To The Moon

Speaker: Jonathan Lo, Investment Representative at Tiger Brokers Singapore, on P/E, ROE, dividend yield, and why the quality of a business can matter more than the quality of its management.

[About the Speaker] Jonathan Lo is an Investment Representative at Tiger Brokers (Singapore). With nearly 20 years of practical trading and investment experience, he interprets markets through multi-asset, macro-directed long-short strategies expressed through equities and options.

[The Hook] Is management more important, or the enterprise itself? The speaker leaned on Buffett: a structurally disadvantaged company is hard to turn into a consistently profitable one, even for a good management team.

[The Popular Valuation Ratios]

• P/E ratio comes in two kinds. Trailing 12-month P/E is backward-looking, "like looking in the rearview mirror." Forward P/E is based on analysts' projected earnings, like looking through the windshield.

• Return on equity (ROE) = net income ÷ shareholders' equity × 100. A high ROE suggests the company uses capital productively. But ask how it got there: it could come from taking on a lot of debt to open stores or run subsidised campaigns to win market share.

• Return on assets (ROA) measures income against the assets a company holds. The speaker noted it can be more useful for businesses like banks.

• Dividend yield = dividend ÷ share price × 100. Pair it with the payout ratio, the share of earnings paid out as dividends. You don't want it too high, so the payout stays sustainable. The speaker's own emphasis: consistency, year after year.

[Using the Tiger App's Valuation Track]

In the Tiger app, under the Analysis tab, the valuation track shows today's P/E against its historical range, for both trailing and forward P/E. Green means below one standard deviation, red means above. It gives a sense of how optimistic or pessimistic investors currently are about a company. The forward version is based on analyst consensus, so it shows how bullish expectations are.

One subtle point: the same share price can mean different valuations at different times, because earnings change. A stock at $100 today may look different from the same $100 five years ago.

You can mix and match these ratios into your own screening process.

[Quality of the Business]

A company's problems sometimes surface only over time. The speaker's case study: a CEO celebrated as a superstar in his era, whose record looked different after he retired and the financial crisis hit. His point was not whether the man was good or bad, but that this is worth studying.

The Buffett lesson: the enterprise matters more than the person steering it. The speaker contrasted Coca-Cola, still held and still performing, with another company investors backed hoping for growth, which kept needing fresh capital.

[The Economic Moat]

A moat is a company's competitive advantage. The slide lists five:

• Switching costs: obstacles that keep customers from changing products (e.g. Apple ecosystem)

• Network effects: value rises as more people join (e.g. Facebook, TikTok)

• Intangible assets: patents, licenses, brand identity (e.g. Coca-Cola brand)

• Cost advantage: producing at lower cost (e.g. Costco)

• Efficient scale: a market that supports only one or a few players (e.g. National Grid)

The slide's reminder: if a competitive advantage doesn't exist or may prove fleeting, there's no moat.

[Key Takeaways]

• Know what a ratio measures before you trust it. A high ROE can come from debt.

• Compare P/E with its own history, not just with other stocks.

• Look for dividend consistency, and check the payout ratio.

• Moats protect profits. Ask which kind a company has.

[Call to Action 🎯]

1. Open the valuation track for a stock you follow, trailing and forward.

2. Write down which of the five moats it has, if any.

3. Drop a comment: which company do you think has the strongest moat, and why?

Markets are always moving - and sometimes, the best move is knowing what works for you.

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