Buy Mama A Stock

What are you getting for your mom this Sunday? Probably, you have bought her a handbag, a necklace, a blender and again another handbag as in the past so-many Mother's Days. For this coming special day, buy her something special, if you don't mind it being secondhand -- a stock. A good stock is more appreciable in value than jewelry, and certainly, more durable than a handbag. Still more, it could be more exciting than a blender.

There are many different stocks to shop around for, depending on what you think she needs.

If it is for her savings, the stock that has long-term prospects suits her investment profile. She would unlikely dump a gift you send her. Therefore, the stock should also provide a nice dividend yield for her recurring income.

A banking stock will do. HSBC #5 is a luxurious gift for $50,000 per a board lot of 400 shares, at $125. i am pretty sure she would like it. If you get her a Cartier watch, she would probably say you have wasted the money. But i bet she won't say so should the money be spent on HSBC shares.

Hang Seng Bank #11 is more affordable, for $10,650 per board lot. It offers a 4.9% dividend yield, at $106.5, but only modest growth prospects. It has a price-earnings multiple of 18. HSBC, at $126, trading at about 14 times prospective earnings and yielding 4.4%, is preferred.

If the gift is to bring her excitement, your pick should provide a sense of ownership for a business that she appreciates. After all, owning a stock is not different from owning a share of a business. The gift could be shares of TVB #511, Tong Ren Tang #8069, Wing On #289, Lam Soon #411 and etc. Again mind the minimum price for an investment in TVB.

Whenever she turns on the TV, she will realize that she owns a bit of the broadcast business. Nevertheless, she will not have the voting rights for the ending of the dramas, or the choice of news anchors. What a pity!

Does the recent share price rally have anything to do with the successful Korean big-hit "Jewel in the Palace"?

TVB traditionally trades at premium valuations, probably due to its prominent market presence. At $39.9 per share, it trades at about 21 times prospective earnings, not particularly attractive. Maybe, leave it for the next Mother's Day.

Tong Ren Tang would be an interesting pick. Listed in 2000, this Chinese-medicine company has a strong balance sheet, a proven track record, rising dividend payouts and strong branding. At $14.75 per share, Tong Ren Tang trades at an undemanding 13.2 times prospective earnings. For the first quarter of the year, net profit rose a mild 4% from the same period last year. The recent weakness of the share provides buying opportunities.

Moms, receiving this gift, might suddenly become more health-conscious than ever. For those who have already been loyal customers, they would comfortably hold the shares.

Quam has recommended Wing On for quite a while. i won't bother to repeat why. One should be aware that its major profits come from rental income, rather than its legendary department store business, which recorded losses in 2003. Office rents in Hong Kong and Australia are important factors to look at.

On the other hand, while Lam Soon is famous for its "Knife" and "Red Lantern" brand edible oils as well as "AXE" and "Labour" brand detergent, its detergent business has been making losses. Mothers should have known what has gone wrong with its detergents.

Last but not least, you may buy her your favorite pick and show her what a brilliant investor you are. And let her share the profits from the hard work in your research. She must be proud of you, unless your investment turns sour.

Wish you a wonderful Sunday with your family. From then on, perhaps, investment will become a hot talking point.

(Disclosure of interest: I hold shares in HSBC)
May 5, 2005
Copyright Quamnet