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Should invest (more) in SPH now?

Thursday, July 20, 2017

Reader:
Hi ak, I like to hear your view on SPH. I have hold the stocks which I bought few years ago avg price 4.1. With this recent big drop, do u think it make sense to buy more to avg down the cost? The business seems to cutting more div in coming future ๐Ÿ˜Ÿ

AK:
Whenever you are thinking of investing more, ask yourself if you were not already an investor, would you invest now. You will have your answer. Quite simple. ๐Ÿ˜‰

Reader:
My feeling is telling me not to buy if I do not have any.. thanks




Regular readers might remember my blogs on QAF Limited and why a higher share price might not mean that the stock is more expensive. 

In actual fact, QAF Limited's stock could actually be cheaper even though the price was higher.

(For those who are new to my blog or are growing forgetful, read this:
http://singaporeanstocksinvestor.blogspot.sg/2015/04/qaf-limited-114-share-is-cheaper-than.html)


Along the same line of thought, a lower share price might not mean that a stock is cheaper. The stock could actually be more expensive.

It has to do with earnings.

Related posts:
1. Fate of my investment in SPH.
2. Sizing my investment in SPH.

2 comments:

Spur said...

Capital is a very precious thing, and needs to be judiciously deployed as well as safeguarded.

That's why Buffet's 2 famous rules. :) :)

For investments, I always practice exit strategy, even if the investment appears to be the next Internet or iPhone. Some may disagree, but this is what works for me.

On a simplistic basis, 3 things go into risk management:
1) Risk tolerance taking into consideration portfolio approach.
2) Position sizing.
3) Moving stop loss.

E.g. For a single company stock, I may have risk tolerance of losing no more than 3% of my overall capital. Let's say I'm quite confident of a blue chip with strong earnings and dividends growth.

I have capital of $1M, and I'd like to invest $200K into this blue-chip. With this position size, I will need to have a moving stop loss of -15%. If my thesis / homework is erroneous, and the stock drops > 15% after I buy it ... I cut loss, no questions asked. ($200K X 0.15 = $30K = 3% of $1M)

If the stock rises over time, I may adjust the moving stop loss level depending on my view of the company & its valuation etc.

For those who think -15% is too tight, especially if this is supposed to be a high conviction stock, then my answer is increase the stop loss, but lower your position size. Or else have a bigger capital base.

AK71 said...

Hi Spur,

Peace of mind is priceless. ;)

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