What Is Your Investing Pick For 2016 – The Weighing Machine Or The Voting Machine?

With 2015 coming to an end in a couple of hours, let’s look back at how the market has done for the year. Using the SPDR STI ETF (SGX: ES3) as a proxy for the Singapore market, it’d appear that stocks in Singapore are down by about 13% since the start of the year.

This reminds me of something that the investing great Benjamin Graham once said about the stock market – that it is a voting machine in the short run, but a weighing machine in the long run.

Keeping Graham’s wise words in mind, let’s look at how the SPDR STI ETF has performed over the long run. According to the exchange-traded fund’s website, it has returned 7.21% per year (with dividends reinvested) since its inception in April 2002.

For me, what this goes to show is that being in the markets for the long haul and not engaging in short-term trading has its benefits for investors.

Let us now look at a company that has seen its stock do well over the past year. SATS Ltd (SGX: S58) is one such firm and it is involved in ground handling and food services. The company’s share price has risen a staggering 29% year to date.

However, the company has only enjoyed a 34.6% share price return in total over the past five years. What this means is that investors who stuck with the company over the years have enjoyed handsome returns over just one year. This is often the case with stocks and this is why it is important that investors be patient.

Looking at SATS’s business performance over its last four fiscal years, it should be noted that the company has performed well. It has managed to maintain a return of equity of above 11% and has seen its net profit grow as well.

Additionally, SATS has cash of S$403 million as compared to debt of just S$109 million as of 30 September 2015, which means the company has a strong balance sheet.

At the end of the day, what is important is that when investors pick companies to invest in, they go for companies with (1) long-term prospects that they are fairly confident of, and (2) businesses that they understand that. By sticking with these two basic fundamentals, investors may be able to sleep better at night in 2016.

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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 Esjay does not own shares in any companies mentioned.