Buy minimum 1000 lots?

One of my good friends learn to buy share by buying the minimum of 1000 lots. This trigger my thinking that, "Is it ok to buy the minimum of 1000 lots?".

Most trading agency charge minimum $25 per transaction. If you buy 1000 lots, the break-even minimum charge of $25 => $25/0.28% = $8,926. In other words, if you buy a share of price $8.926, they will charge you $25, same as the minimum charge.

Then what's the impact of charges over the total cost/invested amount? As shown below, if you buy 1000 lots of a share with price $0.5, you will be charge of $25.24, which is equal to 25.24/(500+ 25.24) = 4.8%. So, if you invest just $525.24, you loss 4.8% immediately. Similar with price $1 share. You invest $1,025.48, you loss 2.5% due to charges.

Conclusion: when the share price is small, try to buy more lots. Try to make sure every transaction cost at least $2,000 (e.g. 2,000 lots of share with price $1 or 1000 lots of share with price $2).

Stock call 26 Jul 2013

You may aware that many stocks are recovering from previous MAY'2013 adjustment. If you want to follow the strategies in my previous post(Investment Strategies, part 2), there are some potential good stocks that fulfill the conditions.

M1 is a bit late to catch, but breadtalk, starhub etc still not far away from the buying point.

Disclaimer (again?!) : I am not buying any of these as I finished my bullet. This is just a suggestion. Please exercise your judgement. You don't share with me your profit, so, it's unfair for me to share with your losses, right? :)

Singtel M1 Starhub

People always like to compare Singtel, Starhub and M1. They are the only 3 big players in Telecommunication market of Singapore. So, let's see how they perform using the method in the previous post.

Market Cap : 1 Singtel = 8 Starhub = 20 M1
Profitability : Singtel> M1 > Starhub
Earning Per Share (EPS) : Singtel > Starhub > M1

The "Cash flows from operating activities / Net income" of all 3 companies are more than 1; meaning they can make more money than Net Income. Good.

It's no fair to compare ROE% as the capital structure of these 3 companies are different. Starhub is extremely heavy on debts (40.6), Singtel(0.7) on equity while M1 is slightly more on debts (1.8)

So, which one more worth to invest? Well, financially there are not much different as these 3 are performing quite well, except the down trend of Margin% of M1. So, you may look for other areas, especially the qualitative side. For stability concern, Singtel is still the best as they don't have too much debts. If you aim for dividend yield, then you can look for dividend payout and time the market to get the yield you want(3.5% to 4.6% as at the price now).

For me, I won't go for any of these yet because limited capital I have now. The cheapest, M1, also cost $3,300 per lot now. But I would definitely buy some to diverse my portfolio risk. Telecommunication market is always presumed to be a stable industry.

https://www.dropbox.com/s/e5pd0nbinrq4krt/Singtel_M1_Starhub.xlsx

Stock tips

Go around various blogs and ask around stock tips never fail to annoy me. For me, whoever asking this is a "gambler". They don't know what they invest on, lazy to do homework, but want to take short-cut to make money. So, will you claim from the blogger if you lose $?

Ok, let's cool down and i analysed why we shouldn't hunt for stock tips:

(1) Smart bloggers / Guru always have "disclaimer" to protect themselves so they can say whatever they like, without holding responsibilities.

(2) There is always a lot of assumptions/conditions that they may not tell you. I can say you can make money when you buy Singtel share at S$1.80. But i may not tell you, this is the time when STI is 1600.

100 people has 100 different portfolios, different capital, different strategy at different time. They may have the time to hold but you may not.

(3) Asymmetric information. There are many investment companies with many stock analyser, while OCBC researcher may think Singtel worth $3.5, CIMB may think Singtel worth $2.80. There are so many ways to "calculate" the "true value" of a company. Think about it, if those "fortune teller" is so accurate, why they still need to work so hard for the company?

So, please wake up, there is no shortcut in live, so does investment. It is rather silly to just follow what people said. You are the one responsible for your hard earn money. Nevertheless, the only person that i willing to share my tips faithfully is my wife. Just because, her money is also my money..haha..

Dividend Yield vs Share Price

 As you known,

 

Assuming Dividend ($) is fixed. For 1% drop in Share Price ($),

 

So, for n% drop in Share Price, Dividend Yield (%) will increase 

For example, if dividend yield is 5%, assume dividend ($) is fixed, a 1% drop in share price will increase dividend yield of 0.05% . For a 7% drop in share price, the dividend yield will increase by 0.38%

As shown below, for a share to increase dividend yield from 5% to 6%, the share price need to fall more than 16%!