The stock market went from bad to worse. Dow dropped another 100 points and looks to break the 11,000 level. This was caused by IndyMac incident, a name you and I not familiar with. Could more write down on the way? Yeah, if the situation does get worsen, then it might just go a bit lower.
The valuation now has gone from overvalued to undervalued. People seems to have build a high level of risk premium in the equity price. You just find your stocks keep dropping day by day. But my gut feel is if we are not at the bottom, we should be near there. Valuation is at rock bottom and the Asia growth story is not going to taper off just like that. It is bargain time and refrain from buying too aggressively, because you might be caught off guard by more bad news. What I would do is just to wait patiently, and if it really get ridiculous, I might be going in again to grab some. Just make sure you are not going to use the money you want to buy stock in 3 years time.
The growth outlook just got a little bit dimmer. How much the earning would fall is anyone's guess. I have seen quite a fair bit of earning downgrade already happened. The once high flying stock was brought back to earth, follow by the market condition and analyst downgrade. The problem with analyst is they tend to magnify the stock price swing. However, that is their job.
Investors are not going to assign high valuation to even the great stock. So, tread with care. You look at Sino Env and Swiber, the earning outlook still look pretty robust, but the valuation has come down really a lot. Would the environmental concern in China goes away when US economy is down? Not likely. Would the oil major stop their exploration work around the Asia Pacific if oil price down at $100? Not likely. Having said that, high beta stock is not for the faint hearted.
Sunday, 13 July 2008
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2 comments:
Hi Alen,
I browsed through the papers and magazines and I still see plenty of buy calls around. However, we must not be mislead that because the market has fallen, meaning that the stocks have become undervalued. At times like this, it is important to dig even deeper into a company financial statement. Time is also another critical factor, how long can we wait before the market or your stock pick up? It can be months or even years.
Cheers!
Derek
True. It is easier to issue buy call than sell. There is an expected slowdown on growth and that is being pricing into the share price.
Remember Buffett always pick up his company during the downturn. Because if you buy a fundamental strong company at the fire sale price, you just need patient for it to perform. But, of course, whether you are patient investor is another story.
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