Wednesday, March 03, 2010

Some Opinions

Cheok,

Let me try to offer you some second opinion.

1. Impressive PER.

What does the PER ratio stands for? It stands for the current stock price compare to its earnings.

Having a LOW PER ratio, means that the stock is trading at a lower price compared to its earnings and when this happens we usually ask why? Why is this happening?

Two possibilities. (a) it could be a hidden gem (b) there's something about the stock/company/group the market do not like.


Anyway, as per my understanding, an impressive PER means nothing. Really. It's either a High PE or low PE.

2. Dividend Yield.

Of course, its nice but as per blog posting,
Investing In A Stock For Its Dividend Yields, many just do not point out the issue that the dividend paid per year is never a constant figure. Dividends paid could increase and it could decrease. Which means the equation in dividend yield is never a constant. It's a variable which changes.

Is going for HIGH Yield stocks a sure win strategy? Refer blog posting again.
Investing In A Stock For Its Dividend Yields

Anyone can show me an example where such a strategy works, but then in that blog posting, I have showed 2 clear examples where it could fail! Mind you those two stocks were once a favourite amongst the local investing community too!

3. A high debt company not trying to lower down the debt and just try to distribute $ to shareholders.

As long as the expansion of debt does not blow up in the company's face, for sure the company and its shareholders will enjoy such a policy. But logically, one can ask oneself a very sensible questions such as is such practice wise? Is it good company practice? Would the dividends paid be sustainable? And most importantly, when the company stops paying the dividends, what is the shareholder left with? (Is the answer a company with extremely high debts?)


Hope these second opinion helps. I have no idea if one can make money or lose money in such a stock. Sorry.

2 comments:

SS said...

You duk main tepi-tepi lubang everyday, so PER cannot use, Div Yield also cannot pakai, so how, my moo...moo... cow ?

Moolah said...

Did I say cannot use?

I can't help if you cannot understand simple English.