AK went shopping in the (stock) market.

Mr. Market has been feeling rather pessimistic of late.

Winter has come?

In the last trading session, I bought stocks of the following companies':

1. SembCorp Marine
2. SembCorp Industries
3. ST Engineering

These companies have relatively strong balance sheets and order books to keep them busy for years. It is hard to imagine that they might be going the way of the Dodo.

Of course, prices could weaken further. If they should weaken significantly, I would probably buy some again. Buy some again? Yes, I will continue to pace my purchases in the face of possible continual market weakness. We do not know when prices have bottomed until we are past the bottom.

So, nibble, don't gobble.

Not quite the Great Singapore Sale, for sure.

During the GFC, we saw SembCorp Marine and SembCorp Industries trading at PE ratios of 7x to 9x. Personally, I do not think that we will see another GFC but we could see a soft landing. So, PE ratios of 10x to 11x, perhaps? Based on my estimates, SembCorp Industries could see its share price at between $4.00 to $4.40 then. What about SembCorp Marine? Perhaps, as low as $2.50 a share.

ST Engineering's PE ratio has always been somewhat higher and even during the GFC, its PE ratio was still pretty high at about 15x. Currently, ST Engineering is trading at a PE ratio of almost 20x which isn't crisis cheap but seems fair enough with a prospective dividend yield of about 3.8%, assuming a 75% pay out ratio. Compared to about $4.40 a share more than a year ago, current price level presents a more comfortable entry in more ways than one.

Learn from the squirrels?

Of course, it is hard to say whether Mr. Market would go into a depression or not. So, it is important to have a war chest ready. When to roll out that war chest? When valuations approach crisis levels and if that should happen, we want to be able to take advantage of the much cheaper valuations.

Related posts:
1. SembCorp Industries: A safe price.
2. SembCorp Marine: A nibble.
3. Mystical art of wealth accumulation.

Work because you want to and not because you have to.

Recently, I had a chat with someone on my preference to invest for income and how I am now able to work because I want to and not because I have to.

He said he would like very much to quit his job and focus on making money from the stock market.

He asked when would he be able to do that if he should follow my methods?

I told him that it really depends. 

For some, it could take just a few years. 

For some, like me, it could take almost 20 years. 

For some, it could happen by the time they retire at age 62. 

For some, it might never happen.





He wasn't impressed and told me that a couple of presentations he went to told him that he could retire within a few months if he should follow their methods. 

I said that I am aware of such courses and claims out there but I really cannot comment much on these apart from saying I would exercise caution.


To his credit, he did not walk away but instead he asked when I said "it really depends", what did I mean?







Well, following my philosophy, how soon a person can choose to work because he wants to and not because he has to depends on:

1. How much money does he need in life?

2. How much money is he saving (not making)?

3. How much money are his investments making?

We went through his answers to these questions and he was shocked to find out that he probably would not be able to stop working till he is in his 60s. 





I reminded him that it is actually not too bad. Some people cannot stop working even in their 70s.

He said he would like to stop working in his 50s although if he could stop working before he hits 50, it would be better. 

What should he do? 

Well, the answer is in those 3 questions mentioned above again.







1. How much money does he need in life?

Are the needs really needs?

After all, we only need so much money in life and the rest is for showing off, someone said.






2. How much money is he saving?

To save more money, he has to increase his income and reduce expenses.

It is quite simple. Find legitimate and ethical ways to do so.





3. How much money are his investments making?

If he is leaving the bulk of his money in savings accounts, he is doing himself a disservice. He has to make his money work harder.

One way is to make use of weaknesses in the stock market to accumulate some good stocks that will generate good income.





When we parted ways, he said he had plenty of thinking to do.

I do not know if he would become an income investor or if he would take up courses which would allow him to retire in a few months. 

The choice is definitely his.





Related posts:
1. How much do we need?
2. Common advice on saving money.
3. To protect our wealth, we have to take risk.
4. Retiring before 60 is not a dream.
5. How to have a comfortable retirement?