^V^ PE (4) How to fish ? n a girl with gun (right method) able to hunt tiger easier than a man using pillow (wrong method) to hunt ^V^

^V^

I am not saying stock with PE < 10 will definitely profit u ! but !!! at least u know what u r buying n u wont over pay for what u bought ^V^

No matter how, u still hv to take some risk even stocks that u bought r all below PE 10, everybody know how to buy LOW PE stock, but not everyone able to catch low PE stock with sustainable future earning ( here i am talking about sustainability of its future earning, of course if her earning jumped above yr forecast is even better ). D key success here is "Future earning "

Example

Stock X

Share price = 1.50

EPS for 2 qtrs = 15.64

Let presume that stock X managed to maintain such a good earning for d coming 2 qtrs , hence, 15.64cts x 2 = 31.28 cts for year 08 ^V^

If my forecasting turn to be good, 31.28 cts will translate its PE to 4.7 (21% return per year)with current price of 1.50, let assume d PE for its industry stood at 13+-, its fair value should be 13 x 31.28 = RM 4 + ! even PE 10 will still give u fair value of 3.10+ ^V^

D above r with d assumption that what u hv forecasted r in line with yr forecasting ^V^

What happen IF >>>>

What happen if d coming 2 qtrs turn to be an lousy one, presuming she running at huge loss with negative EPS of 30cts !??

let calculate again..

first 2qtrs EPS = 31.28, d other 2 qtrs giving u -0.30cts

D whole year EPS is now 31.28 - 0.30 = 1.28cts

yr PE is now 1.50/ 1.28 x 100 = 117 !!!

what is PE 117 stand for ?

PE 117 stand for 0.85 % return per year or u needs 117 years to recover what u hv invested ! (why buying such stock that giving u return of 0.8% if u can enjoy FD rate of 6.6 % with zero risk !??)


See ? future earning will determine d movement of yr share price ^V^

Then how to minimise yr risk from wrong picking ?

2 ways :-

1)Track earning records

Its 3 to 5 years track earning records : check d earning track records for stock like PBB, YTL , BAT , Maxis, IOI.... NO losses at all for past 10 years !!
That's y i always ask u ppl to follow those with track proven results blogger ..ha ha

2)What is on going now n years to come

example : We know 9mp is hot going n it will on going for another 2 to 3 years time, Mega projects need steel (http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_6f4bdce6-cb73c03a-6798eb00-5043bd24 ) , cement, timber n ..... from here I know n confident that d coming 2 qtrs earning for masteel n onastel r definitely sustainable ^V^ hence, their coming earning will definitely in line with what i hv forecasted .


Guys, no easy n fast money from KLSE, we need to use brain n also d right method (FA) in order to acheive financial freedom from stock mkt. If Metastock really work as it is, why there r still ppl losing money after using it ? they may say bcos u r slow n dont know how to interprate it ! Excuse me ! this is IT world, they can programme in such a way that when d software detected a buy signal, alert u n u jump in ,same goes to sell^V^ dont tell me they cant do such a simple programming !! d only reason why they dare not to do that is bcos they r lack of confidence n need something to cover their ass.

What is d point if u born as a genius but adopted a wrong method ? a girl with gun (right method) can hunt tiger easier than a man using pillow (wrong method) to hunt ^V^ Think it over esp those who using TA method, am I not correct ?