I hv rec'd a mystery gift from my fan last week, an investment book written by Mr Cold Eyes, I found that I am actually adopting d same investment method as Mr cold eyes did, he said, he will not buy in any stock with PE > 20 ^V^ see ? he mentioned d overall fair value or PE is around 14.75 which is similar to my fair value @ PE 15 ! He did mentioned about buying stocks with PE < 10, if their earning growth r in positive zone, making $$$$ is only matter of time ^V^ read d above attachment n compare it with what i hv written as below :-
October 07
^V^
PE = Share price/ EPS
From year 1990 to 2000 , avg FD rate was around 8 %
From Year 2001 to 2007 , avg FD rate is around 6 %
Hello bro benjamin, i know u r loaded lah. those ppl placed their FD more than 1 mil will enjoy special rate like our bro benjamin..ha ha
take d average , i will say is around 6.5% ^V^ agreed guys ?
hence : - PE 15 is as same as 6.6% FD rate, how i got that ?
simple :- 1/15 x100% = 6.6%
if PE @ 20 means 1/20 x 100% = 5%
If PE @ 25 means 1/25 x 100% = 4%
If PE @ 30 means 1/30 x 100% = 3.3%
If u invested one dollar in stock x, n this stock x giving u EPS of 10cts ( 1/0.10 = PE 10 ), this means it needs 10 years for u to gain back yr capital of one dollar ^V^
In short PE 10 means u need 10 years to recover yr capital
PE 20 means u need 20 years to recover yr capital
Now calculate yrself, if stock x traded at PE 3 , answer me, what is d FD rate for PE 3 ? n u need how many years to recover yr capital ?
If u can answer that.. this show u r HALF understand d magic key of PE !
answer that ^V^
Posted by Samgoss at 3:44 PM 7 comments
***
Monday, October 8, 2007
^V^ PE (4) How to fish ? n a girl with gun (right method) able to hunt tiger easier than a man using pillow (wrong method) to hunt ^V^
^V^
I am not saying stock with PE < 10 will definitely profit u ! but !!! at least u know what u r buying n u wont over pay for what u bought ^V^
No matter how, u still hv to take some risk even stocks that u bought r all below PE 10, everybody know how to buy LOW PE stock, but not everyone able to catch low PE stock with sustainable future earning ( here i am talking about sustainability of its future earning, of course if her earning jumped above yr forecast is even better ). D key success here is "Future earning "
Example
Stock X
Share price = 1.50
EPS for 2 qtrs = 15.64
Let presume that stock X managed to maintain such a good earning for d coming 2 qtrs , hence, 15.64cts x 2 = 31.28 cts for year 08 ^V^
If my forecasting turn to be good, 31.28 cts will translate its PE to 4.7 (21% return per year)with current price of 1.50, let assume d PE for its industry stood at 13+-, its fair value should be 13 x 31.28 = RM 4 + ! even PE 10 will still give u fair value of 3.10+ ^V^
D above r with d assumption that its future earning rose in line with u hv forecasted ^V^
What happen IF >>>>
What happen if d coming 2 qtrs turn to be an lousy one, presuming she running at huge loss with negative EPS of 30cts !??
let calculate again..
first 2qtrs EPS = 31.28, d other 2 qtrs giving u -0.30cts
D whole year EPS is now 31.28 - 0.30 = 1.28cts
yr PE is now 1.50/ 1.28 x 100 = 117 !!!
what is PE 117 stand for ?
PE 117 stand for 0.85 % return per year or u needs 117 years to recover what u hv invested ! (why buying such stock that giving u return of 0.8% if u can enjoy FD rate of 6.6 % with zero risk !??)
See ? future earning will determine d movement of yr share price ^V^
That's d reason y I will not buy in any penny stock with PE > 15 n blue chip @ PE>20 !
How to minimise yr risk from wrong picking ?
2 ways :-
1)Track earning records
Its 3 to 5 years track earning records : check d earning track records for stock like PBB, YTL , BAT , Maxis, IOI.... NO losses at all for past 10 years !!
That's y i always ask u ppl to follow those with track proven results blogger ..ha ha
2)What is on going now n years to come
example : We know 9mp is hot going n it will on going for another 2 to 3 years time, Mega projects need steel (http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_6f4bdce6-cb73c03a-6798eb00-5043bd24 ) , cement, timber n ..... from here I know n confident that d coming 2 qtrs earning for masteel n onastel r definitely sustainable ^V^ hence, their coming earning will definitely in line with what i hv forecasted .
Guys, no easy n fast money from KLSE, we need to use brain n also d right method (FA) in order to acheive financial freedom from stock mkt. If Metastock really work as it is, why there r still ppl losing money after using it ? they may say bcos u r slow n dont know how to interprate it ! Excuse me ! this is IT world, they can do d programming in such a way when d software detected a buy signal, alert u n u jump in ,same goes to sell^V^ dont tell me they cant do such a simple programming !! d only reason why they dare not to do that is bcos they r lack of confidence or may be they need something to cover their ass.
What is d point if u born as a genius but adopted a wrong method ? a girl with gun (right method) can hunt tiger easier than a man using pillow (wrong method) to hunt ^V^ Think it over esp those who using TA method, am I not correct ?
Posted by Samgoss at 6:34 PM 10 comments
