Investment in stock market
Investment in stock market – Part 2
Continued from last issue…
We knew some of you might have been waiting for a while after reading our last issue. Hence, we directly jump into “growth stocks” and “value stocks” to complete our background introduction.
Small-mid capital stocks – Usually, such stocks included those companies with a market capital (number of shares outstanding times the stock price) of USD 10 billions or less. Actually this range covered many companies. Hence the definition should just serve as a reference rather than a sharp separation line. Smaller companies in market capital reflected their business sizes. There are still rooms for development in many aspects. Thus they could grow at fast paces and attract many investors. As their smaller market capital sizes, the stock prices are affected by market sentiments with greater volatility. Hence, be psychologically prepared if you are going to invest in these companies.
Companies benefited from policy – Examples can be easily found in the China market. There was a RMB 4,000 billion stimulation policy after the financial crisis in late 2008. Many of the sectors were benefited from the stimulation pack, namely railways, automobiles, constructions, cements, solar energy and so on. Thus, picking the right sector or tracking policies may be easier for some over digging out a company with potentials from the stock universe. In contrast, some of the policies would exert negative impacts to certain companies. It is often to hear about industry consolidation of phasing out of certain inefficient plants or machineries. This of cause would be a threat to some weak industry players to close down. At the same time, it could even affect industry leaders when the improvement required certain upgrades on the existing facilities.
Industry trend or structural change – As time pass by, we can easily notice the changes around us. When the average age of our country is growing older, the demand on medical services and pharmaceutics will increase. As technology is getting more advanced, now you can hardly find a feature phone in shops but instead seeing smart phones everywhere. Hence, the mobile venders and its suppliers are making a lot of money. In addition, the hike in data transfer also brings more income to the telecommunication operators and had driven up their demands on back stage supports such as servers and maintenance. We see the structural change affects companies involved in the whole value chain of the industry. Thus if you noticed some changes, try to connect this to your daily knowledge to seek for investment ideas.
These stocks are trading at “cheap” price relative to the companies’ fundamental such as earning power, dividend yield, and return to equity etc. Mostly investors use the term undervalued to describe such stocks.
Finding value stocks is a difficult task but many investors are taking this as an ultimate goal due to the large upside potential when the market corrects the stocks’ values. Finding value stocks can be started by gauging the price earning ratios, net asset values, dividend yields and compare with other stocks in the same industry. However, assessing other fundamentals and the quality of the management teams are the tasks to be carried on by many analysts and fund managers
Stocks are undervalued usually due to insufficient information flow. Although this sounds impossible, it does exist. Moreover, there are some low profile companies with insignificant market capitals to draw attentions from investors. In addition, undervaluation might also relate to dull market sentiment or cyclical effects. Finding value stock is challenging but once you success, the feeling of achievement can be overwhelming. At the same time, it accompanies considerable return.
May be now some of you start to feel more comfort to invest in dividend stocks, or you are more excited to catch up with the growing stocks. To the rest may be enthusiastic to seek out the undervalued treasures. No matter which way you go for investment, just pick the way that fits.
中小型股票 – 通常这类公司的市值（流通股票数量乘以股价）在100亿美元或之下。实际上这个范围也涵盖了许多公司。因此，这定义只应作为一个参考，而不应视作一条清晰的分介线。市值较小的公司也反映了他们业务规模较小，还有很大的发展空间。因此这些公司可以快速增长，同时也吸引了众多的投资者。由于市值较小，股票的价格容易受市场情绪影响而导致波动性较大。因此，如果你要投资于这些公司，必须要有心理准备。
受惠于政策的股票 – 这在中国市场很容易可以找到例子，如2008年年底金融危机后的4万忆刺激经济方案。当时许多行业因此受惠，如铁路，汽车，建筑，水泥，太阳能等。因此，选择受惠的行业或跟踪政策可能比从股海中发掘有潜力的公司来得更简单。不过政策也会对某些公司会产生负面影响。经常听到的行业整合和逐步淘汰低效能的工厂或机器便是一例，较弱的业者会受到淘汰的威胁。同时，如需要将现有的设施进行升级，那么对行业领导者也会有不小的影响。
行业趋势或结构性改变 – 随着时间的过去，我们可以很容易发现周围的变化。我国的平均年龄正在老化，对医疗服务和医药的需求将增加。随着科技日趋先进，现在在商店很难找到一个以前的手机，取而代之是随处可见的能手机。因此，手机厂商及供应商都赚了一笔。此外，上升的数据用量也为电信运营商带来更多的收入，同时也提高了对后台支持如服务器和维护的需求。我们看到的结构性变化是影响着整个产业链。如果你发现了一些变化，可以尝试和你的日常知识作出联想，从而寻求的投资概念。