Three wise men were blindfolded and led one at a time into a room where an elephant stood. Each was asked to discern what was in the room without removing his blindfold. The first, upon touching the elephant’s trunk, concluded a “snake” was in the room. The second, upon contacting a leg, concluded a “tree” was in the room. The third, upon grasping the tail, concluded a “rope” was in the room. All were surprised to discover the elephant once their blindfolds were removed. — old Indian fable You may have heard this old fable before. The three blindfolded wise…
Three wise men were blindfolded and led one at a time into a room where an elephant stood. Each was asked to discern what was in the room without removing his blindfold. The first, upon touching the elephant’s trunk, concluded a “snake” was in the room. The second, upon contacting a leg, concluded a “tree” was in the room. The third, upon grasping the tail, concluded a “rope” was in the room. All were surprised to discover the elephant once their blindfolds were removed.
— old Indian fable
You may have heard this old fable before. The three blindfolded wise men were not able to make a good guess of the complete picture (in this case, an elephant). It can be the same with investing. For any potential investment, our own view may be limited, and we may miss some major points. We could always do with more intelligent and Foolish perspectives.
To demonstrate, let’s use rig builder and conglomerate Keppel Corporation Limited (SGX: BN4) as an example. You can read more about the company here and catch up with the latest developments at the company here.
Within Keppel Corp, there are four major business units, namely: offshore and marine, infrastructure, property, and investments. The offshore and marine business unit – which is involved in rig building – is by far the largest unit, making up close to 65% of Keppel Corp’s total revenue for 2014.
With this company, I would like to share three possible views, from three differing investor personalities no less. They are the value investor, the income investor, and the growth investor.
The value investor’s view
The market has not been kind to shares of Keppel Corp lately. Since the start of 2014, the conglomerate’s share price has fallen by 27% to yesterday’s close at $8.16.
With the price of oil having fallen by more than half since June 2014 (and currently below US$50 per barrel), the share price of Keppel Corp has continued to be in the doldrums, sitting near its 52-week low.
In short, the news does not look cheery.
However, the value investor might beg to differ. To the value investor, a saying from Charlie Munger may come to mind for this “cheerless scenario”:
You Pay A Very High Price In The Stock Market For A Cheery Consensus
— Mungerisms (@mungerisms) August 8, 2011
Instead of waiting for a cheery scenario, what the value investor sees is that Keppel Corp has an attractive price to earnings ratio that is below eight. The conglomerate’s dividend yield of 5.9% (based on its dividends over the last 12 months) could also be a sweetener to the deal for the value investor.
Ultimately, the value investor may see the situation as an opportunity to own a cheap oil share while still getting paid with a dividend while waiting for the conditions in the oil and gas industry to improve.
The income investor’s view
As mentioned, Keppel Corp currently spots a trailing dividend yield of 5.9%.
The income investor would further note that the dividend represents a 46% payout ratio on the company’s net income. In addition, the dividend growth from 35 cents per share in 2010 to 48 cents per share in 2014 may warm the heart of the income investor.
The net debt position on Keppel Corp’s balance sheet, and its negative free cash flow may raise an eyebrow for the income investor though.
The growth investor’s view
The growth investor might be quite displeased with Keppel Corp. The topline for the offshore and marine business segment has been acutely cyclical, clouding the view of any future growth in revenue of the company.
The firm’s $12.5 billion in net order book (at the end of 2014) may bring some solace, but it could take a lot more to convince the growth investor on the investment merits of Keppel Corp.
So, there you have it. Three quick perspectives from three different investor personalities looking at the same company. Thinking as different investor personalities and coming up with different views can be a useful exercise for us. Collectively, the differing views may be worth much more than the sum of its parts.
So, do you – Foolish reader – have another company of interest in mind? Why not give the differing views approach a try yourself and then share it with us? We all may become better investors from sharing our motley views.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.