Investment
Tools
PER (Price Earnings Ratio)
Stresses on a company’s Earnings Per Share (EPS) or
earnings potential.
Price
to Book
Looks at the Net Tangible Assets (NTA) of a company.
Discounted
Cash Flow
The future cash flows are discounted to reach a present value
or price which is then used as a basis to own or dispose a
stock. This is often used for companies that build infrastructure
and have for example, 25 years of collection of toll. The
future earnings or cash flow is calculated to determine the
value of the share.
Strategies
for Investing in Stocks
Go for:
-
Low PER - Focus on stocks with low PER multiple, preferably
below 10 times, usually between 5-8 times but be aware that
they differ between sectors e.g. finance or plantation or
other sectors.
-
Undervalued stocks - Focus on stocks that trade below its
NTA/share.
-
Dividend play - Invest in stocks that give high dividends.
-
Defensive stocks - Should the economic outlook appear gloomy,
invest in defensive stocks whose earnings are least affected
by the economic downturn.
-
Penny stocks with strong fundamentals and good earnings
potential for higher percentage returns.
Other
Investments
Apart from stocks, you can also spend your money on other
things that increase in value. Among them are:
- Land
and house.
- A
collector’s car – not just any car.
-
Antique furniture
-
A collector’s watch
- Antique
ceramics
-
Antique carpets, fabric and textiles
-
Antique jewelry, paintings or books
-
Rare stones e.g. rubies (at least 5 carats) or emeralds
(at least 10 carats). Unfortunately, diamonds are too common
and for them to appreciate in value and be worthwhile investments,
they need to be at least 100 carats.
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