tag:blogger.com,1999:blog-28086856.post7435636805058737366..comments2024-03-20T01:42:13.273+08:00Comments on Eight percent per annum: Value investing in Singapore stocks: Scenario Analysis or Sensitivity AnalysisJayhttp://www.blogger.com/profile/03292158817395898619noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-28086856.post-55185034966402514412008-08-01T08:55:00.000+08:002008-08-01T08:55:00.000+08:00If you look at the inverse of PE which is earnings...If you look at the inverse of PE which is earnings yield, taking a higher PE means that the market is willing to pay for lower yield (20x = 5% yield only) of course, we are usually using just a 1yr or 2yr forward PE, which excludes LT growth.<BR/><BR/>But personally, I would not invest in stocks with PE more than 20x bcos it means that the stock has to grow tremendously in order to just validate its high PE.<BR/><BR/>It is much safer to buy a cheap PE stock that has got growth. That way when the growth does come true, it's an added bonus.Jayhttps://www.blogger.com/profile/03292158817395898619noreply@blogger.comtag:blogger.com,1999:blog-28086856.post-21860998344025555752007-02-12T01:28:00.000+08:002007-02-12T01:28:00.000+08:00Hi 8percentpa,Thanks for your analogy for the blue...Hi 8percentpa,<BR/><BR/>Thanks for your analogy for the blue sky and nightmare scenario. I understand what you are trying to say by using sensitivity analysis to forecast, but often times the future is murky and many companies are in danger of alling victim to "acts of god" which may wipe out a significant amount of their assets.<BR/><BR/>Thus, for P/E projections, I would say industry and risk analysis is necessary in order to achieve a fair rate of success. A business operating in an earthquake belt is obviously more vulnerable to disasters than one operating in a safer environment; thus we might attribute a lower P/E to the former a higher one to the latter even if they are in the same industry.<BR/><BR/>As for the SIA case, I would recommend taking an average P/E for the entire industry (airlines, in this case) and project it for SIA; but add a premium to the P/E as SIA is currently a market leader. This also goes for market laggards where the P/E should be discounted against the industry average.Anonymousnoreply@blogger.com