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STI soar to a record high again at 3800 and I have a hunch that it will hit 4000 at the end of the month. From what I have observed, the stocks which are surging upwards with strong buying demand are mainly blue chips so I was wondering if there's a possiblity people are funding it by selling growth stocks. Well, actually I guess daily trading activity is not as important as it seem to be and predicting it may even impair my own judgement but I just can't resist the tempation of viewing my portfolio performance every half an hr because it is just a click away!!!.. HA, I should have work at a place with no internet access (just joking ) ...
As what I have mentioned in my previous post, my portfolio consist of mainly growth stocks where they mainly move together with the economy.. The sectors which I'm currently vested are retail, construction, internet, beverage and water treatment. If I do follow strictly with Buffett's methodology to purchase only stocks with a economic moat (close to a monopoly of business), I guess I would not be holding any of the stocks except maybe for 1. I broke the rules mainly because I forsee them benefiting in the future from global demand and econmic growth but still, I only purchase them when they fulfill the following criterias :
1: Healthy financial Records (3 years Financial statment, balance sheet, Cash Flow)
2: Competent Management (Some indicators like ROE, ROA, Remuneration, Board indepedence)
3: Not purchasing them at an inflated price (Important)
It is extremly difficult deriving the company's intrinsic value using discount cash flow method. Firstly, I have to predict the company's inflow of cash flow for 10 years which is literally impossible because future is uncertain... The best I can attempt is to give a fair estimate to future cash flows to derive the present value of future cash flow but the accuracy depends how aggressive/conservative you define the discount rate.. After obtaining the price from the formulae , I will further discount it at a rate depending on the company growth and that will be my entry price.. Normally, you will get an entry price that is much lower than the current price so patience plays a key factor but having said tat, this isn't any magic number and need not be followed rigidly....
To be continued!..
Melynn
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3 comments:
hey, ur ardent fan leaving a comment again!
ha, u r bolder than me, i mentioned at e beginning of 2007 that e sti may rise to 4000 by e end of e year, n stuck to that prediction amidst all e downs in apr n aug... but u go a step further by bringing e 4000 mark closer to e end of e mth! well, hope u r right =)
good concise analysis of ur buying strategy... have u thought about how e China QDII funds are going to affect ur buying appetite? =P
all e best!
hey mj, nice to see ya ard especially at my blog .. Even though the STI drops 18 points today but it is only 100+ points away from the 4000 mark. My guess is that once it hits 4000, the market might drop drastically to a stage of a prolong correction as people might start to profit take resulting in selling pressure. Ha, if you bought STI index at the beginning of the year, you will earn a 33% on your return when the market reaches 4000 but having said that, you might be earning more than 33% from other stocks which clearly outweighs the opportunity cost..
The new inflow of funds from the china QDII is driving all the china stocks especially those S-shares like COSCO, making it more unaffordable and overvalued. Well, in my opinion I guess it's better to steer clear from all these stocks unless the price is just too good to resist ... Take cosco as an example, although they have clinched several contracts which will see them having a good revnue and earnings in the coming years but still, I can't imagine paying 75 times of their earnings.
Well, hope to see ya ard again and hopefully, you can enlighten me with your buying strategy :)
Melynn
heya,
yes, with the inflow, i agree that valuations may be blown out of proportion for some S-shares... like u said, patience is key, but e temptation to ride e wave is high also, ha ha...
erm... if what u said do come true, both e 4000 by end of this mth and the subsequent drastic profit-taking, then it'll be interesting to see how this reaction clashes with the inflow of funds from QDII =)
Nevertheless, it's imperative that we stick to some rules when buying and selling ya? I like your buying strategy, but sadly, I can't seem to find the time for that, haha =P
Good luck!
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