What is Value Investing?
The essence of value investing is buying securities or shares (or stocks) at less than their intrinsic value. Value investors actively seek shares of companies that they believe the market has undervalued. The key principles of value investing are:-
1. Approach the share valuation from a business owner’s perspective.
2. Establish that the market has irrationally beaten down the share’s price, and the price bears no relation to the share’s actual worth or net asset value.
3. Determine the share’s intrinsic value, which can be a wide range, and is usually an estimate because the calculation of intrinsic value is not by any means an exact science.
4. Determine the margin of safety – in other words, is the share sufficiently undervalued to weather any uncertainty or market downturns.
Who is an Accredited Investor?
An “accredited investor” is defined in section 4A of the Securities & Futures Act of Singapore to mean, in the case of an individual, a person
(a) whose net personal assets exceed in value $2 million (or its equivalent in a foreign currency); or
(b) whose financial assets (net of any related liabilities) exceed in value $1 million (or its equivalent in a foreign currency); or
(c) whose income in the preceding 12 months is not less than $300,000 (or its equivalent in a foreign currency) .
What is Market Capitalization (or Market Cap)?
Market capitalization (or market cap) is the total dollar market value of the shares outstanding of a publicly traded company; it is equal to the share price times the number of shares outstanding. It is the amount of money it would cost if you were to buy every single share of the listed company at the current market price.
What are mid cap stocks?
Mid caps are typically defined as companies with market caps that are between US$2 billion and US$$10 billion.
What are small cap stocks?
Small caps are typically defined as companies with market caps that are less than US$2 billion.
What is Price-Earnings Ratio or P/E Ratio?
A ratio of a company’s current share price compared to its per-share earnings, calculated as:
Market Value per Share / Earnings per Share (EPS).
What is Price-Book Ratio or P/B Ratio?
A ratio of a company’s current share price compared to its per-share value of total assets less total liabilities (book value) as reported in the company’s balance sheet, calculated as:
Market Value per Share / Book Value per Share.
What is Enterprise Value?
Enterprise Value (EV) is the market value of a company’s business. It is the measure for calculating how much it would cost to buy a company’s business free of its debts and liabilities. It can be thought of as a theoretical takeover price of a company’s business. EV is calculated by the following formula:
Enterprise Value = Market Capitalization +Debt +Preferred Share Capital + Minority Interest – Cash and cash equivalents.
What are Preferred Shares?
Preferred Shares (also called preference shares or simply preferreds) are shares of a company which may have a combination of features not found in the ordinary (or common) shares of the company, for example, features such as priority in dividends, priority in distribution of assets or redemption. The actual features of the preferred shares will generally be described in the articles of association or similar constitutional documents of the company.