This strategy is a mechanical method of selecting say 10 stocks of the top 100 largest cap with the lowest PE and highest DY. Thereafter put equal amt of money into the counter and let it run for a year.

Then after one year, review it and sell those that are no longer in the list and replace it with those that make into the list.

Just curious on how many of you investors uses this emotionless and mechanical method of investing in equities.

Xuzen

Not a bad idea though but 10 big cap needs lot of money.
Lets say average price of big cap is RM5 and each one buy 1000units, that will cost someone RM5000 X 10 = RM50,000.00.
2000 units each will cost 100K.
You setup a list and paper trade start from now and we will see after a year see what is the return.
See you after 1 year.

it's a heavily used strategy in the states.
but one criteria has to be the DY needs to be sustainable over a year's period.

yeah very agree, you prepare a list of shares with high dividend yield at least 10% and low PE less than 10 and show us all of as proof of concept.

anyone to prepare the list?

You need to set the cut off point first leh... everyone might have different cut off date...

Xuzen,

http://en.wikipedia.org/wiki/The_Dogs_of_the_Dow

Google is your friend...

Dreamer

The method work if PER and DY is within expectation and not varies too much.

But in reality, it is not especially in the last year and current situation due to rapid changing of company fundamental.
Also PER could subjected to outlier due to extra-ordinary gain in company profit issue which is one off event.

PER figure are changing from time to time, while DY could be the same as well.

It work for those have steady business model mostly come from consumer staple related company, but doesn't work well in highly volatile business, like construction, financial (in market turbulence time).

It is a good method provided variable issue of above mentioned is sort out.

As always, do scrutinise the PER figure, it could mislead sometimes, because PER is about past earning data, and what we concern in stock market is about future earning. Don't merely look at surface of PER 10x then conclude it is cheap.

One can be emotionless in investment if one doesn't do favourism (which generally mistake made by people) and invest based on data only, not because of market overall trend. Do look how much stock price has surged or dropped, merely compared fundaemental data to the stock price.

Just my 2 cents.

There is little company that gave sustainable div more than 10% because if it does, share price will rise resulted low DY already.

Because if a company can give sustainable more than 10%, mean its PER would much less than 10x, which is too cheap by then there will be lot of investors want to have it already.
It may be will occur when whole market sell-off time when there is price distortion and too much pesimistism in the market, just like this beginning of the year. But it will normalise afterwards, as if company can still give good dividend, surely share price will follow suit to go up to a level of 6-10% DY range, which should be the norm situation.

A realistic expectation of high DY is range from 6-10% which is considered high already.
Some of those one off special dividend yield is not sustainable throughout long term, and shouldn't take in account for future. Should be treat as bonus, but not for yield stick for DY consideration.

Since I am the TS, I shall conduct this experiment.

Mod (Cherroy) if I could ask you to pin up this thread.

I will select 10 counters on the last Friday of this month, that have the best PER and DY values from the Top 100 largest Cap list.

I will buy a theoretical value of RM 5,000 per counter.

Thereafter I will monitor its gain or lost every last Friday of the months for analysis and report accordingly.

I shall repeat this process 12 times (every month for one year) and we can see the theoretical gain/loss thereafter. What say you mod?

Xuzen

This post has been edited by xuzen: Sep 19 2009, 12:35 PM

If you have time to try out, I guess every one is happy to see how it will turn out.

But I can assure you, we have will trouble in the calculation of PER and DY part even before starting.

PER although is just a simple figure, but how do you define what is PER for Genting right now? Last year financial year ended one? This Q annualised it? This year up to date? or next year projection?

I will use the DIY and PER as listed in the Star Newspaper. This will make life easier for me.

Xuzen

You should use rolling PER / forward PER as buying stocks is always forward looking on their profitability and the ability to distribute dividends.

What listed in the Star is trailing PER

Besides alfredfx stated issue, newspapers are slowwwww to update those data, so it is trailing + trailing.

Also we have occassionally newspapers publish the wrong data as well.
I never trust those PER, Div, NTA that published in newspaper due to above 2 issues.

Also bare in mind even though those PER, DY is accurate, we must take out those exceptional profit, special dividend issues to have an accurate picture, those are outlier number.

Just like in Reit, when there is properties revaluation surplus, it will register as profit by then profit suddenly jump up a lot, in this case, I can assure that the newspaper will publish very low PER due to surge in profit. But in actual sense, it is not.

Based on DY, surely TM will have >10% DY due to special dividend being given last time.
So lot of work need to be done to dig out the actual figure and situation.



This post has been edited by cherroy: Sep 19 2009, 02:18 PM

never mind, just take history data, it is paper trade after all.
Make it simple, just grab 10 big cap with highest DY, be it past or present.
BUT if you have plenty of time during raya, by all mean get a more accurate one.

This is my list based on data obtained from The Star newspaper of 25-9-2009. The 10 counters are skimmed from the top 100 mkt cap. My selection is based on PE less than 15, DY more than 6%.

Counter P/E DY BOUGHT AT # UNITS Total RM
Data as of 25-9-2009 Bought on 29-9-2009
MAYBULK 6.7 13 RM3.02 1600 RM4,832.00
BSTEAD 4.2 7.9 RM3.46 1400 RM4,844.00
NCB 9.1 8.3 RM3.00 1600 RM4,800.00
BKAWAN 7.9 6.9 RM9.25 500 RM4,625.00
JTINTER 15 10.3 RM4.74 1000 RM4,740.00
MEDIA 15.1 10.2 RM1.61 3100 RM4,991.00
TM 13.6 8.4 RM3.09 1600 RM4,944.00
DIGI 14.4 8.8 RM21.34 300 RM6,402.00
AMWAY 12.7 7.3 RM7.35 700 RM5,145.00
BJTOTO 13.7 6.5 RM4.46 1100 RM4,906.00
Total: RM50,229.00

Xuzen

YEAH this new benchmark index to beat this year. 29/09/2009 = 50,229 31/122009 = 92,205

Hard to see, do it in spreadsheet and save as picture more readable i guess.
So, this one will end in year 2010, 29th September.

I can bet my old KANCIL valued at MYR6,500 that KLSE cannot even come close to NYSE on this DOTD.

No, not in 100 years!

This one suppose to be POC not for betting.