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04-04-2012, 02:03 AM
(This post was last modified: 04-04-2012, 02:04 AM by BrendonA.)
Thought I'd just share an article I've read on Yahoo News today. Not sure if it's the right section to post this so moderators please shift this to the appropriate section if I'm wrong.
Quote:There are many investment strategies employed by experts in the stock market. They are based on different values, different time horizons and different risk profiles. There are three stock investment strategies that I use from time to time. They are strategies based on value, growth and income.
1. Value investing
Value investors usually concentrate on calculating the book values of assets such as cash, cash equivalents and fixed assets. The rationale is that the market is irrational and may misprice these stocks. During an economy downturn, cyclical stocks such as property, and oil & gas stocks can often be picked up at huge discounts to the valuations. The investors believe the stock price will ultimately move to more precisely reflect the value of these assets.
Other valuation techniques use relative valuation techniques such as Price-to-Earnings (P/E) and Price-to-Book-Value (P/BV) ratios. One would compare P/E and P/BV ratios against past trends of the stock itself and also within the industry to determine if the stock is undervalued. However, some stocks may take a long time to converge to its fair valuation. One would have to assess the potential capital gain against the opportunity loss from the holding period.
2. Growth investing
Growth investors focus on stocks which have high growth potential. Growth investors typically examine historical growth rates of revenue, EBITDA and earnings to predict the future trends. They also will identify catalysts with the potential to multiply earnings such as new products and new drugs. However, some of these stocks can be extremely speculative or even manipulated, depending merely on news and catalysts.
A lot of growth investors use Price Earnings Growth (PEG) ratios — which is calculated by (Price / Earnings) / (Annual EPS Growth rate) — to determine valuation for growth stocks. That is because the P/E ratio may be too high to justify an investment. Also, there are instances where the company may be making losses currently; hence the only way to value it is using forward P/E.
3. Income investing
Income investing in my opinion is the most important strategy. Income is generated from dividends and hence dividend yield and dividend growth are the key criteria. Dividend yield is also a way to determine value. When the dividend yield is high, the stock may be considered undervalued and the stock may be considered overvalued when the dividend yield is low. The track record of the historical dividend payments is also essential — make sure that the companies pay reliably and progressively raise dividends. The payout ratio and dividend cover ratio are also used to study the sustainability of the future dividends.
Which of these strategies do you use in your own investing? Share them with us in the comments below!
Calvin Yeo is the founder of the Making Passive Income blog.
Posted via www.MoneyMatters.sg, your guide on how to make more money, save smarter, invest intelligently, and enjoy your money like a pro. Click here to get our free report on what you must know about financial freedom.
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Thanks for the article, pt.3 can be re-invested into pt.1
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR!
4) In BULL, SELL-SELL-SELL!
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WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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you can't gain anything if there is no growth
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(04-04-2012, 11:54 AM)Drizzt Wrote: you can't gain anything if there is no growth
If you reinvest the dividends received back into the same stock, it gives you growth. If you diligently monitor and buy more of the same stock whenever Mr Market gets depressed and depress all prices, then sell the extras when Mr Market is in a state of Euphoria, you get Capital Gains! So, boring no growth dividend stocks may not be that boring and unrewarding if you are a little bit more hardworking.[/align]
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Drizzt,
You are spot on!
Earnings growth is the one ring to rule them all. The common denominator of all 3 strategies. Come to think of it, who invests in a company expecting the earnings to shrink?
No earnings (money); no honey!
(Unless of course if you are shorting)
Just google singapore man of leisure
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(04-04-2012, 12:16 PM)KopiKat Wrote: (04-04-2012, 11:54 AM)Drizzt Wrote: you can't gain anything if there is no growth
If you reinvest the dividends received back into the same stock, it gives you growth. If you diligently monitor and buy more of the same stock whenever Mr Market gets depressed and depress all prices, then sell the extras when Mr Market is in a state of Euphoria, you get Capital Gains! So, boring no growth dividend stocks may not be that boring and unrewarding if you are a little bit more hardworking.[/align]
i like what you say above. That's why i know i am a "Rojak Investor" Sometimes, lose money one. Lose too much. Shouldn't happens any more. i promise myself. That's why my signature. 
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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I fully agree with Kopicat on dividend stock.
SPH is my dividend stock. The dividend received will be saved, and re-invested in other "value" stock include SPH when price is right.
So far, it work well for me.
It is like in the BCG (Boston Consulting Group) growth-share matrix
Dividend stock is like cash cow, Growth stock is like star, both have their advantages
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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