What price to buy Macdonald and Proter and Gamble?

PG has a free cash flow of $12 B and cash of $13 B and long term debt of $38 B. The current price is $104 and market cap is $258 B. Only if the share price falls to 1/4 of the current price, that is $25, can it be a very good buy. Because the market cap will be $60 B and the free cash flow is 1/5 of the share price.

MCD has a market cap of $124B and a share price of $167. Free cash flow is only $5 B and the cash is $1B and it has a long term debt of $52B. Only if the market cap falls to $20B can it be a good buy. Wow, that will means its share price will drop to $30.

Wow, will this materialise? I do not know, but if it does not, the share price will likely see-saw for the next 10 years until it increased its cash flow.

US stocks are not a good place to put our money in. Where to put our funds?

Bonds. Interest rate are at a record low now. If there is a bank or big company default on its debt, interest rate will shoot right up and then bond prices will collapses, if I am not wrong.

Options and futures are too dangerous even for the professional investors.

Foreign currencies are also not safe.

If you have $1 Billion to invest, where will you put your funds into?

Fixed deposit?  I really has no idea. Maybe after my dream I know where to invest the funds.

US stocks and Sg stocks

I think it is a Long Long way to the bottom of the stock market (2-3 years) as many US companies like MacDonald, 3M, Johnson and Johnson, Coco-cola and Apple have poor balance sheet. What do I mean by this?

For example, Macdonald has a market cap US$110B, PE of 18 and a dividend of $5 for a share price of $148, giving it a dividend yield of 3%. Furthermore 0.12% of the shares are owned by insiders and 68% by institutions. These are bad signs. To top it off, analysts are recommending people to buy at a score of 2.1 (1- strong buy -5 sell). Over the years, cash has reduced from $2.5B to $0.8B and long term debt has increased from $29B to $34B.

Is this a one-off story of a great company falling from grace? No. Because stocks like coco-cola and Johnson and Johnson paint a similar story. I was shocked to learn of this fact. Could Warren Buffet be wrong on coco-cola stock or is Peter Lynch wrong on this analysis? I guess Peter Lynch is right and Warren could be right because he bought the shares at a low price so it does not hurt him if the share price falls. Even the stock like Apple has a Long term liabilities of $114 B and cash of $67 B. In Singapore there are a large number of shares whereby the cash per share is more than the share price and the balance sheet is much stronger and the dividend yield is 5%-8%. US stocks usually has less cash than Long term debt. This is a horrible position to be in now.

Moreover, the interest rate is now dancing near zero. There is nowhere to go but up only. At this point in time, people are not talking about the US banks health. Rather, they are more concerned about the health crisis of the COvid-19 virus. It is a matter of time, there will be a credit crisis and then companies will start going belly up and waves of debts defaulting will impact the banks. Perhaps Fifth third bank and Huntington banks will go to 50 cents in this once in a lifetime opportunity. Maybe I am dreaming.

Anyway, even if this crisis is not here, US companies are highly overvalued and Singapore stocks are undervalued. The tables could be turned onced the tide has turned. Let us see what will happen next. I will choose to be with the financially strong rather than with the weak.

Many thoughts

Hi there,

Welcome back to my blog again after a long break. I have thousands of thoughts in my mind. Acutally, my emotions and thoughts are mixed up as i wrote this blog. The reason why i am writing this blog is because i need a place to sort, organise and crystallise my thoughts on life and investment.

Yesterday, i looked through some stocks like FITB and HBAN and they trade at US$30 and U$15 and no insiders has bought them recently. Stocks like Dairy Farm and Hong Kong Land trade at US$5 and the balance sheet has worsened since the past 5 years because of huge debt and less cash. It is definitely a no buy. For stocks like A-Sonic, it went up from 22 cents to 53 cents due to good dividend and the cash pile is 33 cents per share. Alas, I did not buy this stock because I did not think well of the stock because of its low profit growth and prospects. Well, every stock has its day. I really should kick myself for not buying this because I spotted this stock in september 2019 and say it is a good buy but i did not act on my analysis. Aiyo.

Well, we got to find another stock like A-Sonic. Our goal now is to turn our investment into $700,000.

Children clinic

I saw two well-dolled up mothers at a recent visit to a baby/children clinic. Some of the things that I noticed about them are:

For the first lady:
1) Her face has make-up with mascara
2) She carried a Prada bag
3) Her fingernails are well-done up with shiny paint
4) She seemed to be in her twenties and her hubby is in his 30s-40s.

For the second lady:

1) Her face is also well-make up
2) She wears a white translucent T-shirt that shows her bra colour
3) Her legs have wounds or bruises from injuries(maybe from riding motorbike)
4) She has a maid

These observations point to extravagance. I wonder how much their respective husband is spending on her handbag, her fingernails and the maid etc... What is their top priority? Is it the children, handbag, fingernail, make-up or fun?

Children – a lifetime of liabilities or Assets?

A recent incident at a playground reminded me that children can be an asset or liability. This is what happens:

About a month ago, my 2-year-old son and I met two friendly and caring children, 7-11 years old (oversea Indian based on their accent). We were at a fitness corner for adults and these two Indian children came along and asked me how old is my son and what his name is. They even cautioned my son to be careful when using this fitness equipment. I was very impressed with their upbringing and friendliness. I thought these two Indian children will go far with this attitude in life. Their parents did bring them up well.

About a week ago, at the same fitness corner, my son and I met two unfriendly and malicious children, 4-5 years old (Chinese). What happened was this: first, they glared at us, then they insulted us with words like “baby goes home”, and even wanted to throw water at us. I suspect, they would have thrown water if I was not there. Next, one of them wanted to sit on a fitness station that my son was using. As my son refused to get up, he even shows a kicking action. (I suspect he would kick my son if I was not there). I intervened by shouting “wait!” Lastly, a black girl about age 4-5 years old came along. She climbed up the fitness station with her bare hands, and the 2 malicious children upon seeing this, tried to make her fall down by hitting her hands or feet. Thankfully, she held on. Once again, she was insulted by the two children with words like “baby go home”. The black girl had enough of this insults and pointed and shouted back at the rude boy. The boy pointed and shouted back at the black girl. Luckily, the girl’s mother called her back. I am sure the mum saw the quarrel but she chose to ask her to leave. I am disgusted of this two boy’s attitude and their malice. The girl, I am impressed with her mum. She chose to let it go and get her child to focus on something else.

Well, children can be an asset or liability. It all depends on their parents’ upbringing. Recently, we heard that there is a stabbing incident at Orchard Cineleisure. Will these two malicious boys be one of the fatalities in future? I am worried for them in future. Will they become a liability or asset of their parent, family and our country?

Opportunities many missed

In life, we will come across many opportunities we ignore, neglect or do not know, till it is too late.

For my friend, Mr Weak, he does meet opportunities like a good girl, a good job in a rising industry etc… but he chose to drive them away. For the girl, she helped him to mend his clothes, which is a rare feat in Singapore today. He chose to drive her away by bringing a china girlfriend home. He has a good job in a shipping industry in year 2003. At that time, shipping is slowly turning around. Too bad, my friend did not stay around to enjoy the fruits.

I can go on to talk about many others I know, but I leave it to you to look at your own friends and your own experience. In life, treasure the opportunities that we come across daily for we may never stumble upon it again.

Is it worth it?

In Singapore, we see huge price difference in houses, cars, food, etc… Undiscerning investors or buyers are paying for features or things that they may not need but yet they paid.

Today, let us take a look at cooked food. At the lowest end, we have the humble mixed vegetable stall at coffeeshop selling at $3.20 - $3.50 for a meat and 2 vegetable plus rice. Chicken rice is sold at $3.50 too. In a hotel, similar chicken rice or mixed rice will cost $10 and above. Is it worth paying 3 times more for a similar dish with better taste, service and good ambience? Personally, I don’t think it is worth it. The coffeeshop mixed rice is not too bad after all. Many men will go if the hotel staff is a pretty woman. Well, I chose not to.

In laptops, computers, we see this situation as well. The lowest end laptop cost $500 at a sale. The highest end that is super thin cost $2,000 onwards. This is 4 times more in price for slight improvement in performance and weight.

Car prices fluctuate greatly due to the COE prices. 3 years ago, it may cost $60,000 for a brand new Toyota. The new BMW then may cost $200,000. Please note that the $200,000 BMW can only sit 5 adults comfortably. It is not as if it can sit 15 persons or can run 3 times faster. Which is worth it? Though, I love BMW cars, I think the Toyota is more value for money than BMW. Also the extra road tax, maintenance and petrol dollars make me cringe.

In housing market, this is evident too. A 1,000 square feet apartment in Sentosa cost $2 Million. A similar unit in Paya lebar cost only $1 Million. Is the scenary in Sentosa 2 times more beautiful or the air 2 times more fragrant? I doubt so. Investors or buyers are again paying millions this time for some features that they do not need or for their ego.

It is your choice.

Outsourcing

For the past 10 years, we have seen outsourcing in companies, in government, and even in homes.

Companies like DHL, Singapore Airlines, Nokia, Apple, outsourced their unimportant function like call centres, repair services, cleaning services to local or other companies.

Government sectors, like army outsourced their food catering, security services and call centres to private operators.

Closer to home, families outsource their childcare services, financial planning, and buying of food and running errands and even finding a partner.

As in all things, there are pros and cons to it. For my situation, I remained unconvinced that families must outsource financial planning to insurance agents, financial planners. This is because there is no one, absolutely no one more familiar about your own finance that you yourself. As such I have always rejected the services of financial planner from any company. As for child care, I believe that there is no one who can take better care of babies other than their own parent. Not a trusted nanny, reliable maid or even a grandparent or relative. This is because as parent, sometimes, we get irritated by our own babies as well. At least, we will be sorry to our baby and get it over quickly. But who can predict what a trusted nanny or a reliable maid can do in a moment of anger, frustration or irritation. On top of this, this nanny or maid may also have their own family or relationship problem no one knows.

Dairy Farm – a stock I missed 10 years ago

10 years ago, Dairy Farm, which owns Cold Storage, Giant, 7-Eleven, Guardian, etc chain of retail stores was trading at $1. It first came to my attention when it announced share repurchase. Somehow, I missed the opportunity to buy and today, it is traded at $12 without counting the years of dividend received. Wow, it is a 12-bagger in 10 years and more.

Today, as I walked past its business whether, is it Giant, Guardian, 7-Eleven, Cold Storage, I can still scold myself for hesitating to buy it. My excuse not to buy it then was to wait for it to go lower than $1. That day never came. Well, at least I knew it was good, just that I wanted to buy it at a lower price.

Recently, we heard that Carrfour has exited the supermarket business after 10 years of operation in Singapore. The retail business must be very competitive. At minimum, one thing I noticed is that its business is not as good as NTUC supermarket, Watson, etc… Perhaps, one day, Dairy Farm’s business will edge towards a bankruptcy and it will become a turnaround story. This will ensure a great buy. I am dreaming and waiting for that day.

Child abuse

There are many forms of child abuse:

1) One of them happened a few blocks from my house. What I heard from outside the house was this:” Must I train you like a dog? Even a dog is easier to train than you!” a lady in her 30s was shouting in the house. Her child, probably 3-4 years old was crying badly. I was angry and sad that something like this can still happen in modern Singapore, said to be the world richest city.

2) Another type of abuse is deliberate neglect. The grandma is looking far away, totally indifferent to her grandchild’s needs. She seemed in a world of her own. Her grandchild, 4-5 years old, is playing 5 -6 metres away by himself.

Could this be the right way to bring up a child? I wondered.

The final test in life

When we are as young as a sperm, we were competing to see which one of us will hit the jackpot( or egg first). After we have grown 9 months inside mummy’s tummy, we were competing to see if we can come out to see the world successfully.

After we were given birth, we were tested on ears, eyes, to see if we are generally like the majority of our peers. Soon after, we were sent to schools to compete in science, maths, English etc. Major tests like PSLE, GCE O’ Level, GCE A’ level , degree, diploma, driving test, medical test followed. The final test in life is to take care of our own children and our marriage. This is life’s hardest test in which our character traits like patience, love, discipline, responsibility, reliability, were all tested to the core.

If we are successful, we will be blessed with happiness. I wish you all the best.

When to draw the line?

When I read that parents have to draw a fine line between protecting their children and overprotecting their children, I am reminded that our schools, army camps, government etc may overprotect our people.

For example, in the army camp, recruits enjoy welfare like sleeping on branded King Koil mattress, taking air-conditioned ferry services to camp, eating commercial-standard chicken rice etc. In stark contrast, based on stories or accounts from army recruits 30 years ago, the recruits slept on unbranded low-end mattress, eat horrible food cooked by inexperienced cooks and took open-air ships (called RPL) to camp. Could this welfare be excessive? Are we spending too much money on material stuff and not focusing on the emotional and training needs of our recruits?

30 years ago, I understand that pregnant ladies go for medical checkup only a few times during pregnancy. Now, pregnant woman go for check up at least every month. Are we paranoid and wasting too much time and money on checkup? Do we over-exaggerate our minor illness or pain or do we over-value our life?

The reasons for this excessive care in our society, be it army camp or hospitals could be due to the emergence of the rare Singaporean due to our low birth rate, too much funds in the army camp or in family, the higher expectations of highly educated parents and the power of media. Could this ultimately be good for our society?

Taking care of babies

I have seek wisdom from people around me on taking care of babies and children. My question to them is “when taking care of babies, what do you think is the most important thing?”

Here are their answers:

1) “Discipline. Never beat them or lay hands on them. Do not pamper them too much or they will walk all over you. “advised a mother of 4 children.
2) “Health” came from a grandmother.
3) “Happiness and freedom,’ said my mum
4) “looking after them,” from my mother-in-law
5) “Understanding our children”, from yours truly.

The best gift to give a child is a happy childhood. This is priceless. - Quoted my mum. I fully agree with what she said.

What do you think?

Insiders selling

Recently, I took a look at Bank of America, Fifth Third Bank and found out that many directors are buying the shares. This usually means the bank is doing well. Until one look closer.

A closer look revealed many officers selling the shares. For the many directors buying, I noted that they are buying at zero cost a share. In short, the directors buying does not mean much as they pay nothing to get more shares. It is the many officers (insiders) selling that woke me up. How can the company be doing well if so many middle rank staff is selling the shares? Do they know something that we outsiders don’t?

Surely, we outsiders know less about the bank than the insiders. I suspect it is wise to follow the track of insiders to be careful of banks stocks such as Bank of America and Fifth Third Bank now.

My Mum – an independent thinker

At a time, 40-50 years ago, when most people are very traditional in thinking and superstitious, my mum was ahead of her peers. She was able to think independently instead of listening to the majority. For example, in taking western medicine, she knew that it comes with side effects. For minor illnesses like running nose, slight fever and cough, she advocates to let the body battle the virus rather than see a doctor. Needless to say, she has her own home remedy for running nose, cough and slight fever.

In stark contrast, many elderly folks believe in seeing doctor or Chinese sinseh for minor illness. I also realize that the more superstitious a person is, generally, the poorer they are. This is true in Macpherson area, where many poor folks live. During the ghost festivals, many offerings are lighted along the corridor near the void decks. This is more than what I have seen in other towns like Serangoon or Bishan.

A look at Wikipedia confirmed my mum was on the right track. As many flu, cold, running nose, cough cases are caused by virus, this mean that medication by doctor does not help. In fact, it is recommended on the internet to let the body fight against the virus.

Thanks for the great advice. Thank you, mum.

The uncertainty ahead

It is reported in the news that there are 1 Million foreign workers or more working in Singapore. Assuming a $1,000 per month paycheck, this is $1 Billion per month ( or $12 Billion a year) in income to foreign workers. Most of this money will go to their rent, food, drinks, and savings being sent back to their home country. This savings transferred back home will fuel a construction and housing boom in their home country. This $12 Billion is only for Singapore. How about countries like Taiwan, Japan, Hong Kong, Malaysia, Australia etc…? if this money stops flowing to the foreign workers, the construction and housing boom in China, India, Malaysia, Vietnam etc… may end.

There are many 6- 9 – year old normal car plate vehicles in car parks such as Toa Payoh, Bishan, Ang Mo Kio etc which are hardly used in daytime. Someone is paying taxes, maintenance, parking for these vehicles. If the job market remains good, then the car taxes, maintenance will be paid. Should the job market weaken, these vehicles may be sold early. If many of these cars are sold, the car market prices will dive.

In view of such situation in Singapore, it can be said that there is an excess of vehicles and foreign workers in Singapore. As such, car prices and foreign workers numbers can only go one way down.

My complaint was listened to, finally!

A few years ago, when I learnt that HDB linked the prices of new flats to prices of resale flats. I complained that it is not the right way to price the flats.

Why? The reasons:

1) We knew that market always have bubbles. By linking the prices together, during a property price bubble, HDB new flats prices will follow the prices of resale flats and be inflated. HDB will earn fat profits. During a downturn, the prices of resale flat will be depressed and new flats prices will be sold maybe below cost.

2) HDB mission is to provide affordable flats to families, and linking the prices together contradicts this mission.

3) A resale flat in a mature estate like Ang Mo Kio can never be compared to a new flat in Seng Kang because of the difference in availability of amenities like schools, child care facilities, buses, roads, MRT, market, shops etc. As such new flats must be sold at a price much lower than resale flat and not linked to resale flat.

A better way is to price the new flat slightly higher than the cost of building the flat. This ensures HDB make small and stable profit rather than earn big profit in boom years and suffer losses in downturns. Finally, the new minister has listened to my complaint and has delinked the prices of new flats to resale flats.

Now, I have another complaint. The cleanliness of the public toilet in coffeeshop, market, CC, is in third world standard and not first world. Can we do something about it?

What happens when a country go bankrupt?

I got the answer from wikianswers.

From the link below:
http://wiki.answers.com/Q/What_happens_if_a_country_goes_bankrupt

First of all, bankrupcy is highly unlikely. If a country is heading towards bankruptcy, they will:
1) Form trade agreements to increase trade
2) Seek loans from allies
3) Seek assistance by offering military benefits

i) For USA, they have signed many Free trade agreements with South Korea, Singapore and other countries. I suspect trade agreements to increase exports can only do so much for USA and is unable to turn the trade deficit into a surplus within a year or two.

ii) USA may also seek loans from Japan, Europe and many allies. But Europe is facing a crisis of its own and may not be able to save itself. Japan may help, but they face slow growth. Other allies may want to help but their financial situation makes it impossible.

iii) Only Japan may give assistance by accepting military benefits. But as long as Asia is peaceful, this may not be significant to Japan.
If all fails…

1) The stock market will crash and credit will seize
2) All financial institutions will fail
3) All government funded programs will end (such as medicaid, defense, police, education, infrastruture support like roads, utilities etc)
4) Business will close and jobs will be lost
5) There will be mass rioting (and no police to stop the rioters or fire fighters to fight the fire)
6) Everyone will start killing each other for food
7) The rich will buy the country and turn a democracy into a dictatorship

Will this happen? I sincerely hope not.

Could the COE prices for car be an indicator of the economy and stock market?

When things are rosy like now, COE prices for car are at $80,000, a 5- year high, home prices like Bishan flats broke the million dollar mark in recent history; the economy is in a boom which is about to go into a downturn. It is as predictable as the four seasons.

Recently, the government has introduced new measures to cool the car market and this means the car COE prices will likely go down by next year. If these new measures to regulate car and house prices are coupled with a credit crunch, the prices for cars and houses will fall by at least half.

As a proof of this theory, year 2009, just after the credit crisis of 2008, we witnessed the low of COE prices at $5,000 to $10,000. When the economy is flushed with cash in year 2012, COE prices went up to $80,000.

The coming weaker COE prices may also mean a weak stock market and economy. Let us await and see.

Is Singaporean the only ungracious commuter?

Today, as I was waiting to go into the MRT train, a person of European/American origin ( Caucasian) who was behind me overtook me to rush into the train first when the door just opened.

I was shocked because of 3 reasons:
1) It was at 2pm (non-peak hours on a weekday), so only a few people are this door. What is the rush about?
2) European or American origin people are said to be more cultured
3) I nearly bumped into him as he rushed for the gold (no gold la!) inside the train.

This is in sharp contrast to the Australian who queues up patiently when going up a public bus. I can hardly believe my eyes when this happened just now.