^V^ GPACKET @ 4.30 , a classical example for" why i said buying high PE stock is a kiss of death !? ^V^

I hv rec'd a mail from my fan saying he was confused with High n Low PER stock after he came across one blogger highly recommended High PER stock 4 share selection, his email attached with d following :-


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Stock Market

Written by " HIGH PER SUPPORTER"

Wednesday, 26 December 2007
To value a share, you must know certain numbers which are important. To name a few, they are:
EPS (earnings per share
DY (dividend yield )
PER or PE (price-earnings ratio)
PSR (price to sales ratio)
NTA or NAV (net tangible asset value)
Gearing (sometimes called debt-equity-ratio)
The PE ratio is the most often talked about. It means the market price per share divided by the net earnings per share. One way of looking at it, is that a PE of 4 means that it will take 4 years to recoup your capital at the current rate of earnings.

Is buying a share at low PE the way to riches? Certainly not. PE alone is not the way to value a share. Wealth is not so easily created; otherwise any form five boy can become rich. You need to know very much more.

Sometimes it is better to buy at high PE than at low PE. When a share is selling at low PE, it means that the prospective earnings are poor and therefore its intrinsic value will be lowered. On the contrary, when it is selling at high PE, it means the prospective earnings are good and therefore its intrinsic value will be enhanced.

It is better to buy a good company in its bad year rather than a bad company in its good year. Think about it, and you will know what I mean.
Prospective earnings are forecast earnings which may turn out to be inaccurate. Hence, if you buy at high PE and your forecast earnings are wrong, the share price will not go up. On the contrary if you buy at low PE and earnings per share subsequently drop, your low PE will become high PE, and the share price will drop also, So you see, it all boils down to earnings.

Fundamental analysts are paid highly, because they are supposed to possess the ability to forecast EPS correctly. In reality, sad to say, many failed miserably.
“If you wish to enjoy the glory of the sunrise, you have to slog through the darkness of the night”. Do your homework, read more, upgrade yourself, and someday you will be rich.
the answer?

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From d above,high PER stocks r highly recommended by him ,buying high PE stock means the prospective earnings are good and therefore its intrinsic value will be enhanced.

Really ? well..let take Gpacket as an example

@ 4.30, Gpacket was traded at PE around 35 (High PE )!

U can see she falled like nobody biz from 4.00

to 3.50

to 3.00

to 2.60

to 1.50 (after its latest QE turned negative last month )

See how bad it is for buying High PE (over value ) stock ?? see ?

D wriiter said these also :-
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On the contrary if you buy at low PE and earnings per share subsequently drop, your low PE will become high PE, and the share price will drop also, So you see, it all boils down to earnings.

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Fully agreed ! but !!! hey..u forgot to mentione what will happen 2 yr High PE stock if its earning per share drop ?? she wont drop ? cos she has intrinsic value ??ha ha ..why dont u mention that ?

Look at Gpacket ! doesnt it belongs to high PE stock @ 4.30 ? Why she falled like nobody biz from 4.30 to 1.50 ?

K.. let compare it to my Low PE pick "SKPRES "

I bought @ 0.165 with PE around 5, it is now traded at 0.135 , d dip is only 15% as compared to Gpacket with dip more than 180% !!

U may say, of course lah..yr skpres is only 16cts mah..

well..ok!

Then take a look at my Mahsing n Hiaptek ..ok ?

FYI, from my old posting as per attached, u can see that I hv made 11K+ from mahsing n 600+ on Hiaptek , let presume i did not sell them off n hold until now , let check it out !

Bought Mah sing @ 1.739 (PE 9 ) n Hiaptek @ 1.94 (PE 8 ) .

today price

Mahsing at current price = 1.51 (falled 13% )

Hiaptek at current price = 1.79 (falled 7.7% )

Gpacket at current price = 1.51 (falled >180% )

Tell me now, whic is better ? high or Low ??

Let presume each point of PE equal to 1 feet, buying gpacket at PE 35 means u r buying at 35 feets , imagine how hard u hit if u fall from 35 feet as compared to buying stock with PE <10 ( less than 10 feets ). got it ?

who will badly hit ? fall from 35 feets or 10 feets ? High PE or Low PE ?

Still dont get it ? ha ha

need a second thought ?

As i said, u know it doesnt mean u understand it, u understand it doesnt mean u know how to apply it ^V^