Skip to main content

Peter Lynch and the blue chips

It's always good to learn something new from blog reading. Those scraps of information are like bread crumbs which can lead me to discover more interesting stuff about investing - to know what I don't know. As the saying goes, danger lies when you don't know what you don't know.

Stalwart - simi lai?

 "Stalwart is a term popularized by legendary stock picker Peter Lynch to describe a large, well-established company that still offers long-term growth potential. "

"In addition to a strong balance sheet, one of Lynch’s key measures for a stalwart company is the P/E growth ratio (PEG), which is calculated by dividing the company’s price-to-earnings (PE) ratio by its earnings growth rate. Lynch determined that PEGs below 1.0 were an indication of an underpriced stock relative to its growth rate. He considered stocks with PEGs below 0.5 to be a real bargain. For dividend-paying companies, he factored in the dividend yield to arrive at a yield-adjusted PEG ratio. Wal-Mart is often cited as an example of Lynch’s stalwart methodology."

[Source: Stalwart http://www.investopedia.com/terms/s/stalwart.asp#ixzz4uQvSnJIq]

哦，P/E还可以这样子用的喔。


I interpret it as - 
Stalwarts are mostly companies with a strong moat and competitive edge. Their offerings and business models are either difficult to replicate or monopolizing. As such, it is difficult for newer, smaller cap companies to gain market share from them. 

 However with the rapidly evolving technology and the rise of new business models, it is no surprise that some of these stalwarts may find their offerings getting obsolete if they are unable to keep up with change. Examples were Nokia and Fujifilm.

-----------------------------------

Just a fun simulation here based on an old blog post of mine last year - http://rainbowcoin.blogspot.sg/2016/03/4d-market-rules.html

STI was at 2837. Now STI is at 3246. (Difference +409)

If I were to buy all the resilient blue chips (highlighted in yellow below) then in 2016, assuming almost equal amount invested per stock, how would my portfolio fare now?


Time travel to Oct 2017 and
the results are...

Shares Price then $ vested Price now $ vested Gain/loss
Ascendas REIT 4100 2.44 10004 2.66 10906 902
Capitamall Trust 4600 2.17 9982 2 9200 -782
Jardine Cycle 300 39.55 11865 39.82 11946 81
SATS 2600 3.91 10166 4.66 12116 1950
SPH 2600 3.92 10192 2.71 7046 -3146
Thai Bev 13000 0.77 10010 0.9 11700 1690
Wilmar 3100 3.21 9951 3.2 9920 -31
TOTAL 72170 72834 664

Negligible capital gain. Becos one rock sunk the ship. Image result for defeated emoticon


Could have done better by buying the STI ETF!
(Those who bought the banks really hit home run. LOL)
Moral of the story

 Do not buy simply based on the company's resilience in a down market. Do look at the company's earning prospect, forward price trend and overall sentiments.


How many of the blue chips are still stalwarts? It's for you to decipher.



*** Disclaimer: I have no vested interest in the above stocks.
Labels:

Comments

Post a Comment

Popular posts from this blog

Reflections for year 2024

2024 has been a relatively peaceful year. So peaceful that I have read countless novels and other books, met my sports buddies almost every weekend and picked up horticulture. Physical and mental health As we say, health is wealth. I have stuck fairly consistently with my exercise regime and tried to include more fruits and vegetables in my meals (although I eat out more and cook less these days). My weight, BP and cholesterol levels are doing ok. For those 40 years and above, remember to get your  subsidized health screenings from the government . Working less and meeting up with friends more contributed to an improved mental health. I see that the government has stepped up on initiatives in the community but work place initiatives from employers still seemed lackluster, especially for those who can't WFH and need to commit 44 hours or more a week at frontline work. I have also started a Gratitude journey to celebrate all my little life milestones. Financials Investment wise ...
Post a Comment
Read more

The best credit card for my house reno & prep

As updated in my previous post, I have finally bought my own place solo. For the past few months I have been busy coordinating with various contractors and vendors for my house renovation. As I am still on flexi work schedule, I decided to be my own ID. With only a simple renovation in mind, I set my reno budget as 20k (aircon & fixtures inclusive). The renovation process and acting as my own ID were not as easy as I thought. It took me about a month to gather and compare quotations from different contractors and another few weeks to finalize all the things that I need my chosen contractor to do. I eventually settled for a main contractor who specializes in carpentry work but also provides painting, tiling and electrical services. I have grossly underestimated the amount of defects that need fixing for this resale flat. Fortunately, the floor tiles and some of the existing built-ins are still in good condition so I kept them, otherwise I would have burst my budget. The first issue ...
Post a Comment
Read more

Shit happens and I lost my low-hanging fruits

My POSB SAYE account just hit its 25th month —the much-anticipated “month of maturity.” I was all ready to enjoy the 3.5% bonus interest I’d patiently saved for… only to receive a measly $17+ cash gift instead of a few hundred dollars. I was about to send a message to query the bank what caused this interest drop versus what I have gotten on the 13th month. Confused, I double checked my account history and— gasp! —found a single $50 transfer I’d made to a joint account in one of the past months. I hadn’t even realized that I’d chosen the SAYE account as the fund transfer source. For those unfamiliar with the T&Cs of POSB SAYE: “To receive the additional 3.5% p.a. Cash Gift Interest, ensure that you do not make any withdrawal from your POSB SAYE account.”   “If a withdrawal is made in the month, this will result in the previously accumulated additional 3.5% p.a. interest to be forfeited.” Yes, one tiny transfer = months of bonus interest gone . Even depositing it back the...
Post a Comment
Read more