What to do when your portfolio is fully valued

[FFNow]

Just curious, how do you determine if the blue chips are overvalued or undervalued? What made you buy these particular blue chips during the crisis?

[corydorus]

I would view SMRT as Fairly Valued considering the yield.
I think Singtel is seriously mispriced. A Stock with ROE 15%, Good EPS and DPS...at S$3.11...to me is a min. S$4 stock...

So alot of estimation ...in my view when coming to valuation.

[vader1671]

Just curious, how do you determine if the blue chips are overvalued or undervalued? What made you buy these particular blue chips during the crisis?

I generally do a DCF valuation along with fundamental evaluations.

Most of the blue chip stocks were trading at 3 or 4 year lows during the crisis even though the company itself didn't change (and theoretically the intrinsic value didn't change either) and the business environment would not be significantly altered. SIA Engineering was trading for less than $2, Capitaland (!) was trading for less than $2 which was significantly below NAV. SMRT and Singpost were pretty low as well but I can't remember the cost.

These blue chips are not only critical to the country, but they are backed by the government. In additional to all that, the fundamentals were still solid and I was fairly confident that they wouldn't fail but rather revert to mean once the business environment recovered. Once the P/E hit < 10, I bought. My only regret is not buying enough, but we all have that now and then.

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I would view SMRT as Fairly Valued considering the yield.
I think Singtel is seriously mispriced. A Stock with ROE 15%, Good EPS and DPS...at S$3.11...to me is a min. S$4 stock...

So alot of estimation ...in my view when coming to valuation.

I don't own Singtel, but I do know some good people who work in the Telco business. I'm slightly hesitant to own any Singapore Telco especially with the government's efforts at making their offerings a commodity. I've heard that Singtel's service (the new mio offerings especially) is fairly poor.

But of the 3 local companies, Singtel is probably the best positioned due to their overseas investments.

This depends on whether that long rumoured merger of M1 and StarHub ever happens. I doubt so.

[thinknotleft]

So my conundrum is this,

1) I can look for new undervalued stocks to purchase with my monies, but I don't want to expand my portfolio any further. I'm pretty familiar with the stocks in my portfolio and don't think I have the capacity to follow a few more.

2) I can put money into my existing fully valued stocks and not get as good growth as I'd like.

3) I just shove everything into a cash fund and wait for my portfolio to become undervalued again (half of me hopes it won't since it'll be a paper loss)

I know that investment theory would suggest that I do 1). Since all my stocks are fully valued, I should sell it all and look for more undervalued stocks but I don't think I can expend the effort and I don't think the companies that I own have suddenly turned into horrible losers.

What would you do?

Hi Varder

You seem to have a high cost in putting in addiitonal efforts to look for more undervalued stocks. And, you think that your exisitng portfolio is likly to provide you with small but probably acceptable positve returns. You may also be keeping your existing portfolio for dividends.

I will do (1), since I do not mind expending addiitonal efforts to research new stocks. And, I do not have a strong preference dividends.