Wednesday, March 9, 2011

Local Stock Market Not Attractive?

It is getting harder to invest in the local stock market, while expecting a decent return (more than 10% excluding dividends) for a holding period over 1 year. The low hanging fruit have all been taken.

However, my feelings (yup, my feelings) tell me that I have and need to buy stocks. At the back of my head, some part where my feelings are stored, a little voice is telling me, "you are missing out on a good opportunity!"

But this is what I see. The Straits Times Index is currently trading at about 1.8 times book value and 15.9 times earnings. PE-wise, this as close as the historical average as it can get, plus minus 1 times, or an up and downside of 6.3 percent. The logical part of me tells me that all things equal, the risk-reward ratio is not there for the stock market as a whole.

What about picking individual stocks? So far, most of my stock picks have crumbled like the broader stock market. In terms of what I have in the portfolio, some of them, like Etika International, have taken a walloping. Interestingly though, my stock screen has churned out stocks like Boustead, Kingsmen and Etika International as good businesses at cheap prices. I dare not bite. Yet.

Do you have any good businesses at cheap prices you would like to share? No S-Chips please, I am allergic to them!


  1. hi Both Angel Stone and SGXSTockpicker

    I added both your blogs to my bookmarks bar, i like to read the article regarding investment in stocks. Of course i myself am holding several stocks as well. Unfortunately i am a very newbie so i cant share as much as you are sharing with you. Thanks a lot for these insightful articles.

    I am actually holding a few s chips (ya unfortunately) i bought them before the major slump in STI in feb. They are taisan and fuxing. And they just keep sliding like no tomorrow and yes i am still holding. aiks! and they are leavng further and further from my buy in px. Do you have any suggestion to me and my 2 s chips? thanks

  2. Hi SGXStockpicker

    Do you have any clue why Etika has dropped so much? Is it due to broader market or any fundamental changes.

    Could it be an attractive entry price?


  3. Hey James,

    I think the answer quite obvious. Sugar and other raw material price rose so their margin dropped alot. COGS for 1Q11 rose by 43%! Hence profit dropped, but even further due the increase in other course. I will try to do some crystal ball gazing, but more visibility is needed, since we really cannot be sure if sugar prices will drop. By the way for malaysia, their are subsidies on the price of sugar, im not sure where it stands at the moment.

  4. Will you buy more Etika or are you considering selling?

  5. Hey CIF,

    the answer is yes i may buy. the question is when do i think that a. the overall market conditions will turn b. is high raw material prices a permanent thing.

    the answer to a. is that there will be more downside but i think -100 more points is the short term limit. the market is just correcting IMO.

    the answer to b. is that i don't know if high food prices are permanent. i probably need to read up more into the sugar subsidies in Malaysia too. But i think that within the condensed milk space, it is very hard to transfer the increase in cost to consumers, because it is way too commoditised. probably i will drop their CFO a line to see what are they doing in that aspect?

    i will monitor the situation and read up. the insiders are trying to buy from the open market to prop up the price. not for the faint hearted.

  6. For stocks on the Singapore stock market, I was thinking of either Noble or Ausgroup. These 2 companies are in the commodities and oil & gas businesses respectively. And it appears that they are quite cheap now.