Monday, April 20, 2009

Stock Selection ~ compare, compare, compare...

Dear Ringgityen,

As we know when come to selecting which stock to invest, one thing that we need to do, is comparing one stock with another. Why stock A, and why not stock B or stock C ? One obvious answer is because stock A appears more actractive COMPARE with stock B or C.

B and C may have a very good earning, very high net cash, and no debt ..... but COMPARING to stock A which have BETTER earning, HIGHER net cash and no debt, will make stock A more Attractive.

Another situtation could be the price comparison.
B & C might have a better or higher earning and net assets .... but their current trading price is too HIGH compare to price of stock A, and this will make stock A more Attractive again.

And as you raise it, the short history of earning (eg. newly listed stock or less than 5 years), will make the future projection of its earning more difficult and usually resulted in higher probability of error. So, to avoid wasting my time analysing something which will resulted in high probability of error projection, I will just skip this newly listed or young stock.

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