SGX Stockfacts Screener

There are 728 companies listed on the SGX. For the first-timer, or relatively new investor who have had fewer than five transactions, you are probably still conforming with social proofs -- a bias that believes that if everybody is doing something, it can't be too wrong.

As a non-conformist, and I say that because I will probably be the out-lyer in most social experiments, I am conscious of all these cognitive biases and human natures, hence I consciously act on raw, hard, facts that will stare at my face while I concurrently tear away any emotions.

Here's my simple criteria to selecting stocks, backed by sound financial fundamentals.

1. Low Debt/Equity (D/E) ratio You can never be any safer than following this ratio. A company with little or no debt means that the company has superb money management. They watch their top and bottom very tightly. This is very suitable for new investors because of the loss/risk aversion bias.
2. Minimally 3.5% yield Bank of China pays 3.55% p.a. on balances up to $60k if you credit your salary, spend $500/month on credit card, and pay 3 bills. It's safe to have dividends higher than the savings interest rate. A metric to look at for over-valued companies are extremely low yields, such as tech companies that cost a bomb before they even start to make enough money to pay you dividends higher than the savings account interest of 0.05%.
3. Price/Earning ratio < 13 which is an STI average This is also an arbitrary anchor to make you see feel safer that you are buying a stock that is below the average, which has a lower chance to be over-valued compared with another company that is above the average.
4. At least $800M market capitalization This is an arbitrary number I took from someone else's study (I can't remember) that companies in the 70-th percentile in terms of market capitalisation have the best performance. The companies are big enough to secure funds/loans for expansion, likely have established corporate governance structures, but are also small enough to grow and transform to seize opportunities, usually have one boss to call the shots. The very very large caps (e.g. >$10B) with very established businesses will not be able to adjust as quickly because of multiple layers of management to manuverve and many stakeholders with vested interests. They tend to be over-valued as well because the market pays a premium for their track record and reputation.

With these simple criteria, I present you a screen shot of only 20 companies that can satisfy my selection criteria from SGX Stockfacts Screener...

Here's how you select the criteria, if you don't know how.

Here's the shortlisted 20 companies.

This is the easy part. Now, start reading up on each company to find a business that resonates with your beliefs. You are one step nearer than 728 companies staring at you.

The writer owns shares in SIA Engineering, Keppel Corporation and Keppel REIT.

[Updated on 27/8/2016: You can also check the market statistics that SGX compiles every month to show which are the performing sectors. In this year, until Jul, Consumer Goods, Telco and REITS were the top 3 performers. How I use this data is to look for those sectors that are negative and study the companies in those sectors to look for under-valued stocks. Those that are positive, I will just verify with my stock selections to see if I had performed better than the average. For example, telco 12.84%: my singtel share bought at $3.60 last year is $4.20 now, so it's +16.67%, so I had performed better than the average.

Annual Sectorial Performance of Singapore Securities

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