Selecting a good stock to buy is not always easy.
Many factors have to be in place for me to even consider a stock as a suitable candidate to include in my portfolio.
The reason for the rigour is because when I do find a stock to own, it has one which I can hold for the long-term.
At the Smart Investor, we are not looking for short-term punts or hot tips.
Instead, we are carefully considering both the risks and the rewards before we make a decision.
This process ensures that the weaker stocks are filtered out, leaving just the strong candidates behind.
A focus on risk is important as it will ensure you don’t lose too much money should things head south.
All in, a holistic approach to stock investing should require you to look at the strengths of the company, the catalysts for its future growth and the risks that are looming over the business.
After careful consideration, here are three stocks I would like to buy if I had S$30,000.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited, or SGX, is Singapore’s sole stock exchange operator.
The group operates a platform for the buying and selling of a variety of securities such as equities, bonds and derivatives.
For the fiscal year 2020, the bourse operator had reported record revenue of S$1.05 billion, up 16% year on year.
Net profit jumped 21% year on year and the group upped its quarterly dividend from S$0.075 to S$0.08.
SGX has been busy in the meantime as it forges more alliances and collaborations with partners to expand its business.
The group recently signed a memorandum of understanding with the China Central Depository & Clearing Co (CDCC) to strengthen and promote Singapore’s and China’s bond markets.
On the sustainability front, SGX plans to invest S$20 million to do a multi-prong expansion of its sustainability capabilities and initiatives.
Half of this amount will be channelled to new ESG-focused products, services and platforms.
SGX’s efforts have not gone unnoticed.
It was named Asia’s Best Forex Exchange for the third year running, and also won Regulation Asia’s “Exchange of the Year” for the third consecutive year.
Things are looking up for the group as derivatives volumes continue to rise as more investors use its products for hedging and portfolio management.
On the securities front, SGX has also seen an increase in IPOs in late 2020.
Companies such as Nanofilm Technologies International Ltd (SGX: MZH) and Credit Bureau Asia Ltd (SGX: TCU) recently added more diversity to the list of names trading on the local bourse.
SGX is set to announce its fiscal 2021 half-year earnings on 21 January. Its shares are trading at around a 3.2% dividend yield currently.
iFAST Corporation Limited (SGX: AIY)
iFAST is a financial technology company that operates a platform for the buying and selling of unit trusts, equities and bonds.
The group announced a strong set of earnings for its third quarter of 2020.
Net revenue jumped 27.5% year on year to S$61.5 million for the first nine months of the year, while operating profit more than doubled to S$17.5 million.
Net profit soared 120% year on year to S$14.3 million.
The pandemic had accelerated the inflow of client assets onto iFAST’s platform, pushing up the level of assets under administration (AUA) for the group.
Last week, iFAST announced that its AUA had hit yet another record high of S$14.45 billion as of 31 December 2020.
AUA were up across all of iFAST’s key markets of Singapore, Malaysia, Hong Kong, India and China, while Singapore’s AUA hit a milestone of S$10 billion.
As revenue is tied to the level of AUA the group manages, investors can expect continued good performance when the group releases its full-year 2020 earnings in February.
Micro-Mechanics (Holdings) Ltd (SGX: 5DD)
Micro-Mechanics, or MMH, designs and manufactures high precision tools and parts used in the wafer fabrication and assembly processes in the semiconductor industry.
The group reported a strong fiscal 2021 first quarter ended 30 September 2020.
Revenue rose 18.3% year on year to S$18.1 million while net profit surged 42.3% year on year to S$4.7 million.
MMH’s balance sheet remains rock-solid with S$25.5 million in cash with no borrowings.
The pandemic has driven up demand for electronic devices, which in turn has spurred higher demand for integrated circuits, memory and logic circuits.
The World Semiconductor Trade Statistics (WSTS) forecasts that global semiconductor sales will increase by 6.2% in 2021.
This tailwind, along with the shift towards online payments and transactions, should bode well for MMH over the long-term.
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Disclaimer: Royston Yang owns shares in Singapore Exchange Limited and iFAST Corporation Limited.