The indicators to gauge and assess investment safety include liquidity, solvency, beta, NAV or net asset value, reserves and operating expenses. We have shortlisted the top companies using data from Bloomberg that have the best overall cumulative safety ratio.
SINGAPORE (Feb 28): Covid-19 continues to take its toll globally and have adversely impacted the financial markets. Global stock markets are on a decline, with the local Straits Times Index (STI) down more than 4.1% since mid-January. In light of the pandemic fear, the market and investors have shifted to safe haven assets, namely gold, government securities, and cash. The price of gold is up 4.7% from last month, while the “risk-free” asset – Singapore 5- and 10-year government bonds, have seen their yields drop by 200 basis points on average due to high levels of demand. A multitude of scenarios have been projected by market analysts and watchers alike — some may say that stocks are cheap, others might say the worst is yet to come. Regardless, when it comes to investing, particularly in times like these, investment safety is of utmost importance. Preservation of capital — as aptly put by many investing gurus — takes precedence over perceived growth.
When it comes to investment safety for stocks, there are multiple metrics that can be looked at to determine whether an investment is safe enough. It mostly revolves around the balance sheet, which reflects what a company owns and owes at a certain point in time. Assuming the worst-case scenario, the safety analysis ought to determine the maximum downside of a stock. This article will explore the various indicators, ratios and metrics used to assess the investment safety of a company, focusing on SGX-listed stocks. It is also important to note that stocks with cheap valuations do not necessarily imply that they are safe. Cheap valuations merely suggest that the stock’s intrinsic or fair value is above its current share price.
