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A Simple Investing Strategy To Consider

Credit: Simon Cunningham

I once had an opportunity to meet a property investor-cum-writer, Dr Peter Yee, in Malaysia.

Being an experienced property investor, he explained to me how he became wealthy through real estate investments. He used to be a school teacher. But, he has amassed a fortune from his many years of investing.

Naturally, I tried to learn as much from Dr Yee as possible from our conversation. I was struck by the simplicity of his approach towards investing.

One of his strategies is called “Crisis Investing.” According to Dr Yee, Crisis Investing is a simple strategy that many investors can employ. His reasons are as follows:

All investments, whether they are properties or stocks, move in cycles. There are times when the cycle is positive and times when it is not.

As investors, we need to know where we stand in the cycle – either through experience or learning from others – and to take the appropriate action accordingly.

Our actions, however, need to be contrarian in nature – we buy when others are fearful and doubtful.

In essence, Dr Yee summarises Crisis Investing as buying when there is a crisis, when people are in fear. And, fear can be seen when stock markets fall hard, say by 20% or more.

But, what should we buy? He said we should stick to the big blue chip companies. “Is that all?” I asked. He smiled and said, “That’s all. It’s not that complicated.”

Let’s consider Dr Yee’s strategy by using five blue chip companies, selected at random for the sake of argument. They are namely, Keppel Corporation Limited (SGX: BN4), Singapore Exchange Limited (SGX: S68), Wilmar International Limited (SGX: F34), CapitaLand Limited (SGX: C31), and Singapore Telecommunications Limited (SGX: Z74).

On 3 February this year, Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI), fell to a 52-week low of 2,528 points. That level is around 30% lower than a 52-week high of over 3,500 points that was seen in April 2015.

Let’s also assume that ordinary investors had chosen to apply Dr Yee’s strategy by buying stocks near the beginning of this year. How could they have performed? Comparing the price changes from 3 February to today, the five blue chip stocks above have appreciated between 8% and 25%.

Keppel, SGX, Wilmar, CapitaLand, SingTel share price table
Source: S&P Global Market Intelligence

If we assume that we had invested equally amongst the five stocks, our average return would be around 16%.

Now, some readers will say: Everything looks easy with the benefit of hindsight. Personally, I have to agree. His is not an easy strategy to execute.

Yet, I cannot deny the wisdom behind his simple strategy. It is even quite Buffett-like in essence. But, I also suspect there is a lot more than that which meets the eye. I am sure Dr Yee would not buy a car without first kicking the tyres.

We should do some kicking too. Just because a heavyweight blue chip has been knocked down does not always mean it will get up. Some can stay down for the count.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.