Is investment just about focusing on the financial aspects?

At the start of my investment journey, I only emphasized on the financial aspects of a company such as the balance sheet, income and cash flow statement. Gradually, I learnt that I should also look out for macro factors such as the global trends that will affect a company’ cash inflows and outflows.

Why are global trends important to me?

Global trends such as exchange rate, import/export, interest rates, etc are some high-level information that seldom affects our day-to-day livelihood unless we are deeply involved with them directly (i.e. trader). But, if we are able to find the link between global trends and companies of our interest, this information will certainly be useful!

So the question is: 

"How will the change in (global trends) affect the companies’ business?"

Let me share an actual situation regarding the currency change between AUD$/S$; and its impact on companies’s business:

When Singapore dollar is strengthening against Australian Dollar (i.e. Receive more AUD$ for every S$1), Singapore companies (i.e. Singtel and Fraser Centrepoint) that have significant business exposure in Australia, will earn lesser when their revenue in AUD$ is converted to S$. If the companies intend to maintain their S$ margins, the higher AUD$ cost will make them less cost-competitive. For these companies, I will focus on finding out the companies' plans to manage/hedge their foreign currency exchange risk.

What have I been doing?

I usually test my observations with the actual outcomes and over time, calibrate my assessments accordingly. I also engage in active discussions with my peers to gather more view points. I also realised that the global trends are changing so rapidly due to new considerations and unknowns (i.e. Brexit). Thus, I believed that I must continue to stay updated on the latest global situation; and engage in more discussions with others. All these are to gain a fuller perspective as well as to challenge my existing assumptions as they might no longer be valid in the latest global situation. I have applied them in making strategic decision for my investments (i.e. to invest in companies in certain business sectors or with exposure to specific countries).

Same-Same or Different?

It is likely that all of us may end up with different views and perspectives as we try to connect the dots between the global trend and potential business prospects. This is not for me to perform fortune-telling. It is really to analyse possible trends or likely outcomes so that I can uncover new understanding to improve my investment skills and reduce my own investment risks. I enjoy exchanging my thoughts with people, especially those with differing views, as I see such sessions as opportunities to find out new perspectives and see the same world through another angle. Well, what I am sure is that nothing is certain and the future is for anyone's guess :) 

So what's next?

So other than the macro factor that was mentioned above, what other factors do you think are important to take note of? Feel free to share your views below! I also actively engage in discussions in several facebook groups to exchange my views. You can also join our TripleHuat facebook page here!!

Together, let us all Go & Huat ah!

GoHuat