To be rich in Singapore, you either need to be a successful entrepreneur or a good investor.
Value investing is a valid strategy. You’ll put your money in a legit company that’s currently at a low point to take advantage of its rising stock prices once the company rebounds.
But let’s clarify some of the terms in the title, first.
Blue chip stocks are reputable corporations. These large companies have a long tradition and are well-established on the market. You can depend on their earnings because they’ve proven their financial capabilities. They are considered chips with the highest value. In Singapore, the blue chips are the largest listed companies in Singapore, on the Straits Times Index (STI).
But sometimes, things get rough.
During uncertain times, the most recent one being the COVID-19 pandemic, stocks can devalue. That’s how these stocks reach their 52-week lows. Luckily, chances are their companies will make a full turn-around based on previous experience.
Hold your horses, though.
Don’t make any investment without researching the company and its background. For example, Nokia was once a strong and powerful company and yet it has fallen from grace.
The STI comprises the most prominent organizations in the world that have a lot of stocks available on the market. You can find 700 companies listed on the STI. Select the Singapore category, though, and you’re left with thirty. Out of these thirty companies, ten comprise almost 70% of the index.
We’re talking about:
- DBS Group Holdings
- Oversea-Chinese Banking Corp
- United Overseas Bank (UOB)
- Singapore Telecommunications (Singtel)
- Jardine Matheson
- Keppel Corporation
- Ascendas Real Estate Investment Trust
- Thai Beverage
- Hongkong Land Holdings
So why trust the STI?
STI shows that these companies have increased their total returns by almost 15% since 2014 if we take into account both their dividends and capital gains. Besides, STI is under constant scrutiny. If one of these stocks doesn’t respect the criteria for STI inclusion, it’s replaced by a better one.
How can you use this knowledge?
Find the best 52-week low stocks.
How To Find The Best Blue Chip 52-Week Low Stocks
The first step is to visit the Straits Time Index (STI) and to select the Singapore category. Next, you should choose one of the best stock screeners to analyze these blue-chip companies.
Why should you do that, if these companies are part of STI?
The first reason is that no stock offers a 100% guaranteed win. Not even blue stocks, even though a lot of experts claim this to be true. So, you’ll still have to do a bit of research before investing in a specific company.
And secondly, you should only invest in companies with which you resonate. That way, you’ll be more motivated to manage your stocks well.
This whole process may seem tedious or intricate, but we’re here to lend a hand.
Look at the table below to get a better picture of these companies:
|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 Industrial||USD$39.22||USD$37.37||13.19||-||0.45||4.07|
|Hongkong Land||Real Estate Investment & Services||USD$3.87||USD$3.46||13.58||-||0.26||5.60|
Source: StocksCafe and SGX
Learning How To Evaluate And Cherry-Pick The Right Companies
The table above probably looks daunting, but it’s not as complex as it seems. Let’s clarify.
- The change from 52-week intraday low shows how much the stock prices vary from their 52-week lows.
- The price-to-earnings ratio shows you how many dollars you have to invest in a company to get a dollar back from their earnings.
- The price-to-book ratio is the ratio between a company’s market value, aka the share price multiplied by the number of outstanding shares, over its book value, aka the company’s net assets.
- The dividend yield represents the financial ratio of the cash dividends you’ll receive once you become a shareholder.
Knowing these terms, you might want to invest in the companies that have the lowest change from the 52-week intraday low.
You may reason that these companies sell their stocks at low prices and they’re on the STI, so they must be suitable investments.
But that’s not always the case.
And that’s why we advised you to do your research first.
For example, Keppel and Singtel seem like your best options. However, they didn’t get to this low point in their financial histories serendipitously. The market is constantly changing and it depends on the industry the company is in as well. With flights being postponed due to COVID-19, the oil industry has been greatly affected causing the largest drop in oil prices.
A simple Google search shows you that both companies’ net profits have been falling for the past few years. Keppel was all over the news when Temasek didn’t want to bid for it anymore because of its plummeting financial trajectory.
That’s why you should research the reasons for stock prices decline before you start bidding on anything.
Ask yourself this: can the company get back on track? If temporarily unfavourable market conditions caused its downfall, then yes. If poor management caused it, then no.