Finding Hidden Gems In Singapore

It took a while from start to finish. Actually it took much longer to do the research. But the journey was well worth it in the end.

What could I possibly be referring to? Let me explain.

It was a sunny Saturday morning in Singapore. What better way to spend the day than a trip to the beach.


But I didn’t want to go to any old beach, especially not the overcrowded ones that everyone goes to by default in Singapore. I wanted to visit somewhere a little different. And Lazarus Island seemed to fit the bill, nicely.

The curiously-named island was not easy to get to, though. In fact, some people have never even heard of it. It required a long hop from Orchard, a big skip from Marina South Pier and a hefty jump from St John’s Island to get there.

But the stretch of beach on the other side of the island was simply breath-taking. What made it even better was that there was barely a handful of, presumably, like-minded visitors, who bothered to make the effort.

Extra effort

Looking for hidden stock-market gems can be like looking for less-than-popular places to visit. It requires extra effort on our part to root around parts of the market, where others can’t be bothered to go.

That could mean sifting through fallen stars or under-researched small caps.

Investing legend Peter Lynch once said: “The very best way to make money in a market is in a small growth company that has been profitable for a couple of years, and simply goes on growing.”

He makes a good point.

The reasons are obvious – most institutional investors tend to ignore small companies. It could be because small companies can be more illiquid. It might also be because big companies have small moves, while small companies have big moves – in both directions.

But since professional fund managers are judged by how they perform compared to a major benchmark, such as the Straits Times Index (SGX: ^STI), they don’t exactly relish the idea of underperforming the index, even if it might be temporarily.

Our advantage

However, that could be our strength. It could be a good way for us to beat the market, namely by looking at companies that fly under the radar of the big institutions.

Here in Singapore we have an abundance of small companies. Some have the potential to grow quickly, which is exciting for us stock pickers.

What’s more, some small companies are not only profitable but also have proved that their concept can be replicated.

Consider BreadTalk Group (SGX: 5DA), which only ten years ago reported bottom-line profits of just S$1 million. At the time, the company was valued at around S$30 million.

Today, with annual profits of around S$12 million, the baker-cum-restaurant owner’s valuation has catapulted tenfold to almost S$300 million.

Going for growth

BreadTalk could be a good example of how observant amateurs can find exciting growth companies, long before the professionals have either discovered them or even want to discover them.

But bear this mind: It doesn’t take long for bargain hunters to find the bargains in the stock market these days. And by the time they are finished buying, the stocks won’t be bargains anymore.

That applies not only to stocks and shares but, possibly, to secluded Singapore beaches too.

A version of this article first appeared in Take Stock Singapore.  Click here now  for your FREE subscription to Take Stock – Singapore, The Motley Fool’s free investing newsletter.

Written by David Kuo, Take Stock - Singapore tells you exactly what is happening in today's markets, and shows how you can GROW your wealth in the years ahead.

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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 Director David Kuo doesn’t own shares in any companies mentioned.