Magic formula screen for Singapore stocks

Magic formula investing was derived by Joel Greenblatt, he used it to buy a basket of stocks that has high earning yields and a high return on capital. 

Wikipedia has documented the approach and the formula, you can find the link here. Below is the extraction of the para from the link.

The Formula

1. Establish a minimum market capitalization (usually greater than $50 million).
2. Exclude utility and financial stocks.
3. Exclude foreign companies (American Depositary Receipts).
4. Determine company's earnings yield = EBIT / enterprise value.
5. Determine company's return on capital = EBIT / (net fixed assets + working capital).
6. Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).
7. Invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period.
8. Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
9. Continue over a long-term (5–10+ year) period.

The Results

Applying the formula on the Singapore stocks, this is what we have. Some of these will definitely be in my watchlist, and let's visit again to see how they perform.

Do you have any of these in your portfolio?

	EY	Rank	ROC	Rank	Score
Rotary Engg	367	1	16	12	13
chew group	26	6	20	8	14
challenger	17	13	31	3	16
UMS	13	17	28	4	21
Ellipsiz	29	4	13	17	21
CSE global	19	11	17	11	22
TaiSin	17	14	20	9	23
Nam Lee	29	5	13	18	23
800 super	13	18	24	7	25
Hai Leck	49	2	11	25	27
straco	11	23	27	5	28
keong hong	17	15	16	13	28
new toyo	22	9	13	19	28
isdn	25	7	12	21	28
Starhub	7	29	239	1	30
singpost	8	28	73	2	30
sinwa	20	10	13	20	30
yangzijiang	23	8	12	22	30
Chemical Industry	32	3	10	28	31
QAF	11	24	19	10	34
Vicplas	13	19	14	16	35
hourglass	12	22	16	14	36
SATS	5	31	27	6	37
Venture	8	26	16	15	41
Wee Hur	19	12	8	30	42
Kingsmencreative	13	20	11	26	46
Cortina	9	25	12	23	48
Lum Chang	13	21	11	27	48
Hock Lian Seng	15	16	3	32	48
uol	4	32	12	24	56
gl	8	27	8	31	58
GP Industries	6	30	10	29	59

My friends bought iphone7 but I bought stocks this week

Apple has just recently launched iphone7, and few of my colleagues were very excited about it. They started monitoring the launched date from their respective Telcos, and finally they managed to book their gadget, and collected yesterday.

On the other hand, I was not as excited as them, not sure if I am the only one. However, the past weeks, the market has been volatile due to the next Fed meeting. I was actually more excited about market behaving irrationally than iphone7. Instead of using the payout from Sim Lian to buy iphone7, I reinvested it back into the market.

What did I buy from Mr Market.

I initiated a small position in KingsmenCreative, giving me a 4% dividend yield, PE and PB is relatively low, This counter has corrected from a high since last May, it is consolidating now, and no one knows if it will correct further.

This counter has defied all the negative news about interest rate increase, surplus of office supply and dwindling demand, and yet continued to move up in price. I first noticed this in 2014, but I sold off too early that year. Last August, it presented another buying opportunity and I took a position on the counter, and again June this year. This week, I initiated another small position to average up. Yes, for individual stock, I average up, not down, cause I dont know how low it will go. It is better to ride on strength than drown on weakness. But this is just my style.

How about you, did you manage to find anything attractive now?

The post above is not a recommendation to trade, disclaimer applies.

Related post
How to pick the leader in Reits

How did my HSBC performed after BRExit

Weeks before the BRExit polling day, there were many news on the probability of Britain leaving EU, and how this will have impact on it's economy if it happens(now we already know the polling results). There were many gloomy news, and sentiments were not good. After seeing how the large US banks are still around today and survived the Great Financial Crisis, I kind of like bank, and they are top of my list for any gloom and doom situation. I did a search looking for the largest bank in UK, and found that HSBC to be one of them.
Below is HSBC 10 year chart extracted using google, do you get excited when you see this kind of chart.

And comparing with the other large bank(Barclays) in Britain, below are their ratios, and they certainly don't look high.

Source : fool.co.uk

Before I initiated to buy, I asked around, and most of my friends/colleagues are familiar with HSBC than Barclays. Most of them at some point in their life were having credit cards issued by HSBC, and also they had seen before their banking branches around the island.
Last check, I am already up 18%(not forgetting the dividend that I will be getting), one of my star player for now.

How about you, were you brave enough?

What did we learnt from the last Fed Interest rate increase

On 16 Dec last year, Fed raised the interest rate, and lately, many of the financial news are also talking and speculating about when the next increase will be. Let's look at what happened to some of the counters when the interest rate was increase last year, hopefully, this can help us to navigate for the next one.

The first column is the counter price after the announcement of the hike, and the next column is the lowest point of the counter price the few months after. Despite what many analysts have said about banks are the ones to benefit from the rates increase, they have also corrected, just like the other counters.
How will the next one be different from this ... I wonder.

What to do with the conditional cash offer for my Sim Lian?

Sim Lian has offered at $1.08 to exit and will be delist from the exchange, and I have accepted the offer. What am I suppose to do, as a minority minority shareholder, it seems that we do not have much a choice. This is a stock with good dividend and discount to it's NAV, for most of the investors, it would be nice to keep it as a long term investment, enjoying it's dividend and as well as it's capital gains. Yes, on it's offer, this counter has given me a 25% capital gain from my initial buy price.

Why did I buy Sim Lian

1. I noticed that the major shareholders, including it's founders were buying their own shares. If the owners have confidence in their own company, we should pay attention.
2. Good dividend, my original intend was to buy and collect it's dividends.
3. A bonus came along the way, for some reason, the share price also appreciate slowly over time.

How should I use the cash offer

Below are few of the shares either new or existing (which I will top up), which are on my radar now.

1. OCBC bank - I have mentioned this counter in one of my earlier post, most of the reasons there are still valid.
2. GL - this counter is largely unloved due to property sentiment
3. CSE Global - this counter is also largely unloved due to the current state of oil and gas industry.
4. UOL - this counter is largely unloved due to the current property sentiment. 

I might post my opinion on the above counters in the next posts, above is not recommendations, please do your own homework.

Related posts:

What are you doing with your OCBC rights
Singapore banks - The world's strongest banks
My strategy and lesson learnt