A Winning Strategy

[Shepherd Boy]

According to Teh Hooi Ling, the author of an investment column "Show Me The Money'; has mentioned using of 2 financial ratios to be a key of a winning strategy for long term investment.
Of course not to forget Benny Ong, the founder of Life Planning Associates who has shared with her this strategy that has later inspired her to test out whether it's a proven track record.

So the two ratios are these:
1. Buying stocks with the highest dividend yield
2. but lowest Price-to-Book (P/B) ratio

Based on her study, following the strategy over a period of 22 years, you would turn $100 into $1575.
In other words, you have a 13.3% compounded annual return.

Notwithstanding the risk of privatization, there are 3 more things to take note of for the strategy to work:
1. Make sure the stock is fairly valued.
2. The stock is paying decent dividend.
3. The company has little borrowings.

With that, i wish you a happy investing journey!

 

[Dividends Warrior]

Personally, I use a formula consisting of 3 figures.

- Net Profit Margin %
- Dividend Yield %
- PB ratio

 

[Dyhalt]

After investing for 20 years, my experience tells me there are only 2 things that will always be on your side, Time & knowledge.

Investing in something based on numbers is a risk by itself. For example shipping companies gave extremely good divided % and PB ratio based on numbers since 2013. But if you invest in them, chances are you've lost most of your investment money in the 4 years of shipping slump.

Invest in something you know might not gave skyrocket returns, but you have a much clearer idea about its future prospect, so even in the event the stock price under performs, given time it should reflect its fundamentals again. Vice versa you'll exit before others knows about the problem to avoid the major corrections.

Cheers

 

[peterchan75]

Ratio and % by themselves are meaningless. Most website will compare them to industry average. They are available to the public but how to get the compounded 13% is totally another ball game. I suppose that strategy is forever secret.

 

[havetheveryfun]

Personally, I use a formula consisting of 3 figures.

- Net Profit Margin %
- Dividend Yield %
- PB ratio

You guys never heed the saying of wahkao of dont be hard up over dividends ? how can still use dividend yield as a criteria ?

 

[Shepherd Boy]

You guys never heed the saying of wahkao of dont be hard up over dividends ? how can still use dividend yield as a criteria ?

Teh Hooi Ling has also tested the strategy of simply buying stocks with the lowest PB ratios only. However, it paled in comparison with that of buying stocks with the highest Dividend/ PB ratios.

This was what she discovered, a sum of $100 invested in the lowest PB portfolio would have grown to $365 from 1990-2012. This gives you a 6.1% compounded annual growth.

Yet if a a sum of $100 invested in the highest Dividend/ PB portfolio, it would have grown to $1575 from 1990-2012. This gives you a 13.3% compounded annual growth.

Anyway for those who never heard of her, below is a brief introduction:

Working Experience

Portfolio Manager
Inclusif Value Fund, Swiss-Asia Financial Services
May 2017 – Present (4 months)

Managing Partner
Aggregate Asset Management
September 2013 – February 2017 (3 years 6 months)Singapore

Senior correspondent
Singapore Press Holdings
May 1992 – August 2013 (21 years 4 months)

 

[888888888888]

Port managers look at dividends as well. use it concurrently with other parameters. like eps growth calculations, obtain dividend payout ratio, expected share value at end of 3 years, forward PE assumption. have all the figures in a ratio tree. of course, understanding the biz and the mgt is of paramount importance.