Overseas investment

[sillyivan]

Currently, 100% of my shares investments are in SGX. I do have 90% of my cash holdings in USD. However, I have been tracking USA stocks for more than 5 years and looking to pounce when there's a dip.

I find that US stocks have huge potential but most of it are currently overvalued whereas SG stocks have low potential but most of them are currently fair value. So there is a trade-off.

For most of you, which platform do you use to transact overseas stocks? Do you guys go with off shore platforms like Saxocapital/Ameritrade etc or stick with our local brokers?

[weijian]

Currently, 100% of my shares investments are in SGX. I do have 90% of my cash holdings in USD. However, I have been tracking USA stocks for more than 5 years and looking to pounce when there's a dip.

I find that US stocks have huge potential but most of it are currently overvalued whereas SG stocks have low potential but most of them are currently fair value. So there is a trade-off.

For most of you, which platform do you use to transact overseas stocks? Do you guys go with off shore platforms like Saxocapital/Ameritrade etc or stick with our local brokers?

There might be a reason why US stocks are "consistently overvalued" and SG stocks have "low potential" over the last few years when you were looking at both?
Of course, no one knows where the future lies. But on hindsight, not diversifying overseas has been a mistake as threadstarter indicated.

[blackclock]

But if there are two similarly undervalued companies, why not buy the one on your home ground?

I used to have similar thinking as u. But this time round i will not hesitate to put my money in USA stocks if there are 2 similarly undervalued companies. Because in the end, US stocks will far outperform Spore ones based on historical indices charts.

Karl, I have tried all these years to find similarly undervalued companies in Singapore
But so far, I failed. It's not easy to break into new market, without strong backing from the Chamber of Commerce / military strength / unique technology

Appreciate if you could share with us your experience.

[karlmarx]

But if there are two similarly undervalued companies, why not buy the one on your home ground?

I used to have similar thinking as u. But this time round i will not hesitate to put my money in USA stocks if there are 2 similarly undervalued companies. Because in the end, US stocks will far outperform Spore ones based on historical indices charts.

Let's take a look at their numbers and see what they tell us.

1. S&P vs STI, 2010 to Present

Absolute returns, dividends excluded:

S&P Jan 2010 to Present: 170%
STI Jan 2010 to Present: 11%

P/E ratio:

S&P, Jan 2010: 20
S&P, Present: 22

STI, Jan 2010: 18
STI, Present: 14

The point that some have highlighted about the inferior returns of STI is well noted. 

S&P's present valuation is not a lot higher than in the past, so these constituent companies must be earning more. STI's valuation is lower than before, but even if the multiple increased at the same pace at S&P's, its returns will still have lagged S&P. 

So, it looks like S&P companies are earning more than STI companies. What is the reason for this?


2. S&P vs STI, 2001 to 2010

Absolute returns, dividends excluded:

S&P, Jan 2001 to Jan 2010: -13%
STI, Jan 2001 to Jan 2010: 38%

P/E ratio:

S&P, Jan 2001: 29
S&P, Jan 2010: 20

STI, Jan 2010: 22
STI, Present: 18

So now the tables are turned. Those who bought S&P during 2000 would'be cursed, while those that bought STI cheered. 

Again, what is explanation for what we are seeing here? I do not have an answer. But I think it is worth thinking about.

===

Some comments:

1. My takeaway from this simple exercise is that it is not correct to assume that one market is more likely to perform better than the other. Therefore, I do not think it is wise to assume that, say, S&P will outperform STI again for the next 10 years, and then proceed to put your money on it. There has to be some rationale for why some markets outperform others. If I were to put my money on S&P, I must know why it is more likely to outperform STI. 

2. STI's p/e ratio has been on a downtrend for 20 years. Will it return to its 'historical average?' I do not know. Given the varying levels of prosperity for the different industries, it might be better that -- as I have mentioned previously -- investors make specific bets on particular industries that they are confident of performing, instead of diversifying across all industries through an index. 

In other words, if you want to do well in Singapore's market, you have to put your money on the promising (probably our big 3 banks?), and avoid the duds/laggards (which in recent years, are the O&G stocks).

3. There are no easy answers. If you are a DIY investor, you have to do your own homework, which, in this case, is finding the best market to buy an equity index. This is not something that I've tried to figure out. 

===

https://www.ceicdata.com/en/indicator/si...e/pe-ratio

https://www.multpl.com/s-p-500-pe-ratio/table/by-month

[karlmarx]

But if there are two similarly undervalued companies, why not buy the one on your home ground?

I used to have similar thinking as u. But this time round i will not hesitate to put my money in USA stocks if there are 2 similarly undervalued companies. Because in the end, US stocks will far outperform Spore ones based on historical indices charts.

Karl, I have tried all these years to find similarly undervalued companies in Singapore
But so far, I failed. It's not easy to break into new market, without strong backing from the Chamber of Commerce / military strength / unique technology

Appreciate if you could share with us your experience.

Do you mean to say that it has been difficult finding undervalued companies in Singapore?

I think that's just the market being efficient. If it is so easy to spot, everyone would have quit their jobs. 

There have been very very few stocks which doubled in the past 5 years, and many many more than has halved. So unless you were very careful with your picks, it is likely you will have just performed average, or worse.

My experience is very narrow and limited. I will suggest you read as many of the company-specific threads in this forum, as possible. Particularly those with very high postings. Look at why some of these companies are popular, look at how their business has performed over the years, and so on. There is a lot to learn from those.

[blackclock]

Karl, thanks for doing the summary to compare STI with S&P

Please note, this comparison is not very accurate. The reason is because index components keep changing.
We used to have Noble, Starhub, Olam etc. Once they fall, they will be removed from the index. So our index Always look good

US companies generally are at the top of food chain. They have moats in technology (patents & trademarks), and strong American chamber of commerce to enforce them (together with the military). It's easier for them to open up new markets.

On the contrary, most of our companies are Sub-cons, or sub-sub-cons. We work as an agent (or proxy) for US companies.
Things will go very well, if US still choose us a preferred agent. They will help us to negotiate for good deals, so our companies can benefit by penetrating into those regional economies.

Now US seems to be less interested to get involved, probably its better for them to stay neutral, as China is getting more friendly with our neighbours.
Eg, Philippines has issued a license to China Mobile. That will eat into one of Singtel's most profitable pie (Globe)

I agree that SGX has some undervalued companies. But how do you define undervalue?
Based on Past political & economic situation? Yes.
Based on future? No. They are mostly in decline, because most of them DO NOT have moat / competitive advantage.
Those being hyped-up as Innovators (like Hyflux), are merely system integrations. They do not hold any special technology.

We used to win because regional economies are closed & corrupt. They are opening up, and they do not need us in long term.
If that happens, we will lose hinterland.
What is Hong kong without China?

[dreamybear]

Someone once asked WB where he got his investment ideas from - he said he would pick up a list of all the public companies on the NYSE and start with the letter A...

So I agree with karlmarx on the point there are good investments in SGX, but may need to research and understand ALL listed companies in SGX / Catalist. For me, I do not have the discipline(read until "sian" nor the time nor the health(neck / backache from sitting in front of PC).  

On the other hand, I share the same sentiments as blackclock regarding the competitivenss of SG(occassionally I also reflect on the "you have friendly neighbours? grow up !" LKY video* & not take things for granted), and also if we want to invest in the likes McDonalds, 3M, Disney, Apple, I think the US mkt is the way to go. However, they tend to trade in high valuations and low dividend yields since they are super well known, and much more sought after by investors. The good thing abt US stocks is we can read the Earnings Briefings Transcripts, which I don't think is popular here yet.

Being an "international" investor has an advantage though, in case we migrate one day because of our children or whatever, we can still invest for a living anywhere we are !     Pretty much like those HNWI whose assets are international !

*http://theindependent.sg/bilahari-kausikan-shares-old-video-of-lky-saying-weve-got-friendly-neighbors-grow-up/

[karlmarx]

I agree that SGX has some undervalued companies. But how do you define undervalue?
Based on Past political & economic situation? Yes.
Based on future? No. They are mostly in decline, because most of them DO NOT have moat / competitive advantage.
Those being hyped-up as Innovators (like Hyflux), are merely system integrations. They do not hold any special technology.

My impression is that you are making the assumption that 'lousy' businesses cannot be undervalued. To me, this is not true.

Although Singapore companies are not technology or innovation leaders, may not have 'moat' or 'competitive advantage, this does not mean that they cannot be undervalued. 'Good' businesses can be overvalued and undervalued. 'Lousy' businesses can also be overvalued and undervalued.

The only way to find out -- whether there is any undervaluation or not -- is to perform your own valuation. And then compare your valuation against the market price. Any difference will determine whether there is any under or over valuation.

[Shiyi]

Intrinsic value is quite elusive, especially in this era of technological disruption.
Looking at the top 10 companies in the previous 30 years, 20 years and 10 years, the list keeps changing.

Who can say if Apple will still be around 10 years down the road?

[Bibi]

I think Buffet feels Apple shld be around 10 years down the road. I believe when he made an investment, he is not so short term that the a co doesnt exist anymore in 10 years time.

There are many strong USA companies that can keep growing for decades. How many Spore co can do that? Probably less than 10. Many hit a speed bump after a recession and hardly recover. It seems for past 10 years the best way to earn money is to short every stocks listed in Spore.