We’ve probably seen countless articles, or social media posts educating us on the importance of investing. However, with so many forms of investments (think bonds, stocks, exchange-traded funds, options, etc.), where does one start?
If you’ve dabbled in investments, you’ll know about value investing. According to this strategy, you invest in an otherwise healthy organisation that’s on a downward slope. When the company recovers, you’ll reap the benefits of increased stock prices.
That brings us to blue-chip stocks, 52-week lows, STI, and other complicated terms. So, what exactly do all these terms mean?
Blue-chip stocks represent big, trustworthy companies. However, even huge companies are not spared. With the ongoing COVID-19 pandemic, lots of companies saw their stock prices fall because of lockdown and restrictions. This includes shares of the Singapore Airlines which fell to their lowest in 21 years.
So, these downward slopes cause 52-week lows, which define the lowest stock prices during the past year. However, according to these companies’ past evolution, you can be pretty sure they’ll rebound at some point.
But before you invest in any company with low stock prices, you’ll have to consult the Straits Times Index (STI). The STI consists of the top worldwide companies with plenty of stocks to share. If you’re only interested in Singapore, select this specific category, and you’ll see thirty listed companies.
Ten of those companies add up to just a little below 70%.
According to STI, these organisations saw a total increase in their returns of about 15% between now and 2014. Their returns include capital gains as well as dividends. Another question some might ask is why is the STI trustworthy?
This is because it continually checks its companies. A company that stops corresponding to the official criteria is removed from the listing.
Now, it’s time to put this knowledge into fair use.
How To Find The Best Blue Chip 52-Week Low Stocks
The first step will be to go to the STI website. Next, use a stock screener to analyse your chosen blue-chip company further.
But, if STI is trustworthy, why should you use a stock screener?
Firstly, remember that even trustworthy stocks aren’t 100% sure. That’s why you should vet the company before you invest in it. More importantly, remember never to invest money you’re not willing to lose.
Secondly, it’s best to buy stocks from companies you like. Otherwise, your ill-will towards a company can push you towards unsound financial decisions.
Let’s see if we can help.
We comprised this comprehensive table where you can find data on all ten companies that STI lists.
In the next section, we’ll tell you what to look for.
|Name||Sector||Last Close||52-Week Intraday Low||Change from 52-Week Intraday Low (%||Price-to-Earnings Ratio||Price-to-Book Ratio||Dividend Yield (%)|
|Keppel Corp||Oil Equipment Services & Distribution||S$4.61||S$4.59||0.44||-||0.81||3.25|
|CapitaLand||Real Estate Investment & Services||S$2.79||S$2.56||8.98||10.6||0.58||4.30|
|UOL||Development and Investment||S$6.59||S$6.01||9.65||43.1||0.55||2.66|
|Jardine Matheson Holdings||General Industrials||US$42.3||US$37.37||13.19||-||0.45||4.07|
|Hongkong Land||Real Estate Investment & Services||US$3.93||US$3.46||13.58||-||0.26||5.60|
Learning How To Evaluate And Cherry-Pick The Right Companies
If you understand the columns, you’ll understand how to choose the right blue-chip company for your needs.
So, here are what the terms in the table mean:
- The chance from 52-week intraday low defines the difference between actual stock prices and lowest price in 52 weeks.
- The price-to-earnings ratio is the ratio between your investment and your profit.
- The dividend yield tells you how much cash dividends you’ll get depending on the market value per share. You get this value if you divide the dividend per share by the market price per share, then multiply that by 100.
After reading through these definitions, you might figure that your best bet is investing companies with the lowest change from the 52-week intraday low. Theoretically, that’s sound reasoning because the stock prices are low and STI lists these companies.
Hold your horses, though.
Here’s where thorough research comes in.
Low prices are essential, but they’re not everything. How companies got on a downward slope is equally crucial.
For instance, Keppel, one of the companies with the lowest 52-week intraday low, has shown defective management over the years. In fact, its decreasing net profits even stopped Temasek from bidding for it. Singtel is another good example here because it’s also been losing momentum before the pandemic.
Therefore, before investing in any blue-chip stocks, ask yourself the million-dollar question: “Am I reasonably sure that this company can rebound from its lowest point?“
The answer is yes only if its low stock prices are caused by external market conditions that temporarily modify the demand / offer ratio. Sometimes, these external conditions lead to a complete reshaping of the market so that a few companies cannot recover.
Like all things, investments come with a said amount of risk. It always pays to do your own proper research before you start on a relatively high risk activity. You’ll need some insight and intuition into changing market patterns to make your best decision.