3 Investing Lessons You Should Remember as the Singapore Market Hits a 7 Year High – Part 1

Last week, my Foolish colleague Ser Jing noted that Singapore’s market barometer, the Straits Times Index (SGX: ^STI), had hit a new seven-year high when it closed above 3,500 points in mid-April for the first time since 12 December 2007.

To illustrate further, the Straits Times Index had hit 3,549 points on 12 December 2007 and subsequently fell to a low of 1,456 on 9 March 2009.

With such tumultuous periods in the past, it may be tempting to think that we are ripe for stock market turbulence ahead given that we’re past the 3,500 level again.

But instead of worrying, we may want to take investing lessons from the past so as to better prepare ourselves for the future.

With that, I would like to share three lessons I have learnt over the past seven years.

Lesson 1: Buy Great Companies and Hold for the Long Term

As alluded to earlier, the Straits Times Index has taken more than six years to return to a level above 3,500 points since it last reached there on 12 December 2007.

With the benefit of hindsight, it may appear that 12 December 2007 would be a terrible time to start investing.

Investors though, would have been mistaken if they thought that all stocks had floundered since then.

It turns out that shares of great businesses have contrived to climb higher since that fateful December. I have previously shared my own experience with investing at a market-high here. And while my previous personal examples were with US-listed stocks, there are also Singapore-listed shares that have gone on to do well for their investors even if the investment had been made near the pre-crisis peak.

Take Dairy Farm International Holdings Ltd (SGX: D01) for instance. The pan-Asian retailer has seen its 2014 revenue and net income come in at much higher levels than they did in 2007. These can be observed in the chart below:

 Dairy Farm Financials

Source: Dairy Farm’s Earnings Reports

Along with the improving top- and bottom-lines, the financial standing of Dairy Farm has improved since 2007 as well. The way Dairy Farm’s balance sheet has strengthened over time demonstrates this:


Source: Dairy Farm’s Earnings Reports

The company’s underlying business strength has not gone unnoticed – Dairy Farm’s shares have clocked-in capital gains of 119% since 12 December 2007. This performance greatly exceeds the flat returns of the Straits Times Index over the same time frame.

In short, it doesn’t matter whether we are in seven year highs or seven year lows. In both cases, we should be hunting for the best businesses we can find.

Click here for the next lesson in the series!

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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 owns shares in Dairy Farm.