Friday, February 10, 2017


With so many stocks in the Singapore stocks markets, many investors definitely want to invest their hard-earned monies wisely on the best stocks. So how is a best stock or a good stock defined? To many investors, it is natural to speculate on some stocks which promise very high and sexy returns as they are coaxed by some great “turn around” stories or stories promising even more returns for the stocks. These investments often turn out to be “feedback” rather than achievement.
In my opinion, a good stock is defined when the price you pay is lower than the value of a stock. There are many metrics which defined value, but there are basically just three common metrics as far as I could do a quick recall.

The first is using some form of discounted cash flow to arrive at some future value of the stock based on current price of the stock as well as some form of assumption. This future value of the stock is commonly carried out for growth stocks. If the current price is less than the calculated future value, then some investors will think that it is a good bargain and a good buy to purchase the stock. I do not use this metric as I find that the calculation are subject to making certain assumptions like growth rates of the company and profitable margins which are not that objective.

The second measure of value is Price-to-Book or PB value. I like to use this ratio as it is an objective measure and the derivation behind PB value is very factual. A Price-to-Book ratio of less than one must mean that the stock is undervalued.

A third way of finding value is to buy good stocks at good prices when the stock markets undergo some form of correction. Good stocks like blue-chip stocks which normally will not trade at the price during stocks markets correction. This is called bargain-hunting of good blue-chip dividends stocks. Join the emailing list to receive regular Financial and Singapore stocks newsletters too! Like" me on Singapore Stocks Investing Facebook page to receive all posts on your Facebook as well as read more articles. Follow me on Twitter too.

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