Value Investing

Investing in SGX is all about buying low and selling high. Warren Buffet likes to pay $0.50 for a $1 worth of stock.

However, many people are not able to tell the true value of the stock and sell it rashly when the stock go up thinking that the stock is under speculation. However, as inflation rises with time, the value of the stocks appreciates together with it. Just like food and oil prices are constantly rising. You cannot or seldom will find a main course dish in a food court for $2, for now it costs $3-10, which if you can buy a Mac Chicken meal for, even with drinks and fries. Stall rentals in food courts have increased, same goes with food prices.

Value investing speaks from the true intrinsic of a company. The rate of growth the company, ultimately how the company will be valued now and in the future will determine a buy or a sell. If because of a certain decision the company makes which will increase their debts in future, and knowing that the company will have difficulty financing its debts because of bad profits or due to an stronger competitor, then you may decide to sell it or cut loss. One example is Tiger Airways which its share price dropped from $2++ to $0.70++ today due to increased competitions and high oil prices. The unfavourable position of the company makes it hard for it to grow its earnings as competitions are very stiff after the opening of Scoots, a budget airline by Singapore Airlines.

Value investing also comes from the a fundamental analysis point of view. How much risks the companies are exposed to. Airline companies in general are exposed to a constant number of risks which will affect their profits. A plane crash for example will affect huge losses for the company. An increase or a significant increase in oil prices will affect the company. A lack of a minimum required number of passengers in flights, meaning less people want to travel to a country that is part of the airline routes. There are so many factors which will affect the profitability of airlines company. A company that makes more sense in value investing is a company like SIA Engineering (SIAEC) who has a monopoly in its way. Of cause there are much more companies that have the same fundamentals which include Vicom, Singapore Exchange (SGX), Singapore Pools (but is not listed in SGX), ERP (also not listed in SGX). How SIAEC makes money is from the number of airlines landing is Changi Airport per day basis. Because all the airlines need to undergo overhaul operations and maintenance before making the next flight. These airlines have to go through SIA engineering's Overhaul and Maintanance hangars to service their airlines. And thus, SIA Engineering is the monopoly of the overhaul business in Changi Airport. As the number of airlines landing in Changi increases with the completion of Terminal 4, SIA engineering (SIAEC) will grow in terms of profits. As long as airline numbers landing in Changi Airport increases, will benefit the growth of SIA engineering. Inflation will also cause maintenance cost to increase and that will also contribute to SIAEC earnings. In value investing, we look at the factors that will affect the profits of SIAEC. If we know that the airlines traffic numbers are likely to increase, maintenance prices are going up, and SIAEC's stock price had gone down quite a bit, then we know that it is time to buy SIAEC.