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Stock Analysis in 2mins (Ping An Insurance 2318.hk)

Hi Everyone,


As you might have observed in my Portfolio, my major shareholding is denoted in HKD. The bulk of my portfolio is mainly in China stocks. This is a sample format of what I look for in general when selecting winning stock. Of course, there are many more details but it is summarized into the below format for your easy reading.


So here it is a 2mins analysis of one of my favourite stock: Ping An Insurance (2318.hk):


Brief calculation based on the Original Benjamin Graham Formula:


V = EPS X (8.5 + 2G) where V = value, EPS = Earnings Per Share, G = growth

* Original formula used instead of updated for simplicity’s sake, value won’t differ much.


Average Net Profit Growth over 5years: 27.2%


Let’s be more conservative and discount it by 30%: 19.04%


Based on the formula: V = EPS X (8.5 + 2G) works out to be:

  • 5.98 X (8.5 + 2 X 19.04) = $278.55 in 7 to 10years time

Well, this is just a quick gauge for the overall picture but when to buy then?


When did I buy Ping An?


Bought it when PE was around 14 on various instances on Sep 15, Jan 16. That was when the news is flooded with negative China news such as the China debt bubble, triggering stock market circuit breakers and subsequently suspending it [1].


Quote from Warren Buffett "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."


Below are some examples of the accumulation of Ping An shares during Sep 15 and Jan 16. Ping An is currently one of my largest holdings. Currently, it is trading at HKD$70+ per share, dropped from HKD$90+ due to trade war fears.



Sep 2015 purchase

Jan 2016 purchase

Another good opportunity is when a good company made a temporary mistake.


Quote from Warren Buffett "The best thing that happens to us is when a great company gets into temporary trouble . . . We want to buy them when they're on the operating table."


During Brexit, Ping An has some exposure to some properties in the UK. Despite the announcement of Ping An Good Doctor and Lufax that subsequently will be IPOed, its stock price crashed which presents another good opportunity to accumulate. Fast forward a few years later Ping An Good Doctor IPOed. Ping An share price soared to HKD$90+ due to Good Doctor and Lufax hype.


Ping An is not the usual traditional insurance company that focuses just on insurance products. In my opinion, it is a “half-tech” company having 3030 patents, 400m internet users, involved in fintech etc as mentioned in the above analysis. Some of Ping An’s tech companies are still at the infancy stage and have not realized its full potential. Coupled with the megatrend and demographics in China such as the rising middle class, there is much more room for growth in the long run. Unlike most China insurance companies that are state owned, Ping An is the very first pioneering private Insurance provider that worked with Mckinsey in developing their businesses. Quite a huge feat for Ma Mingzhe to rise above the domination of most state-run companies. Happened to chance upon Forbes list of 2000 world largest companies. To date, Ping An ranked top 10 in the world [2].


Hm.. so is the US-China tit-for-tat tariffs / trade war a temporary problem?



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References

1. https://www.cnbc.com/2016/01/07/chinese-securities-regulator-suspends-market-circuit-breakers.html

2. https://www.forbes.com/companies/ping-an-insurance/

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