Wednesday, August 12, 2009

Basic Filter for Over seas stock

In presents over seas stock become more popular invest option for investor around the world. Investor from west looking in to East markets in other clock wise Investor from East side try hard to find the way to invest in Nasdaq too. However a command problem of most new face investor is how to filter them out from other stock among the big various in the list. This articles I'll talk about personal investment and you can learn about over seas stock markets and try your own.

The main Idea is

  1. Market capitalization
  2. Price/earnings ratio
  3. Dividend yield
  4. Price-to-book ratio

1. Market capitalization
I would like to study the stock which small market cap when I buy in intimately market. But for over seas stock I'd like to give directions to Big market cap. Some one think small market cap stocks can provide higher returns compared with big market cap companies and that is true but it's safer to invest your money into Big market cap because when the market hit the problem or something wrong happen you can cut loss that easy to sell your stock any time and it's not too difficult to read the information, news and detail of the company by website or newspaper.

2. Price/earnings ratioP/E ratio
Everyone know it not easy to find big market cap stock which is good Price/earnings ratio (P/E) but anyway blue chip stock is should have P/E lover than over all market and you need to compare P/E of top 30 companies in that country and make sure you buy it in reasonable price.

3. Dividend yield
This is one of the most important thing if you buy over seas stock because each time you make trade online with your broker I believe they will charge you for extra fee more than you trade in your market but you need to compute this fee approximately how many time in a year you make trade by the system. "Good company should pay good dividends" I strong believe about it and most of Big Cap Stock have a fixed dividend payout policy compare with Small Cap Stock some time company may not able to pay good dividends. It doesn't mean Small Cap Stock isn't good but we have to be careful about "global business" some times you don't know when will Small Cap Company will back to normal productive situations and pay you Dividend and again you can't sell it because it'll have low tender offer in a day.

4. Price-to-book ratioP/B ratio
How is it good if you can own Good company stock in lower price than company owner costs? It very hard to find lower price to book In normal situation unless the company has some problem or under world economic problem. Anyway not easy to find a good price but when you need to buy stock at market price higher than book price you should not pay more than 1.5 time P/B ratio of the owners costs invested.

Lastly, above four filter is main important thing to invest in over seas stock of me. But you have to study about company and read balance sheet carefully.

-ASI report

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