As promised I will disclose the list of stocks that I'm currently
holding in my portfolio for sharing, learning & exchanging ideas.
But before that, allow me to explain my stock selection criteria. I find
this method suitable to my style of investing and I do not lose any
sleep when market crashes. It may not suit your styles or methods.
Whichever method or approach to investing you choose to adopt, make sure
you are comfortable with it. After all, it's your hard earned money
right?
Objective & Expectation:
To invest on fundamental basis for a term of 5 years. I have set a target to gain 100% in profits over these 5 years. I may choose to continue investing or redeem for use beyond 5 years.
Risk Appetite:
Medium to High. I like taking calculated risks without losing much sleep at night. For most of the time, I do not buy into turnaround stocks. "Turnaround stocks seldom turnaround" - Warren Buffet. But my risk appetite may increase over time with better knowledge and insight, therefore, I will "never say never" on this one.
Holding Power/Period:
I will hold on to a stock for long term as long as fundamentals remain intact. I may switch from one stock to another if I find something better.
Benchmark:
I will benchmark my portfolio against the KLCI index FBMKLCI:IND.
My Screening Approach:
In the investing world, there are 2 approach when screening for stocks: Top-down approach or bottoms-up approach. Top-down approach will look into a selected sector and then screen for the best stocks in that sector. Bottoms-up approach will look into a stock regardless of sector, and then only compare with its peers. I am using the bottoms-up approach.
Financial Ratio/Criteria:
Started in July 2013. Only Padini is from year 2013. Hua Yang and Mikro MSC was added this year while the rest are from year 2014. Cost price for Teo Seng, Jobstreet & Magni is adjusted to bonus share issued & share consolidation.
I shall further discuss my portfolio performance in my next post. Questions, constructive criticisms, thoughts? Do feel free to comment below.
Note: The stocks mentioned above does not constitute a buy/hold/sell call. Please do your own research beforehand. Thank you.
shinado
Objective & Expectation:
To invest on fundamental basis for a term of 5 years. I have set a target to gain 100% in profits over these 5 years. I may choose to continue investing or redeem for use beyond 5 years.
Risk Appetite:
Medium to High. I like taking calculated risks without losing much sleep at night. For most of the time, I do not buy into turnaround stocks. "Turnaround stocks seldom turnaround" - Warren Buffet. But my risk appetite may increase over time with better knowledge and insight, therefore, I will "never say never" on this one.
Holding Power/Period:
I will hold on to a stock for long term as long as fundamentals remain intact. I may switch from one stock to another if I find something better.
Benchmark:
I will benchmark my portfolio against the KLCI index FBMKLCI:IND.
My Screening Approach:
In the investing world, there are 2 approach when screening for stocks: Top-down approach or bottoms-up approach. Top-down approach will look into a selected sector and then screen for the best stocks in that sector. Bottoms-up approach will look into a stock regardless of sector, and then only compare with its peers. I am using the bottoms-up approach.
Financial Ratio/Criteria:
- Increasing revenue for the past 5 years. A drop in revenue for 2 consecutive financial years is a big no-no for me.
- Increasing net profits and owner earnings for the past 5 years. A drop in profit for 2 consecutive financial years is also a big no-no to me.
- The company must be able to pay some form of dividend in these 5 years. Whether the dividend yield is high/low or increasing/decreasing is not very important to me. If dividend payout increase over time, that would be great.
- Increasing trend for ROIC & CROIC in the past 5 years regardless of the percentage. If more than 10%, then it's great. More free cash is good for shareholders.
- Company must have a minimum of 5% FCF vs Revenue for the latest financial year.
- Return of average equity (ROAE) should be 15% or above.
- Good gross profit and net profit margins compared to its peers or the industry average. If gross profit margin is high, that means you have the cost advantage over your competitors. If the profit margins increases over time, that would be great.
- Company must have a healthy cash balance in bank. Without sufficient funds, a company may need to take a loan from banks/creditors or issue rights subscription which might dilute share ownership.
- I like companies with manageable debt levels or no debt at all.
- I do not invest into companies or sectors that I do not know much about e.g. Banking/financial/plantation.
- I will have 1-2 stocks in my portfolio that gives high dividend yield. (>5%)
- No China companies. They have a reputation for accounting fraud worldwide. I know not all China companies are bad. But I am not willing to take that risk.
- Check for share buybacks. If company does share buybacks when price is undervalued, that's a good thing. Even better if they cancel treasury shares because it's a good gesture from the management that they are protecting shareholders.
- Check if there is sudden resignation from the management team or audit team. Sometimes it may hint of some trouble on board.
- Best avoid companies whereby directors are constantly buying and selling. It will look more like they are trading for their own benefit rather than invest for the long term.
- The stocks that I have selected or interested in buying must meet most of the criteria above.
- Benjamin Graham's growth formula. This method by the father of investing is not popular due to its limitations such as getting a negative value. However, it has worked for me so far. Example of this formula used by Intelligent Investor in his post: http://klse.i3investor.com/blogs/intelligent_investor_notes/57177.jsp
- Whatever intrinsic value I get from the method above, I will put in 40% discount to it. That's my Margin of Safety.
- When the above method fails(negative value), I will use EV/EBIT as a secondary method.
- Why do I not use DCF or reverse DCF or any other method? It's due to my lack of understanding and knowledge about it.
Started in July 2013. Only Padini is from year 2013. Hua Yang and Mikro MSC was added this year while the rest are from year 2014. Cost price for Teo Seng, Jobstreet & Magni is adjusted to bonus share issued & share consolidation.
I shall further discuss my portfolio performance in my next post. Questions, constructive criticisms, thoughts? Do feel free to comment below.
Note: The stocks mentioned above does not constitute a buy/hold/sell call. Please do your own research beforehand. Thank you.
shinado
http://klse.i3investor.com/servlets/cube/shinado.jsp
