Does anybody know any good methods of gauging how honest an s-chip is. I understand the scandals have stopped but besides dividend yield, is there any way to gauge how real an s-chip is?
Hi, Kisuke,
Looking for honest and reliable s-chips is not enough to attain success in S-chips investments. Just like in the corporate working environment, an honest and reliable person may not necessarily be the most efficient worker capable of giving the best performance and rising up the corporate ladder.
From my experience, it is more important to work out an investment strategy that you are comfortable with, taking into account the need to reduce risks exposure to the minimum as S-chips have proven themselves to be high risks and high rewards investment.
A good investment strategy is to look for growth stocks (preferably with some track records) and look for those that could be considered as having low downside risk but high potential capital gain (capable of doubling its share price within the next 4 quarters). It is best to concentrate on a just a few stocks, the very best, as diversification in S-chips enhances the risk of catching a lame, sick or dead duck.
Stocks that fail to show growth or that show sign of experiencing profit margin squeeze, should be quickly divested.
Below is just an illustration of how one may identify the leading stock in S-chips - “Sportswear Sector”.
China Hongxing, China Sports and Eratat are in the same business. Eratat was least affected by the business downturn in sportswear (in 2009) compared to China Hongxing & China Sports. By successfully repositioning itself as a casual lifestyle brand instead of a sportswear brand, Eratat could be expected to compete well with the others through its increasing ability to price its house brand products and carve out a niche for itself. It has “Cash & Cash Equivalents” of RMB 131 million and no borrowings & has declared dividends for the past 2 years. It has the best stock valuation and is clearly the leader among the three.
Last edit: 13 years 10 months ago by observer2. Reason: typo errors
Hi Kisuke,
Read reply by Observer 2 good tips to follow. Yes, besides dividends pay out, " cash and cash equivalents" and the growth or revenue of the companies are important determining factors to invest in these S-Chips. If you study carefully, I'm sure you can spot the jewels in these S-Boxes.
Growth can be the products or services the companies dealing with. Like for example Sunvic, the growth and turnovers is almost more than 1,000% and the stock was traded a low of $0.17 and now almost S$0.69 cts. The other company worth mentioning is Yangzijiang was traded a low of $0.99 now is trading over S$2.00, as being one of the largest shipbuilders in China and the world. Yangzijiang is ranking 28th position in term of capitalisation ended 31, 2010.
Happy trading in S-Chips but be prudent.
The problem is that one cannot tell if the results they report are real or cooked up. For hongxing, the market does not seem to believe that hongxing has the cash it claims to have. At one point in the recession, i recall it falling to as low as 7cents due to overwhelming fear. It is still not properly valued now, imo. Eratat looks better. But I prefer companies like taisan because they pay about 30% of earnings as dividends. This is some proof. Sunvic is on my watchlist as of recently.
Seems there is no real way to have proof of their numbers besides gd div yields.
You are correct, Kisuke, to say that one cannot tell if the results they had reported are real or cooked up. This applies to all S-chips and is one of the reasons why the vast majority has been avoiding them. The reality is that not all S-chips are “rotten” but if all of them are selling at “rotten prices”, it simply means there are some gems around for the picking, but only for those with sharp-eyes or astute enough to find them. This scenario is just like in the past when good, average and bad durians were mixed together in one pile at a hawker stall for everyone’s picking. The big winners were those with the “know-how” in picking.
A valuable lesson that one can learn to emerge a winner in any venture or in the stock market, is to have a positive mindset and making an effort to think out-of-the-box. A person with a negative mindset would just think of all the reasons why a particular task (eg. Buying into an S-chip) should not or could not be done; while one with a positive mindset would think of all the various ways on how it may possibly be done; and eventually evolves a better way of doing it.
There are ways to achieving better accuracy in picking winning stocks and to reducing risks in investments. It is up to each individual to learn or to look for them.
