All About Price: The Concept Of Freehold

This is part of my intermittent series on price, one of the most important and commonly encountered considerations in investing and trading. For this post, I will be touching on a relatively local concept called “freehold”.

Picture generated by Meta AI

 

“Freehold” on Securities

While it is a term associated with properties, the word “freehold” in securities investing meant that the returns, be it capital and/or income via dividends/distributions, had covered the initial amount of the investment. Any further gains from the securities in question were treated as “free”.

The origins of the use of the word in this context were unknown to me, but the best I could surmise was probably a mix of the view of an investment paying it off itself, and the sense of freedom of doing whatever one wants with the extra returns. It is akin to having a stock price achieving a “two-bagger” status, i.e., being doubled in its value.

What to Do After

Though the freehold status has been achieved (and enjoying the moment of “full of win” feeling), the next immediate thought would be what one is going to do about it. A common approach would be to sell off the excess above the initial investment or deploy later dividends/distributions received into other asset classes or securities, but this action would be very much dependent on circumstances. 

For example, if there is further room for the share price to grow, or if even after reaching a two-bagger status, the book value of the share is not reached, then it is wiser to keep them in place. Another is that if there are no alternative or incentivising assets or securities to invest in, and one’s portfolio is not due or relevant for rebalancing, then it is prudent to just leave it as it is. 

If one has multiple portfolios (i.e., the Portfolio Multiverse concept), the choice of divesting the excess and channel them to other portfolios is plausible (e.g., trading, CPF, SRS, etc.). This could work for dividends/distributions received, too, since they are cash in nature and liquid enough to move around.

The Bedokian’s Experience

One of the rare moments which compels me to practice the “selling of excess” was our partial divestment of Apple and using the proceeds to initiate a trading (and subsequently investing) position into Nvidia back in March 2024 (which I shared here). Ironically, in the same link, I had also shared that we had bought back Apple (it had hit our entry price) around a month and a half later after selling some away. 

On hindsight, it turned out to be a good move as our first Nvidia tranche had returned more than 100% (freehold!) while it would just gain around 50% had the capital remained in Apple.

 

Check out the other posts in my All About Price series.

All About Price: Introduction & Valuation of Value 

All About Price: Buyer/Seller Remorse and Premorse

All About Price: The 52-Week High/Low

All About Price: Reversion To The Mean

All About Price: Bottom Fishing

All About Price: The (Price) Margin Of Safety

All About Price: The Price Ratios

Disclosure

The Bedokian is vested in Apple and Nvidia.

Disclaimer

Introducing The Growth Indicator App

Click on the picture above to access the app!

In The Bedokian Portfolio eBook, I had written about guidelines on selecting value, income and growth equities, real estate investment trusts, etc., using financial data like price-to-earnings ratio, dividend yield, free cash flow, etc.

 

Though there are screeners available out there to assist in the research, it could be tedious sometimes when some information is not readily available.

 

With the advancement of artificial intelligence (AI), specifically in the field of large language models and scripting powers, I had developed an app that could generate a graphical screener akin to traffic light signals in simplifying and visualizing the selection guidelines for growth investing¹.

 

And I would like to introduce the Growth Indicator app, right in our newly created Apps page link above.

 

Below is a screenshot of a query output for Microsoft on the Growth Indicator (click for a larger view):

 

And yes, the app is FREE.

 

However, do understand that this app is for educational and reference purposes only, and does not constitute financial advice. A thorough fundamental analysis is needed, especially on other quantitative (e.g., further analysis on income statement, market share percentages, etc.) and qualitative (sectoral trends and inferences on macroeconomic effects, etc.) data.

Disclosure

The Bedokian is vested in Microsoft.

 

Disclaimer 

1 – The Bedokian Portfolio (2^nd ed), p151-153

 

Generation (Of) Alpha

Though the title may sound similar, this is not about a post on people who were born in between the entirety of 2010s and early 2020s. Rather, we are exploring the financial parlance for the word alpha, which is the excess above market returns.

Picture generated by ChatGPT

Using one of the U.S. markets’ indices as an example, the S&P 500, it returned around 17% for the whole of 2025. Meanwhile, Nvidia, a constituent of the S&P 500, returned close to 36% for the same period. Thus, the alpha generated by Nvidia was 36 – 17 = 19%.

Alpha is relative to a selected benchmark index, so choosing the right benchmark is important for accurate interpretation. In the above example, though the S&P 500 was used, other major indices like the Dow Jones 30 and NASDAQ could also be utilised as they are the main representations of the U.S. market in general (which Nvidia is part of as well). Conversely, although the Russell 2000 is a major index, it is not appropriate to compare it with Nvidia, a large-cap counter, for alpha as the former is the primary benchmark for small-cap equities.

On top of individual companies, alpha can be calculated on whole investment portfolios, too, in gauging performance. For instance, a portfolio made up entirely of U.S. equities could be compared with the S&P 500 or Dow Jones, and a portfolio of Singapore counters could be used with the Straits Times Index. Sometimes a mixed local-foreign portfolio is weighed up against relevant indices. Ultimately, it is up to the individual investor on which to apply on, provided it is relevant and reasonable.

Generating alpha on a portfolio level requires the employment of active investing, be it via individual counter selection and/or going into active funds. On a multi-portfolio level (e.g. the Portfolio Multiverse concept), on top of what was suggested in the previous sentence, the Trading Portfolio is a way to do so, in which it may be a possible option for passive investors with index funds in the main portfolio. Another way for passive investors is either to adopt a core-satellite structure (core of passive index funds with satellite of active funds/individual securities) or to create another portfolio for active investing. The combinations are varied and flexible.

For our Bedokian Portfolio, we adopted the core-satellite methodology, and some of our satellite counters are part of index exchange traded funds (ETFs) in our core; while this may be viewed as an overlap (e.g. “why buy Nvidia when you already have the S&P 500 ETF?”), the securities were selected based on different merits. For this case, we have the S&P 500 for U.S. market exposure, but we are vested in Nvidia for the artificial intelligence growth potential with its chips, subject to our own weightage limit for individual company counter (i.e., the 12% limit). This is one of our ways in the generation of portfolio alpha.

Disclosure

The Bedokian is vested in the S&P 500 via the SPY ETF, and in Nvidia.

Disclaimer

How The Bedokian Conducts Fundamental Analysis

Fundamental analysis (FA) refers to the process of examining a company to assess its suitability for investment. According to The Bedokian Portfolio eBook, there are three tiers in FA: financial statements, environmental factors, and economic conditions. The analysis can be conducted using either a top-down or bottom-up approach.

 

Picture generated by Meta AI

At the financial statement level, the company's income statements, balance sheets, and cash flow statements are looked at. Environmental factors are considered the "playing field”, encompassing elements such as competitors and governing regulations; the so-called "rules of the game”. Economic conditions refer to broader influences, including inflation rates, geopolitical developments, and other macroeconomic variables.

 

To detail the entire FA warrants writing a separate book, to which there are already a lot out there, and FA is not a one-size-fits-all kind of thing, hence I only scoped it to ratio analysis according to my selection guidelines. I had quoted this in my eBook: “…a full FA is to be carried out in conjunction with the selection guidelines” (it is at page 102 by the way), so it needs to work together with whatever FA being employed. However, some readers might find it incomplete since I left out much material.

 

In this post, I will outline my selected methods in conducting financial analysis, along with further perspectives on qualitative elements, particularly those extending beyond financial statements.

 

Valuation Methods

 

The eBook introduces several financial ratios, including the price-to-book (P/B), price-to-earnings (P/E), and P/E-to-growth (PEG) ratios.

 

The P/B ratio is often applied to most Singapore Exchange (SGX) listed equities, as some blue chip stocks are described as being traded "within the P/B band”, which is calculated based on standard deviations.

 

For equities in other regions, particularly growth-oriented stocks or those listed in United States (U.S.) markets that are seldom near their P/B, the PEG ratio is employed instead.

 

The P/E ratio serves as a comparative tool for ranking companies within the same sector or industry. Dividend yield is also considered, especially for dividend-focused investors like us, with a preference for yields that exceed the 10-year average inflation rate, though exceptions may be made for U.S. stocks, which typically have lower yields than local ones.

 

It is important to note that these ratios provide only a partial perspective, reflecting just a snapshot based on current or historical data. Further analysis of the numbers behind these ratios is essential, which involves reviewing financial statements such as revenues, net profits, and free cash flows. While valuation techniques like discounted cash flow (DCF) and dividend discount models (DDM) are recognised, I do not apply them often due to the numerous assumptions required.

 

Environmental Factors

 

Often referred to as the playing field, assessing a company's position within its sector or industry typically involves comparison with peers. This process can be complex due to overlapping business activities; for instance, while Coca Cola and PepsiCo are leading companies in the cola beverage sector, PepsiCo also operates in snacks and potato chips, whereas Coca Cola primarily focuses on beverages. Similarly, Apple and Samsung, prominent smartphone manufacturers, offer additional products not always in direct competition, such as televisions.

 

To enhance these comparisons, alternative data sources can be useful. Market share reports from research firms provide relevant statistics, though recent or detailed information may require paid subscriptions; however, some figures are available through financial news outlets. Company projections shared in quarterly and annual reports offer insights into expected developments from the management's perspective. In addition, primary data collection, sometimes called ‘scuttlebutting’, can provide personal observations that supplement formal research, such as noting the prevalence of certain products in specific regions (e.g., my observation of a lot of iPhone users in Japan).

 

Environmental factors also play a role in evaluating companies, including the concept of an economic moat described by Warren Buffett. While monopolies typically have significant moats, there is the risk of antitrust actions by regulators; thus, attention is often given to near-monopolies, market leaders, or brand leaders within a given industry.

 

Economic Conditions

At this level, outcomes are often unpredictable due to factors that are outside of our direct understanding or control. Here, analysts, economists, and fund managers frequently provide predictions (read: guesswork) based on available information, which may influence the analysis of the underlying tiers, i.e., environmental factors and financial statements.

 

Given the uncertainty, “guesstimates” (guessing + estimates) are generally made by referencing historical precedents and current data, though these assessments may not always be accurate. Some developments can be anticipated using macroeconomic knowledge—such as expecting interest rates to increase during periods of high inflation—while others, such as unexpected global events (e.g. COVID-19) or shifts in trade policies (e.g., tariffs), are more difficult to foresee.

 

Being adaptable in response to likely future changes allows for strategic decisions, such as applying associative investing methods (page 137-138 of the eBook), to potentially benefit from emerging opportunities.

 

Wrapping Up

 

The points above outline my general approach to FA, though my methods may vary based on the company, sector, region, or country being researched. While some FA tools and figures are standard, it is often tailored to each situation since perspectives and interpretations differ among investors.

 

Disclosure

The Bedokian is directly vested in Apple.

 

Disclaimer

 

All About Price: The Price Ratios

This is part of my intermittent series on price, one of the most important and commonly encounters considerations in investing and trading. For this post, I will discuss about the various financial ratios that has price as a component.

Picture generated by Meta AI

There are five main types of ratios with price as a major component, which I let Gemini AI handle the descriptions (output displayed in a different font):

1. Price-to-Earnings (P/E) Ratio:

• Formula: Market Price per Share / Earnings Per Share (EPS) 
• Interpretation: A higher P/E ratio suggests that investors are willing to pay more for each unit of earnings, potentially indicating overvaluation or high growth expectations. A lower P/E ratio may suggest undervaluation or lower growth expectations. 
• Example: If a company's stock price is $50 and its EPS is $5, the P/E ratio is 10 (50/5). 

2. Price-to-Book (P/B) Ratio:

• Formula: Market Price per Share / Book Value per Share
• Interpretation: Compares the market price of a stock to its book value (assets minus liabilities). A P/B ratio above 1 suggests the market values the company higher than its net asset value.
• Example: If a company's stock price is $20 and its book value per share is $15, the P/B ratio is 1.33 (20/15). 

3. Price-to-Sales (P/S) Ratio:

• Formula: Market Capitalization / Total Sales (or Price per Share / Sales per Share)
• Interpretation: Indicates how much investors are willing to pay for each dollar of a company's revenue. Lower P/S ratios may suggest undervaluation or that the company is not effectively utilizing its sales.
• Example: If a company's market capitalization is $100 million and its total sales are $50 million, the P/S ratio is 2 (100/50). 

4. Price-to-Cash Flow (P/CF) Ratio:

• Formula: Market Price per Share / Cash Flow per Share
• Interpretation: Measures how much investors are willing to pay for each dollar of a company's cash flow. It can be a more reliable indicator than P/E ratio because cash flow is harder to manipulate than earnings.
• Example: If a company's stock price is $60 and its cash flow per share is $10, the P/CF ratio is 6 (60/10). 

5. Price-to-Earnings-to-Growth (PEG) Ratio:

• Formula: P/E Ratio / Expected Earnings Growth Rate
• Interpretation: Helps to assess whether a stock's P/E ratio is justified by its future earnings growth. A PEG ratio less than 1 is generally considered favorable, suggesting the stock may be undervalued relative to its growth potential.
• Example: If a company's P/E ratio is 20 and its expected earnings growth rate is 25%, the PEG ratio is 0.8 (20/25). 

 

These ratios are usually available from most stock screener sites, or one could calculate the numbers based from the stock market prices and financial statements.

Generally, the lower these ratios are, the better the company’s valuation is, ceteris paribus, though a whole lot of relativity and context are needed in an actual analysis. They should be utilized as a guideline, not as a major dealbreaker when selecting companies to invest in.

The All-In-One Price Ratio

Conversely, during my specialist diploma course days (read here for more details about my view and experience of the course), a lecturer had briefly spoke about using the various price ratios and aggregate them to a score, which I dubbed it as the “all-in-one price ratio”. While I did not get more details on this other than a short mention, perhaps this may be my next side project in deriving “the number”.

Check out the other post in my All About Price series.

All About Price: Introduction & Valuation of Value 

All About Price: Buyer/Seller Remorse and Premorse

All About Price: The 52-Week High/Low

All About Price: Reversion To The Mean

All About Price: Bottom Fishing

All About Price: The (Price) Margin Of Safety

Inside the Bedokian’s Portfolio: ASML

Inside the Bedokian’s Portfolio is an intermittent series where I will reveal what is actually inside our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will talk a bit about the counter, why I had selected it and what lies ahead in the future.

For today’s counter, I had only just added it last week and that is Advanced Semiconductor Materials Lithography Holding N.V., better known as its shortened name ASML.

Partial screenshot of ASML 2023 Annual Report cover. Source: ASML

A Global Player

ASML was founded in the 1980s as a joint venture between two Dutch companies, one of which was the famous electronics company Philips. It makes photolithography machines that are crucial for the manufacture of integrated circuits, or chips/microchips in everyday speak. 

The past decade had seen ASML’s rise with pioneering technology such as the extreme ultraviolet lithography (EUV) process, which allowed smaller process nodes and subsequently more compact chips to be made. The ongoing artificial intelligence (AI) revolution had provided a critical supporting role for ASML in the whole scheme of things. 

A Holistic Analysis Approach

Granted that there were (and still are) many stock analysts, financial news channels, and investing and trading social media sites talking about ASML, it would be difficult not to be tempted to jump onto the bandwagon of like-minded ASML bulls. Thus, a degree of fundamental analysis was required before convincing ourselves to be vested.

Figure 1 shows selected financial line items for review, in particular revenue, net income, current and long-term debt, and free cash flow from 2022 to present.

Selected Financial Line Items (EUR, in millions)	Periods
	Trailing 12 Months	31 Dec 2024	31 Dec 2023	31 Dec 2022
Revenue	30,714.4	28,262.9	27,558.5	21,173.4
Net Income	8,702.8	7,571.6	7,839.0	5,624.2
Total Debt (current debt + long-term debt)	4,687.6	4,631.6	4,260.4	4,584.1
Free Cash Flow	9,283.7	9,083.1	3,247.2	7,167.5

 

Fig.1: Selected financial line items of ASML. Source: Yahoo Finance (as of 21 June 2025)

While revenue was increasing and total debt was kept around the same level, some of the small kinks encountered were the slight undulating net income and the large drop of free cash flow in 2023, the latter of which caused by a net effect of a larger amount of contract liabilities over contract assets. While the term “liabilities” may invoke some concerns, it is basically accounting treatment of payments and recognition of revenue.

As ASML is viewed as a growth counter, I used the growth investing selection guideline from the eBook¹ and apply to it, though I also threw in price-to-earnings ratio for an overall picture (see Figure 2).

Equity Selection Guideline	ASML
Price-to-Earnings (P/E) Ratio being the 25% lowest amongst other companies within the same sector/industry	ASML’s forward P/E of 27.55 is higher than industry average of 25.91
Price/Earnings-to-Growth Ratio of 1 and below	1.44 (5-year expected)
Operating Margin percentage being top 50% among other companies within the same sector/industry	ASML’s operating margin of 35.37% is in the top 50% among the same industry, whose average is 4.27%
Return on Equity (ROE) percentage being average among other companies within the same sector/industry	ASML’s ROE is 55.62%, above industry average of 11%
Positive free cash flow for at least the past three years	Positive as shown in Figure 1
Gearing ratio (Debt/Equity) is constant or reducing for the past three years	0.21 (up to Mar 2025) 0.27 (2024) 0.37 (2023) 0.53 (2022) Signs of reduction

 

Fig.2: Selected financial ratios and percentages of ASML. Sources: Yahoo Finance, Zacks, Gurufocus.com and Stockanalysis.com (as of 21 June 2025)

Though some of the ratios did not fit into the selection guidelines, such as PEG ratio > 1, and not being the average ROE percentage across the industry, certain liberties and discretions were taken to further the decision to go ahead with the investment; these are guidelines for conservative growth companies (stated in the eBook), and after all, most importantly, they are guidelines, i.e., not rules set in stone.

Another aspect that I want to bring in is the comparative figures used, like the industrial averages and P/E utilized, are sort of a red herring. The truest form of comparison is to find another company or sector/industry that matches closely to what ASML does, a not-so-easy task given that its closest competitors Canon and Nikon are conglomerates and their photolithography is just part of their overall operations.

This brings us to the next level of fundamental analysis after financial statements: environmental factors. ASML is a major player in the photolithography business commanding an estimated 90% of the global market share according to some sources, and its EUV process gave it a huge advantage over its other competitors. In gist, it is a near monopoly of its field. This is the major dealbreaker, plus its solid financial fundamentals, to make the buy call.

The Future 

The biggest concern on the future profitability of ASML is its role in the whole geopolitical arena. The United States government had pressured ASML via the Dutch government to restrict some of their latest photolithography machines for export to China, from where it derived 41% of its revenue for financial year 2024. This may be slightly compensated with the demand for semiconductors in other parts of the world, fuelled by the need for smaller chips with faster processing, and not forgetting the burgeoning world of AI.

Disclosure

Bought ASML at:

USD 747.00 at June 2025

Disclaimer

1 – The Bedokian Portfolio (2^nd ed), p151-153

Alphabet And Apple: Latest Quarterly Results

The past week had seen some notable technology companies reporting their quarterly earnings. For this post, I will look at the two holdings which I had declared must-haves for an investor who is venturing into the United States (U.S.) market for the first time, and we will see if this trend continues to be so.

Apple MacBook showing Google website (Picture credit: Firmbee from pixabay.com)

Alphabet

On 29 Oct 2024, Alphabet had announced stellar third-quarter earnings, with earnings per share (EPS) and revenue beating estimates by 14.6% (US$2.12 vs US$1.85) and 2.3% (US$88.27 bn vs US$86.30 bn) respectively. Overall, revenue increased by around 15% year-on-year (YOY), with the Cloud segment revenue jumped nearly 35% YOY. Other major segments such as Search Advertising, YouTube and Google Play increased 12%, 12% and 28% YOY, respectively.

The share price jumped to above US$180 before settling at US$172.65 by the week ending 1 Nov 2024. This represented a year-to-date (YTD) performance of +22.51%.

Apple

Apple announced their fourth-quarter earnings on 31 Oct 2024, with EPS and revenue beating estimates by 2.5% (US$1.64 adjusted vs US$1.60 estimated) and 0.4% (US$94.93 bn vs US$94.58 bn estimated) respectively. Services and iPhone revenue streams improved 16% and 3% YOY respectively, but the overall revenue reduced by 1% YOY, which was dragged down by MacBook (-34% YOY), iPad (-10% YOY) and Wearables (-3% YOY).

Apple’s share price dropped from the US$233-ish to US$222-ish, but YTD is still profitable at +15.78% by the end of 1 Nov 2024.

The Bedokian’s Take

Both companies share common characteristics with each other (besides sharing the same first letter): Both are part of the Magnificent 7 that saw huge growth over the past couple of years; both are leveraging on the rising trend of AI (artificial intelligence or Apple Intelligence) in their products and/or services; and both are magnets of suits from regulatory authorities worldwide and targets of policies in the current geopolitical landscape. These in my opinion are the make or slight break for Alphabet and Apple.

Valuation wise, Alphabet seems to be “cheaper” than Apple in terms of the Price-to-Earnings (PE) ratio. As of 1 Nov 2024, Alphabet’s PE ratio was at 22.9, lower than Apple’s 36.6, and the current S&P500 PE, which is to be seen as the “average”, was standing at 29.2. 

Though financially, the two are fundamentally strong in their balance sheets and free cash flow, the main concern for Apple is that it is facing a decelerating revenue growth. This would impact its valuation and subsequently may cause a downward pressure on its share price. Still, based on the latest number of active Apple devices worldwide, it climbed from 1.5 billion in 2020 to 2.2 billion in 2023¹, demonstrating its wide moat effect. As for Alphabet, it still holds market leading services like YouTube and search advertising, so the moat is relatively safe.

With the companies’ resiliency shown in their moat status, I still opine that they are good to go, though circumstantially for my case I would view it as an average up. A thorough fundamental analysis is still required on your end should you want to enter them for the first time.

Disclosure

Bedokian’s average price for Alphabet (US$131.43) and Apple (US$93.07) based on US$/S$ exchange rate of 1.32.

Disclaimer

1 – Laricchia, Federica. Number of Apple’s active devices in selected years from 2016 to 2023. Statista. 19 May 2023. https://www.statista.com/statistics/1383887/number-of-apple-active-devices/ (accessed 2 Nov 2024)