novice

i am new in stock market. can someone please advise me what stock to buy now, and what criteria should we based on in picking stock ?

Thanks

Hi eface58,

Welcome to the investing world, I am not qualified to give advice as I am not a FA, but I will share my thoughts. (Warning: Long and boring entry)

1st and foremost, if I don't know what to buy, don't buy. Buying on analyst report and hot tips from forummers, uncles and aunties without due homework is a recipe for financial ruins.

Hmm, what should I buy, before that I must answer why I am buying, and the are few scenarios:

1) I just want to beat inflation.
This is rather simple, you can get some retail bonds like CMA3.8 and allocate some money to preferences shares of banks like OCBC 5.1, and you should get a yield of about 4%, which should be able to beat inflation. When interest rises, there should be other offerings in bonds of higher interest, so keep spare cash for such, or you can get a combination of bonds that are maturing soon, and those that are maturing after a longer period of time to spread your risk.

2) I want a decent return of above 6% annually over a long period of time.

This is tough place to navigate. Most importantly, you need to know valuation techniques and buy only when price offer you a margin of safety. Read the "the intelligent investor" again and again, and you will know what to do. For some bare basics:

Growth companies(Read up observer2 threads)
PE, PEG, FCF are important matrics for growth companies. Companies that are fast expanding. YOu need to be able to predict their future earnings for the next 2-3 years at least to be able to value them properly, the longer you can guage their earnings growth, the more accurate your valuation. Matrix than can help you do that are orderbook, projects under development, sector/industry outlook, major customers' capex plans, operating and net margins.

Undervalued companies (Read up sumer threads)
NAV. FCF, consistency in earnings and profits. Quality of assets, assets must be easily liquid, rate of depreciation of assets, cash generating yield of assets. e.g. property- rental yield, plantation- yield per area and the price the produce would fetch.

Income-generating income,
FCF, dividend yield and payout ratio and important matrix to value such companies. Of paramount importance is not yield per se, but the sustainability of it, e.g. competition, barrier of entry, SGX, SPH, SIngpost has a fanstatic monpoly but yield is so-so. Telcoms operate as a oligpoly. Their debt level, future capex etc.

3) I want to make a living out of it.
It means you want to be a trader, and I have no ideas how to do it.

4) I want to get rich fast, ultra rich even faster
Either you are born lucky, or you are 1 in the millions genius in the stock market, otherwise, stop dreaming.

5) I don't want to kill myself, I want some beginner experince to build on.

You need to know debt level, Net debt to equity, debt to current assets, interest coverage ratio, earnings to fixed-cost ratio, current ratio, inventory days, receivable days, ratio of receivables to sales, erosion of margins, recurring of impairment, constant fund raising, frequent changing of CFO, CEO's statements which are always off the mark and failure to execute plans. Read the "risks" section of the prosepctus

sound complicated? Is there a single matrix that works? Yes, the HMIKATB. How Much I Know About The Business, the more you know, the better chance in identifying the winners.

Thanks a lot for your advice, Greenrookie. I find it useful.

I have studied quite many counters, but I have no idea which one to buy. There are some directors who buy many of their companies shares. Among which are Lian Beng, Serial System, etc. Is this a good indicator as they know their business better than others.

Do you have any good counters to recommend ? Appreciate your suggestion. Thanks

efacec58,

I am more inclined to take insider buying as a indicator/ screen factor to look up further into a company than the reason to buy.

Very sorry, as every risk-reward preference are different, and one man's meat can be another poison, I cannot give any suggestions. But the forum is littered with suggestions already, u have to read them out and do some research on your own.

Just a side talk, what is your view that "investing is akin to gambling?" There is a reason what many shun investment in shares, and there is a stigma that it is highly risky. I feel the reason is most people treat it like as casino, and as a result, fortunes are made and more often lost.

I treat investing like a business, I am buying businesses that I think are undervalued. I will not run business and place buy orders after just reading some annual reports and online opinion. I want to make sure as much as possible, someone is willing to buy what i bought at a higher price, or that the business generate income for me (dividends). I believe i do not have windfall luck, so I can only work hard, and hopefully build a good "side business" over the long run.

I hope other "gurus" in the forum will also contribute to your thread as I have a really poor record in investing thus far.

Happy investing and keep learning.

Good luck

I know a bunch of investors who are very successful. If I can distill their strategies into a page of text, I am sure you will recognise that they are all different strategies or approaches.

Greenrookie does a lot of homework -- which I admire. Some successful investors I know are like him, and they have made $X,000,000 in the past few years alone. I am not kidding.

I also know others who do about 30-50% of that kind of homework and yet they are also well rewarded by the market. One key thing I suggest if that you try to take time to attend the AGM, EGM, etc, then talk to the CEO / Chairman, unleash your prepared questions. Get their name cards and also don't forget the CFO. You can email them or even call them from time to time.