Poems - Fundamental Screening and Cyclical Investing
18Mar17
Utilising the POEMS fundamental Analysis Function on my laptop, I managed to churn out a list of stocks that has reasonably good fundamentals. My strategy is to go down the list and pick companies that are good. I will spend some time and effort to Refine my Valuation spreadsheet and make it more intuitive to use, and automate more of the manual processes via VBA and macros.
The first way to screen is by sectorial screening and trade along the business cycle. I can research on specific industries and make it within my circle of competence.
1) Full Recession - This is not a good time for businesses or the unemployed. GDP has been retracting, quarter-over-quarter; interest rates are falling; consumer expectations have bottomed; and the yield curve is normal.
Beginning - Focus on Cyclicals and transport,
Middle - Technology(NOW)
End - Industrials (NOW)
2) Early Recovery - This is when things start to pick up. Consumer expectations are rising; industrial production is growing; interest rates have bottomed; and the yield curve is beginning to get steeper
Beginning - Industrials (NOW)
Middle - Basic Materials(NOW)
End -Energy
3) Late recovery In this stage, interest rates can be rising rapidly, with a flattening yield curve; consumer expectations are beginning to decline; and industrial production is flat.
Beginning - Energy
Middle - Staples, FMCG, FnB
End - Services
4)Early Recession - things start to go bad for the overall economy. Consumer expectations are at their worst; industrial production is falling; interest rates are at their highest; and the yield curve is flat or even inverted
Beginning - Services, Financial
Middle - Utilities
End - Cyclicals and transports
US data is very favourable to the point that Janet Yellen is announcing the second federal hike, as what is expected from most investment analyst. With the signs of large trading partner getting better, and recovery of Singapore key data, I speculate that the business cycle is within the 2 phases I have bold.
http://www.tradingeconomics.com/united-states/indicators
http://www.tradingeconomics.com/singapore/indicators
With this in mind,
Firstly, I will look into 3 industries. Technology, industrials, basic materials
Technology -
Industrials -
Basic Materials -
Water
Secondly, I will shy away from SGX stocks whose industries utilise local water as a production input. If that business cannot successfully pass on the cost to consumers, its bottom line will be adversely impacted. FnB like Koufu that has stiff competition and high reliance on water in production inputs is no go. Water companies like HyFlux, PanAsia, Sound Global will enjoy positive prospects.
Thirdly, I might go into Low leveraged stocks as interest rates are expected to hike again. SIBOR is stale but I speculate high probability of it rising. I might go into Banking stocks, financial companies as well as April issues SSB. I have to wait until the next month for the economists at MAS to price in the interest rate hike and further expectations, before I decide it is a go / no go.
Fourthly, for companies that have united States as its major trading partners, I might take a Keen interest in them.
The second way to screen is to screen by the financial values.
Random companies I have evaluated.
i) SingPost. Price to fall lower before I buy in
ii) Thai Beverage. In progress>
iii) Hyflux . Go
iv) OCBC.
v) Ascendas REIT. Buy and hold
vi) Creative
vii) Singtel
viii) Dairy Farm
Utilising the POEMS fundamental Analysis Function on my laptop, I managed to churn out a list of stocks that has reasonably good fundamentals. My strategy is to go down the list and pick companies that are good. I will spend some time and effort to Refine my Valuation spreadsheet and make it more intuitive to use, and automate more of the manual processes via VBA and macros.
The first way to screen is by sectorial screening and trade along the business cycle. I can research on specific industries and make it within my circle of competence.
1) Full Recession - This is not a good time for businesses or the unemployed. GDP has been retracting, quarter-over-quarter; interest rates are falling; consumer expectations have bottomed; and the yield curve is normal.
Beginning - Focus on Cyclicals and transport,
Middle - Technology(NOW)
End - Industrials (NOW)
2) Early Recovery - This is when things start to pick up. Consumer expectations are rising; industrial production is growing; interest rates have bottomed; and the yield curve is beginning to get steeper
Beginning - Industrials (NOW)
Middle - Basic Materials(NOW)
End -Energy
3) Late recovery In this stage, interest rates can be rising rapidly, with a flattening yield curve; consumer expectations are beginning to decline; and industrial production is flat.
Beginning - Energy
Middle - Staples, FMCG, FnB
End - Services
4)Early Recession - things start to go bad for the overall economy. Consumer expectations are at their worst; industrial production is falling; interest rates are at their highest; and the yield curve is flat or even inverted
Beginning - Services, Financial
Middle - Utilities
End - Cyclicals and transports
US data is very favourable to the point that Janet Yellen is announcing the second federal hike, as what is expected from most investment analyst. With the signs of large trading partner getting better, and recovery of Singapore key data, I speculate that the business cycle is within the 2 phases I have bold.
http://www.tradingeconomics.com/united-states/indicators
http://www.tradingeconomics.com/singapore/indicators
With this in mind,
Firstly, I will look into 3 industries. Technology, industrials, basic materials
Technology -
Industrials -
Basic Materials -
Water
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Secondly, I will shy away from SGX stocks whose industries utilise local water as a production input. If that business cannot successfully pass on the cost to consumers, its bottom line will be adversely impacted. FnB like Koufu that has stiff competition and high reliance on water in production inputs is no go. Water companies like HyFlux, PanAsia, Sound Global will enjoy positive prospects.
Thirdly, I might go into Low leveraged stocks as interest rates are expected to hike again. SIBOR is stale but I speculate high probability of it rising. I might go into Banking stocks, financial companies as well as April issues SSB. I have to wait until the next month for the economists at MAS to price in the interest rate hike and further expectations, before I decide it is a go / no go.
Fourthly, for companies that have united States as its major trading partners, I might take a Keen interest in them.
The second way to screen is to screen by the financial values.
Random companies I have evaluated.
i) SingPost. Price to fall lower before I buy in
ii) Thai Beverage. In progress>
iii) Hyflux . Go
iv) OCBC.
v) Ascendas REIT. Buy and hold
vi) Creative
vii) Singtel
viii) Dairy Farm
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