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Clearly, the title above may elicit some gasps of astonishment and surprise amongst readers, as the thought may not have crossed their minds that this is a “bull market”. However, during the last few months, it has become more noticeable that share prices have, in general, been moving upwards. Despite the gloomy and often depressing news, there were also bits and pieces of positive “green shoots” peppered in between which would make one smile and feel optimistic. Overall, the feeling is one of general caution and most investors would feel some measure of trepidation and would hesitate before jumping in. Or perhaps I am wrong? If one observes the recent Top 30 volume, one will notice that they are mostly made up of penny stocks, and these are businesses which frequently need to raise cash and are at most worth a punt. However, they continue to dominate the Top 30 Volumes listing with a very high churn rate, and supposedly are being traded in large volumes by large institutional players and small-time retail speculators.
This all sounds well and good, or does it? The general sentiment is that things will begin to improve, but how does that factor into our analysis of the businesses we hold? In order to answer that, one must constantly and consistently take a close look at the business to ensure everything is proceeding as planned, and that the numbers still look respectable. There have been many cases of “buy and forget”, which have resulted in an initial investment dwindling to 10% or less of its value (and in worst-case scenarios, the company goes bust and the investor loses everything). If one has taken a close hard look and is assured that all is well, the next question to ask would be – should I continue to add to my position at current valuations or should one adopt a “wait and see” attitude? Clearly, there is no definitive answer to this million-dollar question, and one must use one’s professional judgement as well as experience in reviewing business affairs to make an informed decision.
All is made much more difficult in the case of a bull market, where “a rising tide lifts all boats”. In the last 2-3 months, it has been observed that valuations had risen steadily as economic conditions reverted closer to the long-term average, and when a strong rebound in the economy and growth was anticipated. Read more...[caption id="attachment_1319" align="alignright" width="150" caption="Photo by azrainman"][/caption]
Clearly, the title above may elicit some gasps of astonishment and surprise amongst readers, as the thought may not have crossed their minds that this is a “bull market”. However, during the last few months, it has become more noticeable that share prices have, in general, been moving upwards. Despite the gloomy and often depressing news, there were also bits and pieces of positive “green shoots” peppered in between which would make one smile and feel optimistic. Overall, the feeling is one of general caution and most investors would feel some measure of trepidation and would hesitate before jumping in. Or perhaps I am wrong? If one observes the recent Top 30 volume, one will notice that they are mostly made up of penny stocks, and these are businesses which frequently need to raise cash and are at most worth a punt. However, they continue to dominate the Top 30 Volumes listing with a very high churn rate, and supposedly are being traded in large volumes by large institutional players and small-time retail speculators.
This all sounds well and good, or does it? The general sentiment is that things will begin to improve, but how does that factor into our analysis of the businesses we hold? In order to answer that, one must constantly and consistently take a close look at the business to ensure everything is proceeding as planned, and that the numbers still look respectable. There have been many cases of “buy and forget”, which have resulted in an initial investment dwindling to 10% or less of its value (and in worst-case scenarios, the company goes bust and the investor loses everything). If one has taken a close hard look and is assured that all is well, the next question to ask would be – should I continue to add to my position at current valuations or should one adopt a “wait and see” attitude? Clearly, there is no definitive answer to this million-dollar question, and one must use one’s professional judgement as well as experience in reviewing business affairs to make an informed decision.
All is made much more difficult in the case of a bull market, where “a rising tide lifts all boats”. In the last 2-3 months, it has been observed that valuations had risen steadily as economic conditions reverted closer to the long-term average, and when a strong rebound in the economy and growth was anticipated. Read more...
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Clearly, the title above may elicit some gasps of astonishment and surprise amongst readers, as the thought may not have crossed their minds that this is a “bull market”. However, during the last few months, it has become more noticeable that share prices have, in general, been moving upwards. Despite the gloomy and often depressing news, there were also bits and pieces of positive “green shoots” peppered in between which would make one smile and feel optimistic. Overall, the feeling is one of general caution and most investors would feel some measure of trepidation and would hesitate before jumping in. Or perhaps I am wrong? If one observes the recent Top 30 volume, one will notice that they are mostly made up of penny stocks, and these are businesses which frequently need to raise cash and are at most worth a punt. However, they continue to dominate the Top 30 Volumes listing with a very high churn rate, and supposedly are being traded in large volumes by large institutional players and small-time retail speculators.
This all sounds well and good, or does it? The general sentiment is that things will begin to improve, but how does that factor into our analysis of the businesses we hold? In order to answer that, one must constantly and consistently take a close look at the business to ensure everything is proceeding as planned, and that the numbers still look respectable. There have been many cases of “buy and forget”, which have resulted in an initial investment dwindling to 10% or less of its value (and in worst-case scenarios, the company goes bust and the investor loses everything). If one has taken a close hard look and is assured that all is well, the next question to ask would be – should I continue to add to my position at current valuations or should one adopt a “wait and see” attitude? Clearly, there is no definitive answer to this million-dollar question, and one must use one’s professional judgement as well as experience in reviewing business affairs to make an informed decision.
All is made much more difficult in the case of a bull market, where “a rising tide lifts all boats”. In the last 2-3 months, it has been observed that valuations had risen steadily as economic conditions reverted closer to the long-term average, and when a strong rebound in the economy and growth was anticipated. Read more...
