confused142WHAT STOCKS to invest in in 2014?

A series of our articles in 2013 highlighted stock picks at the start of each of the four quarters of the year.

Amazingly, in aggregate, the stocks gained 51% in 2013. See: Wow! NextInsight Readers' Picks Gained 51% In 2013!

Now we present a list of 50 stocks -- but these were chosen using strictly different criteria from before.

The criteria were low PE, low price/book and dividend-paying. We used Bloomberg to coldly sort these stocks and we made no judgement on whether any of the stocks should be booted out for whatever reason.

The list is presented in a table below.

Why the 3 criteria? To begin with, each of these is sound and well-accepted criterion for stock hunting.  

contrarian_bookThe strategy was championed by David Dreman in his best-selling book, Contrarian Investment Strategies, published in 1980.

"I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low PE, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time." – David Dreman

The strategy happens also to be the stock-picking approach of some fund managers including start-up Aggregate Asset Management in Singapore.

Since inception, the NAV of the Aggregate Value Fund has steadily appreciated by 12.6% over the past year (14 Dec 2012 to 30 Nov 2013), outperforming the MSCI AC Asia Ex Japan and the STI.

Why Investors Like Dividends

Investors like dividends for regular income and love dividend paying stocks even more if they also have the potential for share price appreciation.

When investing in small- to mid-cap stocks, regular dividends are also a signal from companies that their operational profits are real.

Dividends give some assurance that investors are not misled by reports of strong historical or projected earnings growth because of aggressive accounting practices rather than good business outlook.

Large cap companies, on the other hand, are more likely to pay dividends as these are mature companies with stable cash flow from operations.

When the company or industry is at a mature stage of its life cycle, reinvesting profits to expand the business is unlikely to result in significant earnings growth.

This means there is limited upside to the share price and shareholders are better off if the profits are distributed as dividends.

(However, mature companies in highly capital intensive sectors, such as property developers, usually do not pay dividends as they need the cash for working capital.)

Out-of-Favor Stocks

There are stocks with good growth potential and strong business fundamentals but have low PE because of some perception stigma, such as uncertainty in earnings visibility, or high risk (S-chip discount).

Market developments can correct the factors contributing to the market perception stigma.

What the contrarian investor needs to do is to decide for himself the likelihood that a stock can rid itself of this stigma and wait for the market correction on its stock price.

Using Bloomberg data, we short-listed 50 dividend paying stocks with the lowest PE trading on SGX.  We have also eliminated stocks trading above book value.

Over the next 4 quarters, we will be presenting updates on how this list of 50 performs.  

 

 

Company Name

P/E

P/B

Div Yld %

Market Cap (S$m)

Stock price (SG cts)

CHINASING INVESTMENT

0.7

0.1

2.9

4.8

4

FnN_logo
FRASER AND NEAVE

1.6

1.0

2.8

8,622.5

350

ABR HOLDINGS

1.9

1.0

1.6

152.8

76

WEE HUR

2.2

1.5

6.1

300.7

33

SHANGHAI TURBO

2.4

0.5

6.1

25.0

9.1

FUJIAN ZHENYUN PLASTICS

2.6

0.1

3.5

17.9

15.6

Heeton_logo

3.1

0.6

2.0

169.2

63

WING TAI HLDGS

3.2

0.5

1.5

1,556.5

198

TUAN SING HLDGS

3.2

0.5

1.5

346.0

29.5

LION TECK CHIANG

3.3

0.5

2.1

120.5

77

CHEUNG WOH TECH

3.5

0.5

0.3

40.8

13.5

CHINA MINZHONG

3.7

0.6

1.0

573.5

87.5

ELLIPSIZ

3.8

0.4

2.5

46.4

8.4

SING HOLDINGS

3.8

0.7

2.4

164.4

41

LUM CHANG

3.9

0.7

5.9

124.9

33.5

SUNPOWER_LOGO

3.9

0.4

0.8

46.1

14

TRIYARDS

4.1

1.0

3.2

194.7

66

RICKMERS MARITIME

4.2

0.4

8.4

241.5

28.5

FUNG CHOI MEDIA

4.2

0.2

1.5

76.1

10.5

INNOVALUES

4.2

0.8

14.8

47.5

14.8

KSH HOLDINGS

4.3

1.0

5.3

198.9

47.5

Hiap_Hoe_logo

4.4

1.0

1.6

383.1

81

VALUETRONICS

4.4

0.8

6.2

89.5

24.5

UOL GROUP

4.4

0.7

2.5

4,710.1

611

TA CORP

4.5

0.9

3.3

176.7

38

ENGRO CORP

4.5

0.6

3.4

120.7

102

CHINA FISHERY

4.6

0.5

2.3

777.6

38

DEVOTION ENERGY

4.8

0.8

6.2

37.5

18.8

SIM LIAN GROUP

5.0

0.9

5.1

799.7

79.5

FRASERS CENTREPOINT

5.0

1.0

5.9

1,439.1

174.5

PAC ANDES RESOURCES

5.0

0.4

2.3

637.2

13.3

CAMBRIDGE REIT

5.2

1.0

7.1

842.8

68

HONG FOK CORP

5.2

0.4

1.0

546.1

69

CHINA MERCHANTS

5.2

0.8

7.2

664.3

92.5

FRASERS COMMERCIAL

5.2

0.8

6.2

855.6

128

SHC CAPITAL ASIA

5.3

1.0

1.8

48.0

15.8

LIPPO MALLS

5.6

0.9

6.0

969.1

39.5


ASL MARINEASL_LOGO

 

5.6

0.6

3.3

265.9

63


HockLianSeng_logo
 HOCK LIAN SENG

5.7

1.0

7.2

132.6

26

TAT SENG PACKAGING

5.7

0.6

4.5

43.2

27.5

CHIP ENG SENG

5.8

1.0

6.7

454.3

69.5

MARCO POLO MARINE

6.0

0.8

2.1

131.2

38.5

UNION STEEL

6.0

0.6

2.6

42.5

10.8

TAI SIN ELECTRIC

6.0

1.0

8.7

135.9

31

KEPPEL LAND

6.1

0.8

3.0

5,209.7

337

CAPITARETAIL

6.2

0.9

5.8

1,076.1

134

Tiongseng_logo

6.3

0.7

4.5

188.4

20.5

HIAP TONG CORP

6.5

0.5

5.9

37.9

12.3

SINARMAS LAND

6.5

1.0

1.2

1,444.9

47.5

VICPLAS

6.6

0.7

8.2

36.6

7.9

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Comments  

#4 Verbatin K 2014-01-18 22:28
why is Sinarmas in the list? P/B is 1X (no discount) and dividend yield is low at 1.2%. this hardly fit the criteria?
#3 Gene Oei 2014-01-01 23:10
ABR holdings has an extraordinary item in its TTM earnings. Excluding that, the PE is ~18x. Good list but do your homework.
-2 #2 Diversity 2014-01-01 15:54
Bloomberg has not eliminated exceptional gains. The 1.6 PER for F&N is misleading.
#1 Mark Lee 2014-01-01 11:11
Mostly property stocks. 2014 is another year that property stocks will underperform the market due to rising interest rates. Buyers beware.

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Counter NameLastChange
AEM Holdings2.480-0.020
Best World2.4700.020
Boustead Singapore0.955-0.005
Broadway Ind0.1390.012
China Aviation Oil (S)0.9500.010
China Sunsine0.410-
ComfortDelGro1.480-
Delfi Limited0.9250.005
Food Empire1.360-
Fortress Minerals0.320-
Geo Energy Res0.325-0.010
Hong Leong Finance2.490-
Hongkong Land (USD)2.990-0.050
InnoTek0.5350.025
ISDN Holdings0.3100.005
ISOTeam0.0410.001
IX Biopharma0.052-
KSH Holdings0.250-
Leader Env0.049-0.001
Ley Choon0.044-0.001
Marco Polo Marine0.0690.003
Mermaid Maritime0.1470.010
Nordic Group0.365-
Oxley Holdings0.090-
REX International0.1460.002
Riverstone0.760-0.010
Southern Alliance Mining0.485-
Straco Corp.0.4950.005
Sunpower Group0.220-
The Trendlines0.070-0.002
Totm Technologies0.025-
Uni-Asia Group0.820-
Wilmar Intl3.5400.010
Yangzijiang Shipbldg1.770-0.050
 

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