How To Pick A Stock? ● 陈和兴 By Tan Hoe Heng How do you decide whether to buy the stock of company A or company B? Or be-tween investing your money in Singapore or Malaysia? The two commonly used approaches for such decisions are Technical Analysis and Fundamental Analysis. This article will introduce you to both approaches and their principles. When technical analysis is mentioned, people often think of analysts plotting price movements of stocks, drawing lines to find trends, support or resistance. Technical analysis is the art of deducing probable future trend from historical records of stock trading. It is the study of the stock market itself rather than the external factors that influence the market. The most familiar indicators used are the price and volume of a stock. Advocates of technical analysis believe that information is not immediately reflected in the market prices of stocks. For example, when a piece of good news about a company is available, it is not immediately known to everyone but is slowly passed from one person to another. This process takes time and an upward price trend develops for that company as more and more people hear the good news and want to buy the stock and fewer and fewer people are willing to sell the stock. The stock price which has started to move in an uptrend will continue to do so until something happens to change the supply-demand balance. For the technical analyst, he does not need to know what the good news or any other information that is affecting the stock price is; the chart will tell him whether the stock price is going to move up or down. He does not need to know the fundamentals of the company because if the price is going up, the fundamentals must be improving. On the other hand, fundamental analysis examines all relevant factors affecting the stock price in order to determine an intrinsic value for that stock. If the market price is below the intrinsic value, then the stock is undervalued and should be bought. The factors to consider include balance sheet items, corporate management, business prospects and earnings outlook. The fundamental analyst calculates financial ratios based on data available from the balance sheet and income statement of a company. From these ratios, he deduces the financial strength and earnings trend of the company. Then he will meet the company's management to affirm his deductions, to understand the business and to learn of any new development of the company and the industry. A widely used tool in fundamental analysis is the price-earnings ratio or PE ratio. It is calculated using the stock price divided by the earnings per share (EPS) of a company. As a general rule, a stock with a low PE ratio is considered cheap although there are difficulties in applying this principle. PE ratios of two companies can only be compared if the companies are similar. It is believed that companies in different industries deserve different PE ratios. For example, Singapore Telecom is believed to deserve a higher PE ratio than many other stocks because of its position in the telecommunication business. However, analysts have not yet agreed on what PE ratio each industry or company deserves and there is no one way to determine the right PE ratio. Both approaches attempt to predict the future price movement of a stock. Fundamentalists study the cause of market movement while technicians believe that the effect is all that they need to know. Despite their differences, both approaches try to increase your probability of picking up the right stock at a right price. However, these methods only increase your chances but do not guarantee complete success. Some believe that fundamental analysis is good for picking the right stock while technical analysis is appropriate to decide the right price or time to buy. For the professional investor, he has to take another step of deciding the sequence of analysis. This will have an impact on how the investor divides his money among different countries and stocks. Basically, the investor decides whether the market as a whole or the company itself is more important in determining stock prices. Both factors definitely influence stock prices but the degree of influence is the issue. The top-down approach or sometimes known as the Economy-Industry-Company (EIC) model emphasises the market over the company. It starts with the analysis of different economies to determine which country could offer the investor better returns. In the selected economy, it searches for industries that provide better prospects and it picks the best companies within these industries. The top-down approach offers a systematic and structured way to analyse stocks. It advocates that the economy and industry effects are significant factors in determining the total return for stocks. The bottom-up or stock picking approach believes in finding stocks that are undervalued which can provide superior returns irrespective of the market and industry factors. The company effect is the dominant factor in determining stock return. There is no overwhelming evidence to suggest which approach offers superior returns to the investors. The most important thing is that an investor is comfortable with a particular method, understands its strengths and limitations, experiments with it, finds that it works for him and abides by the method. (The writer is Investment Manager of Tat Lee Asset Management Limited. This column has the support of Investment Management Association of Singapore and the Stock Exchange of Singapore.) 如何选择股票? 应买A公司照旧B公司的股票？该把钱投资于新加坡照旧马来西亚 ？本文将介绍两个常用来解答问题的要领：技术阐明和根本阐明。 一提起技术阐明，人们就会想到股票阐明员画股价走势图找支持 线和阻力线。根基上，这个方法是按照已往的记录预测未来表示。换 句话说，技术阐明研究股市自己，不是影响它的外在因素；而股价和 成交量是它最常用的数据。 技术阐明的支持者认为，影响股价的动静没有当即反应在股价上 。举例说，一家公司的好动静并不是每小我私家都同时知道的，而是从一 人传到另一个，整个历程需要一段时间。越来越多人知道这好动静后 会买进，而越来越少人愿意卖掉，这么一来使股价逐步升高。股价会 因此继续上升直到供给与需求的平衡呈现变革。 但对技术阐明员来说，他并不需要知道那好动静是什么，走势图 将汇报他股价会起照旧落。他也不需知道公司的根本因素，对他来说 ，根本会跟着股价上升而改进。他们相信历史会重演，可从已往的股 价走势猜测它将来的表示。 另一方面，根本阐明则研究所有可能影响股价的因素，以确定股 票的实际价值。如果市价低过实值，就值得买进。根本阐明员研究资 产与欠债表的项目、企业打点层、业务展望和盈利潜能，再按照资产 与欠债表和损益表提供的数据计算而得的比例，判断这家公司的财力 和盈利趋势。阐明员也会与公司的打点层碰面，现代职业教育杂志社，了解它的业务以及有 关公司和行业的最新成长。 本益比是根本阐明中最常用的比例，计算方法是股价除每股盈利 。一般上，低本益比暗示股票自制。 不外，这个准则有时不太好用。两家公司从事沟通的业务，才气 够比力它们的本益比；差异行业的公司，本益比凡是是纷歧样的。举 例说，以新电信在电信业的职位，它的本益比会较其他公司高。 对付每个行业的本益比应是几多，阐明员们到目前为止还没有定 论，并且也没有计算正确本益比的方法。 技术阐明和根本阐明都实验预测股价此后的走势。它们的做法虽 然纷歧样，但都尽可能辅佐投资者以符合的价格买入有增值潜能的股 票。不外，它们都只能提高可能性，而不能担保。有些人认为，根本 阐明较适适用于选择股票，而技术阐明则合用于决定买入的机会和价 格。 对专业投资者来说，他们还必需决定阐明的步调。这将影响投资 者把资金分派于差异市场和股票的决定。根基上，他们决定市场的整 体走势照旧公司自己对股价的影响比力大。这两个因素城市影响股价 ，但水平可能差异。 从上至下的要领偏重于整体市场。它首先决定哪个市场能带来较 高的回报，然后再选择具投资展望的行业和属于这一行的公司。这是 个系统化的股票阐明方法，认为经济和行业是决定股票回报的重要因 素。 而从下至上的选择股票方法，无视市场和行业因素，重点是选择 市值低于估值的股票，认为公司自己是决定回报的最重要因素。 哪个方法能带来较高的回报，并没任何研究证明。最重要的是投 资者分明所选择方法的优缺点，并实验使用。 （作者是达利资金打点公司的投资经理。本栏是新加坡股票交易 所和新加坡投资打点协会联办的公家教育打算。）
