14 January 2013

Buy and Hold Strategy?

Buy and Hold Strategy?

It only good to buy when the price is right, and when the counter can last for at least 10 years.

Singapore is a developed country, hence its long run GDP growth Ratio should be on par with other developed economies. Nonetheless, as its economy size is still very small compared to other developed nation, it still is able to grow through expanding to oversea or through higher technology sectors.

Let's look at Buy and Hold Strategy here. It does not really mean that we have to just buy anytime and hold it forever, and just wait for a good result. It could only work IF AND ONLY IF we have done a thorough job in due diligence on the counters that are under our radar. Some industries do have market leaders, and if we decided to hold for long term, then we should choose those that can fall into at least 1 field:

  • Managed by a group of experienced and capable guys with passion and integrity. My ex chairman shared with us that it is good if we can start our own business as early as possible, as he started his very first business when he was in his 20s. He inspired me to start up as a tiny stock broker, but with big dream to be a professional wealth manager in near future. Normally we should look at the board of director, and they should have at least more than 10 years working experience before they can be part of the board. We also should learn some corporate governance, by checking the relationship of independent directors and the board of directors, and the services independent directors can provide to enhance the value of the corporate (e.g. be advisors to BOD). 
  • Core value that a company can bring it to the customers. For example, the more values you can bring it to your clients, the higher profit margin you could get from your clients. Apple has transformed itself from being a computer maker to technology gadget maker (e.g. iPod, iPhone, iPad etc). The company should have its own corporate culture and bring it down to every employees. A good company will always try to create new products that suit clients' needs. 
  • Market leader in Mature Sector. A market leader definitely already is a "brand" to customers and normally market leader can survive even when market crisis comes. The economy of scale it has allows it to beat other competitors in long run.   
  • Renovator in Mature Sector. If you do more homework, this type of companies normally can generate bigger return. But as they are yet to be tested to be success companies, so you have to be really in patience to wait for it to grow its market shares and generate more revenue in longer period. You have to have your own circle of competence to find out the next "Shining Star".
Welcome to share your strategy on Buy And Hold. 


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