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A Powerful Investing Lesson from Singapore’s Best Shares Over the Past Decade

Benjamin Graham, who had been dubbed the father of value investing, once said the following:

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

In other words, in the short-term, stocks can fluctuate widely, but in the long-term, stocks that have strong business fundamentals tend to do well.

Does the quote hold water in reality?

Welcome to the Best Shares of the Decade

To answer that question, let’s take a look at some of Singapore’s best performing shares over the past ten years.

Company Stock price on 25 August 2007 (S$) Stock price on 25 August 2017 (S$) Change in stock price
Tianjin Zhongxin Pharmaceutical Group Corporation Ltd  (SGX: T14) 0.25 1.51 501.6%
Riverstone Holdings Limited (SGX: AP4) 0.21 1.08 418.1%
Poh Tiong Choon Logistics Ltd  (SGX: P01) 0.26 1.30 409.8%
Straco Corporation Ltd  (SGX: S85) 0.18 0.87 397.1%
BreadTalk Group Limited (SGX: 5DA) 0.37 1.60 336.4%
Valuetronics Holdings Limited (SGX: BN2) 0.23 0.91 300.4%
Thai Beverage Public Company Limited (SGX: Y92) 0.26 0.94 266.7%
Best World International Limited (SGX: CGN) 0.33 1.19 257.6%
Spindex Industries Ltd  (SGX: 564) 0.33 1.14 250.8%
Vicom Limited  (SGX: V01) 1.78 5.66 218.0%

Source: S&P Global Market Intelligence (stock prices that are quoted in other currencies have been converted to Singapore dollars; stock prices are rounded up to two decimal places)

The best performing stock for the decade was Tianjin Zhongxin Pharmaceutical Group Corporation Limited, which had grown 502%. Some other companies featured are BreadTalk Group, Thai Beverage and VICOM Ltd.

To know if the stock price growth is linked to the business fundamentals, we have to take a look at the earnings per share (EPS) and its growth rate for each of the ten stocks.

Below is a table showing the EPS figures and their growth rates.

Company EPS data on 25 August 2007 (S$) EPS data on 25 August 2017 (S$) Change in EPS
Tianjin Zhongxin 0.016 0.117 637.1%
Riverstone 0.017 0.054 214.5%
Poh Tiong Choon Logistics 0.022 0.057 163.0%
Straco 0.006 0.057 877.1%
BreadTalk 0.022 0.073 236.8%
Valuetronics 0.047 0.072 54.9%
Thai Beverage 0.019 0.055 184.3%
Best World International 0.025 0.078 215.7%
Spindex Industries 0.046 0.122 167.1%
Vicom 0.158 0.306 94.2%

Source: S&P Global Market Intelligence (EPS figures that are in other currencies have been converted to Singapore dollars; EPS figures are rounded up to three decimal places)

Tianjin Zhongxin saw its EPS grow 637% over the past decade while its share price rose 502% during the same period. Meanwhile, Vicom saw a 94% growth in EPS and a 218% growth in stock price.

Although not perfectly correlated, the growth in EPS had brought about the increase in stock prices for the long-term.

In the short-term, however, the market had indeed been a voting machine. From 2007 to 2009, the stock market saw one of its greatest crashes in history.

BreakTalk Group saw its stock plunge from a high of S$0.69 in 2007 to a low of S$0.24 in 2009, a decline of some 65%. Similarly, Thai Beverage’s shares dropped from a peak of S$0.28 in 2008 to a trough of S$0.17 in 2009, down 39%.

But the two companies, on top of many others in the list, have since recovered to give market-beating returns. The returns, though, are not coincidental. The growth in share prices have come from improvements in their businesses over the decade.

The Foolish Bottom Line

This simple exercise shows that we should always focus on the fundamentals of the business when investing.

Warren Buffett, who studied under Benjamin Graham, said, “If a business does well, the stock eventually follows.”

The best shares from Singapore’s stock market have shown that in the short-term, the market is a voting machine but in the long-term, it is certainly a weighing machine.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Riverstone Holdings Limited and Straco Corporation Limited. Motley Fool Singapore contributor Sudhan P owns shares in Straco Corporation Limited and Vicom Ltd.