The Weekly Nibble: Stock Market Rout

Here are some of the most interesting articles that have appeared on the Motley Fool Singapore’s website this week.

The Stock Market’s “Bloodbath”: Keeping The Right Perspective

Since last Friday’s rout in the US stock market, the Singapore stock market has been on a decline. As of the time of writing (12:13pm on 8 February), Singapore’s market barometer, the Straits Times Index (SGX: ^STI), is down 4.7% since the close on 2 February 2018.

The quick fall of the index may look scary, but it’s important to keep our cool and view things from the right perspective. Using a Warren Buffett quote as a backdrop, my colleague Chin Hui Leong says that if investors were to keep their eyes glued on stock prices, they are likely to overlook the business developments that are happening, and hence potentially missing opportunities to buy stocks on the cheap.

Always focus on the fundamentals of a company first, then think about its valuation. If you are keen to know how to value a business…

The Best Way to Value a Stock: Part III

… you can check out the article above. In his article, Jeremy Chia shows us how to value companies using six different ways. The methods discussed in his three-part series are:

a) the discounted cash flow model;

b) the dividend discount model;

c) the price-to-earnings (PE) ratio;

d) the PE-to-growth ratio;

e) the price-to-book ratio; and

f) the price-to-sales ratio.

Different valuation methods have to be used for different companies. After reading Jeremy’s series of articles, can you determine which method you would use to value a property company (hint: It’s not the discounted cash flow model)?

Why I’d Still Buy Oil Over Bitcoin

Brent crude oil is trading at around US$65 per barrel currently, after reaching a low of close to US$35 in early-January 2016. Oil prices could go on to reach higher levels as noted by Peter Stephens in his piece:

“[I]t is estimated that global demand for oil will continue to increase between now and 2035. Rising prosperity across the globe means that the oil price could benefit from higher future demand, while the use of oil in non-combusted applications could help to support demand in future years. As such, the oil price could perform better than many investors expect in the long run.”

When oil is compared to bitcoins, bitcoins are “unlikely to have real-world use in the long run” and is often seen as an instrument for speculation. Oil, on the other hand, offers an investment opportunity for those who are willing to stomach the volatility.

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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 Sudhan P doesn’t own shares in any companies mentioned.