There are many stock selection criteria such as P/E ratio, dividend yield, NTA, price to book value, good cash flow etc. which all investors follow to make normal profit. I consider the most important criterion is “profit growth prospect”. Can the company continue to make increasing profit this year, next year and year after next year. If you can find a company with good profit growth prospect, you will be able to make exceptional profit.
With no disrespect to professional fund managers, they consider current earning most important and as a result they miss out those companies with poor current earning but with tremendous profit growth prospect. You can buy them cheaply because the funds are not interested.
I Believe that same goes to my recent HK baby stock! CQRC...
Why I like CQRC ....
- FUTURE GROWTH: China is one of the fastest growing countries in economy... Especially in recent years! All the industries are booming! When they booms, they need money to expand the companies! So... Who do they borrow money from? of course! the BANKER! Being the Top 10 bank in Hong Kong, CQRC has the reasons to gain from these! Not to forget... China is a country that it can chatter for its populations ' demands for all the goods.... Do you know that the TaoBao of CHina is so much bigger than EBAY of US!!!!
- Recent sentiment in China push down most of the bank stocks to near year low! Funds... making Fun... They Fleed! This give us an opportunity to buy at low...CQRC hitting HK 3.38 in 20 Jan 2014. Well, is it the bottom? I don't know .... But, I think it is a good price for me to buy in this business in view of its FUTURE growth!
- Do take a careful look at the balances sheet below:..... Net profit had been multiplied by 2x in 3 years! with latest EPS 72 cents giving a PE of less than 10 for a bank stock! WOWOW... Take another look at its NTA : HK 4.2 !!! ( at HK 3.46, closing price today), it is almost 30 % discount of the share! What about another bonus! Take a look at its Dividend yield... > 6% ( I think for financial year 2013, At least HK 0.22 dividend will be given in May 2014)
Do take a detour here to see how does CRQC bank operates...
You must understand your stock.... This is quoted from Koon Yew Yin Blog!
Companies with good profit growth prospect and poor current earning are always available irrespective of the KLCI, market trend or market noise. You have to know the business you are buying, and that means being passionate about knowing everything about that company.
You must look for businesses that you can easily understand because you have to be able to make an educated guess about the future earnings of the business. The more complex a business is, the more uncertain your projections will be. Simple businesses also have an advantage, as it's harder for incompetent management to make big mistake to affect the bottom line.
This are enough reasons for me to buy this stocks!
I am confident that by end of Year 2014, at least 25 % gain from this stock!