Will your positions have the wherewithal to survive a $PSEI downturn of more than 500 points if we go further to new lows?
Is the business model truly broken such as what the stock prices and fears of the market are pricing in?
In a market sell-off where you find that everything is sold (whether earnings actually delivered better than expected, missed, or came in line), despite the burden of waiting a longer time – if you do indeed own prime real estate that was being valued at way below its replacement cost (such as insert stock here), if you have large tracts of valuable franchises that are selling for less than the value of its stake, if the demand would continue to grow and that their individual catalysts would emerge due to their own powerful earnings engines, then the odds of succeeding will be high despite bears shooting everything down.
However, if you’re holding to a losing stock with deteriorating fundamentals and has a broken business model to start with, lo and behold you have a wonderful opportunity to find other stocks marked down in price without those problems.
Financial crises whether brought about by Chinese yuan devaluation, sinking Malaysian ringgit, Malaysian scandals, Greek defaults will demonstrate with brutal efficiency just how irrational investors can be, especially in extreme situations and allow you to buy value when others will not trod.
This by no means is a difficult task. Let the sell flows continue and don’t be a hero. But listen to yourself, do you honestly think that all the companies that fell to new lows have truly broken business models? Or is there one or two from that pack that got sold down along with their flows and technicals?
In any case, it is for each person to do his own diskarte. Cash flows.
Some companies actually came ahead of expectations. Some have pre-sales levels being raised higher due to higher rental rates and occupancy rates. Not all earnings are cyclical. Some are actually defensive and recurring.
Try to get what you’re comfortable with , even if we will fall 20% lower. Be on the lookout for that possibility but don’t neglect that probability of finding great companies amidst this sell off.
Here’s the market screencast 🙂
- Faceless Trader