The Next Big Crash - Are You Prepared?

[NTL]

While there are not many who share this view out there, I am sure there are quite a number here! With few short term players here, most will be looking forward to capital appreciation or dividend appreciation to grow their investment.

[Ray168]

Hi gautam,

I have the similar investment strategy. I have 30% of my portfolio adopt this long term strategy. My target is to achieve 70% over time.

Beside the solid record of dividend history (>10 years) such as dividend growth, I target those companies with low payout ratio (<0.7).

Long post:

Hi Felixleong,

frankly, I am not too comfortable in disclosing my positions but from the posts I participated in, you could guess those counters share some similar characteristics. Hope you don't mind.

I chose this forum to share my knowledge because I think the moderators, esp CityFarmer is doing a good job in moderating this place. And people who post TA or gambling stuff are told off quite immediately. Kudos to the moderator in maintaining this investment website.

There are much more losers than winners in people who buy stocks. Perhaps winners constitute 5%. The real big winners <1%.

IMO, to reap the most out of investment in stock market, one needs to keep a long term view and only buy those fundamentally sound stocks.

I keep mentioning increasing dividends in my previous posts.

Why?

To me, dividends are real cash. If I were a worker, I would prefer to receive my pay regularly and would protest if my boss had skipped my pay that year! And increasing dividends over the past decades could only mean one thing, that the company is making more and more money. The other parts will fit in with the latter point. ie the company has the ability to ride through crisis and yet still pay out dividends, a testamonial of its financial strength. And increasing dividends would mean that the company is growing. Frankly, I don't think there is such a company which has these traits and subsequently went bust?

The power of compounding is great, if and only if, it pays increasing dividends over time.
Let me illustrate this. Say a stock $1, pays a dividend of 4c now, that represents a yield of 4%. If the company continues to increase dividends like what it did before, say 10years time, that dividend could increase to 10c. Now the entry price is fixed, and at that entry price of $1, that 10c dividend would represent a yield of 10%. Should the dividends be used to buy more shares, imagine the total net worth 10 years time.

Crisis or not, it doesn't really matter, for companies which have been in existence for be past 20-30years and have weathered several crises before and yet paid dividends during those crisis.

Of course past performance might not necessary repeat itself in the future. But most do. Thus a bit of diversification is good.

And what i observe is that during crisis, in general, companies which paid decent dividends, they affected to a lesser extent, since they have this dividends to sort of buffer up the prices. And one can get even more shares using dividends during crisis. When prices recover, as they always eventually will, one will join first rank.

Coupled this dividend criteria with buying an undervalued company, I think the downside is even more protected even in extreme crisis.

I hope I did not bore anyone with my dividends thingy. And I chose not to mention any specific stocks because I think investments should be flexible and each and everyone is different. But personally, i feel this is a very important consideration.

[ForeverAlone]

STI hitting 3000 level soon
time to load up some blue chips?

3000 looks like strong support level and fundamentally the STI trade around 12 times earnings with 3% yield?

[kelvesy]

I've been hearing so many financial opinions saying that we are headed to a crash soon, certain bubbles are forming, FED officials are cutting off their QE program or trimming it, 2014 will be a growth year or DOW may be hitting 20,000 by Year 20XX. Chartists are showing similarities of certain charts of certain years and our current year and next direction is heading down. No doubt it is important but I think it has small part to play in context of the bigger picture.

As value investors, I think we rather focus our energies on picking good stocks that fit our bill than to forecast the next market action. Hundreds of hours were being placed into forecast, but is it really effective or futile?

For me, I feel times are uncertain and markets are volatile. Just get ready a 'war chest' to take tremendous advantages when Mr. Market starts worry and offer you a ridiculously cheap price for wonderful company. Don't have to worry if your company is good, even if the share prices fall, it will go back to normal once everything is stabilized (long-term approach). Take advantage of Mr. Market's mood, dun let it run your psychological emotions.

[brattzz]

even BEST companies suffers a drop in prices when the MARCO economy is not performing well...
most important is to get the margin of safety, and that is when that right "price" comes in.

I say we need to continue to keep an eye on the MARCO economy.. while adjusting our stocks/cash ratio according to our greed/fear%.

[pianist]

what will be the trigger event? hmm...

[brattzz]

what will be the trigger event? hmm...

Anything can happen right? no matter what is the reason, even some we cannot understand.. well... what to do right? we cannot understand everything! :O

[CityFarmer]

I've been hearing so many financial opinions saying that we are headed to a crash soon, certain bubbles are forming, FED officials are cutting off their QE program or trimming it, 2014 will be a growth year or DOW may be hitting 20,000 by Year 20XX. Chartists are showing similarities of certain charts of certain years and our current year and next direction is heading down. No doubt it is important but I think it has small part to play in context of the bigger picture.

As value investors, I think we rather focus our energies on picking good stocks that fit our bill than to forecast the next market action. Hundreds of hours were being placed into forecast, but is it really effective or futile?

For me, I feel times are uncertain and markets are volatile. Just get ready a 'war chest' to take tremendous advantages when Mr. Market starts worry and offer you a ridiculously cheap price for wonderful company. Don't have to worry if your company is good, even if the share prices fall, it will go back to normal once everything is stabilized (long-term approach). Take advantage of Mr. Market's mood, dun let it run your psychological emotions.

I agree we shouldn't spend too much time to forecast the market, but totally ignoring it isn't a good idea too, IMO

Combination of top-down AND bottom-up seems a good strategy for a win, IMO.

[Temperament]

I've been hearing so many financial opinions saying that we are headed to a crash soon, certain bubbles are forming, FED officials are cutting off their QE program or trimming it, 2014 will be a growth year or DOW may be hitting 20,000 by Year 20XX. Chartists are showing similarities of certain charts of certain years and our current year and next direction is heading down. No doubt it is important but I think it has small part to play in context of the bigger picture.

As value investors, I think we rather focus our energies on picking good stocks that fit our bill than to forecast the next market action. Hundreds of hours were being placed into forecast, but is it really effective or futile?

For me, I feel times are uncertain and markets are volatile. Just get ready a 'war chest' to take tremendous advantages when Mr. Market starts worry and offer you a ridiculously cheap price for wonderful company. Don't have to worry if your company is good, even if the share prices fall, it will go back to normal once everything is stabilized (long-term approach). Take advantage of Mr. Market's mood, dun let it run your psychological emotions.

I agree we shouldn't spend too much time to forecast the market, but totally ignoring it isn't a good idea too, IMO

Combination of top-down AND bottom-up seems a good strategy for a win, IMO.

i agree.
i monitor the Market daily as much as i can since day one. But that does not mean i am a trader. If you are looking for value buy you are actually monitoring companies. But companies exist in the market and not in a vacuum.
So don't we have to pay attention to what is the market doing now to the companies that you think are value buy? imo.

[kelvesy]

Sorry for the confusion. Ignoring the economic environment is fatal. I do spend time reading up on economic data (GDP growth, consumer spending, inflation, unemployment, etc), and industries. All of these contribute to the successes or survivability of the company. To put my point across, a well managed company in a sunset industry may not excel very well as compared to a normal company in a rising industry.

What is the differences between top-down and bottom-up apart from the steps which are in inverse? Or is the percentage of weightage given to each factor. e.g., economic, industry, company.