Stock Screening on a Wet Sunday

Feeling curious on a rainy Sunday, I decided to do my periodic stock screening which I have not done so for some time.

Using my usual screening criteria, the result actually surprised me this time.

I use the P/E, P/B, dividend yield, net profit and gearing in terms of debt/equity for my screenings.

P/E - Less than 10. However for today's screening I set it as 20 with reason given below.

P/B - Less than 1. Depending on the circumstances I usually do not want to over pay for my stock.

Dividend Yield - At least 4%. Above the risk-free interest rate from CPF.

Net Profit - At least 10%. I feel more comfortable with this figure as I feel there is more sustainability in the business.

Gearing - Less than 40%. Obviously I do not feel comfortable investing in a company with high debt level.

So with this set of screening criteria, I managed to get only 3 counters this time. These are:

1. Frasers Centrepoint Limited
2. Global Investments Limited
3. Keong Hong Holdings Limited

This is a far cry from the previous screenings where I usually get at least 10 - 20 results. If I set the P/E ratio to 10, Global Investments Limited will be out of the picture.

So what does this tells us about the current market?

Anyway for Frasers Centrepoint, it has always been in my watch list. I have no qualm in investing into this company once my TP hits.

For Global Investments, I have only recently started to read up on this company. Without more in-depth understanding I won't take any further action for now.

For Keong Hong, I have previously done some study here. It continues to be in my watch list.

With focus being on my new company now, I will probably be less active in the market unless good bargains appear.

Good luck everyone.

Fundamental Analysis and Technical Analysis

I'm more of a fundamental analysis person when it comes to stock investing.

There are many discussions about fundamental analysis (FA) and technical analysis (TA), advantages and disadvantages of one over the other, blah, blah, blah.

However as I tend to hold my stocks over a longer horizon, I feel a good analysis on the fundamentals of the company coupled with a look at the macro factors is an approach which works well for me so far.

5 of the most common factors that I use to screen my stocks are:

a) Dividend Yield
b) Net Profit
c) Gearing
d) P/E Ratio
e) P/B Ratio

In some cases I also look at the following:

a) 5 Year Dividend Growth Rate
b) Sales (TTM) vs Preceding Year
c) ROE

Nevertheless one cannot discount the importance of a good TA.

Many a times I find myself selling too early despite having a good entry price. Reading the charts will help judge a good exit price.

Another case in point. In a bull run like the one we are facing now, some stock prices are rising faster than you anticipated. Using TA can help you to do some quick trades and in the process, hopefully earn some quick bucks.

Conversely in a bear market, take advantage of a well-applied FA to grab solid counters at attractive prices for some long term holdings.

All in all, personally I feel FA is good for stock investment over a mid to long horizon and TA is useful when it comes to short term trading.

What do you think?