FSM INVEST EXPO 2020
Asked on 14 Jan 2020
When an investor finds a good company (with growth) based on fundamental analysis, how would he/she go about finding the entry price that they are comfortable with?
Do they look at the dividend yield at a particular share price and if satisfied choose that price as an entry price? Consideration of current and historic PBs?
If the share price keeps growing, does it mean that the entry price would have to be re-evaluated.
An example on how to select an entry price would be appreciated.
After pinpointing a particular REIT I am interested in, I would usually monitor over a few days to observe investors support / resistance levels. One must understand what causes the fluctuations in terms of REIT prices - News, Interest Rates, Developments. These doesn't happen on a day-to-day basis. Therefore when market is trading purely on investors intuition, it is easier to find the support / resistance level
So if you've done the hard work of evaluating the quality of the REIT (properties, financials, management track record etc.) and are looking at entry price, I tend to favor a combination of Price to NAV (low) and dividend yield (high) usually, tracing this back over the last 5 to 10 years (where applicable) will give you a good indication of how cheaply the REIT is trading compared to it's historical performance.
This has served me well personally
I look at how much more revenue the reits property can generate through asset enhancement schemes by the reit manager. Reits dividends are affected by how much more revenue their properties can generate. And an increase in reit dividends results in increase in share prices
Follow this train of thought when investing in a reit
There's no single, definite way to evaluate a stock and in accordance their "appropriate entry" point. All the points mentioned by you are valid considerations. To top on that, each individual has different risk appetite and investment horizon.
Simply put, the long-term investor who had identified a good company, short-term price volatility should not be a deterrent to start an initial position. One could simply buy smalls for the first tranche, then subsequently average down if price drops later on. As long you dont leverage your stock purchase and/or deploy monies you will need to use for other purpose in the short-term, it will be fine
Hey there! For REITs, after checking the main criterias like in increasing dpu & nav, occupancy rate, gearing ratio, usually I take a look at historical yield. Once when the current price reaches around there, that's when I'll enter. You can also look at historical p/b!
A more direct answer (which applies not only to reit) is to have a view on the fair value of the counter, your target return and time frame to hit the target return. If you feel the price is at a % below the current price which is undervalued and in the absence of other factors preventing it from realising the fair value in your target time frame or dragging it further in the near term, then it is a reasonable price to enter
You can use some technical analysis here to help you find an entry.
Look for support lines if there is a retracement in price. Or if the trend is strong, look for an entry close to the moving average lines.
Else, you can look at historical dividend yields and from there you can look to enter if the yields are not too far off from its historical yield.