = Operating Profit

  • Higher Price
  • Higher Volume
  • Lower Cost

Investing in a company is akin to being in partnership with its business. It is therefore crucial for investors to possess the ability to analyse and make sense of the businesses of interest. The beauty of investment is that one can be selective to only invest in businesses that are profitable and therefore can bring about considerable capital gains in future.

Dr Tee provides free high-quality investment education regularly to the general public, including Business Analysis (BA), Fundamental Analysis (FA), Technical Analysis (TA), Optimism Analysis (OA) and Personal Analysis (PA). The knowledge could help a person for a lifetime, after mastering the right skills of stock investment.  Register Here.

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Filed Under: Fundamental Analysis, Stock Market Tagged:

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

Posted on September 4, 2018 Written by
key buyers in stocks
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.
 
—————————————————————
Integration of Investing, Trading & Speculating
====================================
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: , , ,

Value Trap of Financial Ratios: PE, PB and DY

Posted on August 14, 2018 Written by
value traps
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.
 
value traps
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. 
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Filed Under: Stock Market Tagged:

Stock Fair Value – Growth Stock & Undervalue Stock

Posted on August 10, 2018 Written by
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.
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Filed Under: Fundamental Analysis, Stock Market Tagged:
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