Stocks that languish

[Eager]

Why does it happen?

I know the market is bear-ish, but if one is smart enough to do some research, find a company with a blue-sky forecast that pays dividends as well, and currently trades at a cheap P/E, why wouldn't an investor buy into it?

Why does such a stock keep retreating?

Is the market dominated by get in/get out traders to the detriment of value investors?

I won't name stocks in case of the impression that I am trying to ramp them, but fair dinkum. Are people really that panic-stricken that they cannot see the value in companies that will ultimately reward them if it wasn't for the short-term thinkers?

 

[ROE]

Why does it happen?

I know the market is bear-ish, but if one is smart enough to do some research, find a company with a blue-sky forecast that pays dividends as well, and currently trades at a cheap P/E, why wouldn't an investor buy into it?

Why does such a stock keep retreating?

Is the market dominated by get in/get out traders to the detriment of value investors?

I won't name stocks in case of the impression that I am trying to ramp them, but fair dinkum. Are people really that panic-stricken that they cannot see the value in companies that will ultimately reward them if it wasn't for the short-term thinkers?

In the long run if the stock keep delivering increase profit their share price will go higher
bar none.

mean while it get trades at whatever going price the traders change hand...you got nothing to worry about if you know enough about the business and confident it can sustain earning and not going belly up any time soon...else someone may know more than you and short the stock or sell out

 

[Julia]

Hello Eager,

Your post assumes everyone buying or selling is a so called value investor.
They are not.

 

[McLovin]

Is the market dominated by get in/get out traders to the detriment of value investors?

You need to see the volatility as a benefit to value investors not a detriment.

 

[qldfrog]

another way of seeing this:
you own stock A you believe isworth at least $100 let's say;
was at $80 2 months ago, is going toward $60 today;
value investor or not, you are better off "trading" it, and get back into it as soon as it starts rising again;
I got this argument with a retiree friend of mine once;
Call me trader or not, there is no stigma in selling a stock you feel undervalued to buy it even cheaper in a month;
That is the way I saved my bacon during GFC #1

On the other hand, as discussed before, A might not be such a good value and you may not be aware of some info others have..but that is a different story

 

[Bill M]

Why does it happen?

I won't name stocks in case of the impression that I am trying to ramp them, but fair dinkum. Are people really that panic-stricken that they cannot see the value in companies that will ultimately reward them if it wasn't for the short-term thinkers?

People are really that panic stricken. There are several gurus/economists/traders/demographers/market commentators/tea leaf readers and the like calling for a wider crash for 2012 and as such people are running scared. Here is one of them, calling at least 3600 on the all ords and probably 3100 for 2012. If the video doesn't play you might need to create a log in.

http://www.finnewsnetwork.com.au/archives/finance_news_network19265.html

 

[Ves]

another way of seeing this:
you own stock A you believe isworth at least $100 let's say;
was at $80 2 months ago, is going toward $60 today;
value investor or not, you are better off "trading" it, and get back into it as soon as it starts rising again;
I got this argument with a retiree friend of mine once;
Call me trader or not, there is no stigma in selling a stock you feel undervalued to buy it even cheaper in a month;
That is the way I saved my bacon during GFC #1

On the other hand, as discussed before, A might not be such a good value and you may not be aware of some info others have..but that is a different story

What if the trend reverses and you have to re-buy it at $100 rather than the planned $60?

 

[Junior]

Why does it happen?

I know the market is bear-ish, but if one is smart enough to do some research, find a company with a blue-sky forecast that pays dividends as well, and currently trades at a cheap P/E, why wouldn't an investor buy into it?

Why does such a stock keep retreating?

Is the market dominated by get in/get out traders to the detriment of value investors?

I won't name stocks in case of the impression that I am trying to ramp them, but fair dinkum. Are people really that panic-stricken that they cannot see the value in companies that will ultimately reward them if it wasn't for the short-term thinkers?

The P/E may be cheap, and a strong dividend yield, but if market participants believe the overall economy is getting weaker, this could lead to lower earnings and lower dividends. This expectation may cause the share price to fall in the short term.

If earnings and dividends do continue to grow for your company, the share price will reflect that at some stage so just hang in there and happily accept your growing dividend income.

 

[Eager]

Thanks, all. It is obviously sometimes hard to keep faith in what you always thought were good decisions at the time, during times like this.

I probably sound like a buy-and-pray investor. That is a harsh moniker in my opinion, invented by those that resent people in for the long haul. Yes, I'm behind in some holdings, but for the reasons outlined in my original post I can still see value in them. It's just a shame that others can't!

 

[Julia]

Thanks, all. It is obviously sometimes hard to keep faith in what you always thought were good decisions at the time, during times like this.

So your original decision is set in stone? Despite massively changing global circumstances, you are going to stick with your original assessment? No room for reconsideration?

I probably sound like a buy-and-pray investor. That is a harsh moniker in my opinion, invented by those that resent people in for the long haul

So why is it a "harsh moniker"? Does not such an expression pretty accurately reflect your position?

. Yes, I'm behind in some holdings, but for the reasons outlined in my original post I can still see value in them. It's just a shame that others can't!

Why is it a shame? Why should others see stocks as you do? Why are they not equally entitled to e.g. regard capital preservation as the prime objective, something the so called value investors appear to completely disregard?

The above comments are not personally directed toward you, Eager. We all have the right to choose our own directions.
In the interests of furthering the discussion, your comments on the above questions would be good. No obligation, of course.

 

[Huskar]

Thanks, all. It is obviously sometimes hard to keep faith in what you always thought were good decisions at the time, during times like this.

I probably sound like a buy-and-pray investor. That is a harsh moniker in my opinion, invented by those that resent people in for the long haul. Yes, I'm behind in some holdings, but for the reasons outlined in my original post I can still see value in them. It's just a shame that others can't!

One definition of intrinsic value (proposed by the Chartered Financial Analyst Institute and quoted by Michael Kemp) is:

"The value that an investor considers on the basis of an evaluation of available facts to be the true or real value that will become the market value when other investors reach the same conclusion."

Inherent in this definition is the premise that market price differs from intrinsic value and that the value calculated is subjective, by which I mean it is specific to the person calculating the value. This fits your claim nicely: when the market realises what you know (eg that it is not in fact the end of the world, stocks will go up etc) then other investors will reach the same conclusion as you and reprice your stocks.

Of course it could be the other way round: when you realise what other investors know, your calculation will change pretty quickly...

 

[Eager]

One definition of intrinsic value (proposed by the Chartered Financial Analyst Institute and quoted by Michael Kemp) is:

"The value that an investor considers on the basis of an evaluation of available facts to be the true or real value that will become the market value when other investors reach the same conclusion."

Inherent in this definition is the premise that market price differs from intrinsic value and that the value calculated is subjective, by which I mean it is specific to the person calculating the value. This fits your claim nicely: when the market realises what you know (eg that it is not in fact the end of the world, stocks will go up etc) then other investors will reach the same conclusion as you and reprice your stocks.

Of course it could be the other way round: when you realise what other investors know, your calculation will change pretty quickly...

You make sense. Like!

To answer Julia - and thanks for provoking further discussion!: Yes, I'm stubborn, but not ultimately. I have crystallised losses before, just like everyone, but I tend to not sell at a loss nowadays - if I consider the signs to be good, I will hang on. I actually don't (often) use trailing stop losses for that reason. Case in point, I recently bought some WTP (when they'd flattened out; I though they had turned the corner), and on today's price I'm behind by over 15%, and I'm still confident that they will come good, and it's not a big deal in the short term because I always wanted to keep them for a while to maximise upside in growth as well as yield vs purchase price, but their continued softness means that eventual profits are compromised. I am of the opinion that they have been oversold, but until a heap of buyers jump on board, I can't prove that!*

Maybe I am a 'buy-and-prayer' after all, but so is anyone with superannuation that is not in 100% cash...does the moniker seem a bit harsher now?

On your third point, you are quite right, and that was actually quite a thought-provoking response. Maybe I can best counter it by saying that I'm not mad, the rest of the world is!

*I used that stock as an example; having recently bought it I'm not after a quick profit, but I could not see why it kept falling. No intention of ramping made.

 

[Julia]

Eager, that's a thoughtful and reasonable response. Would that we could have more such thought-provoking and ultimately mutually rewarding exchanges across the forum.

Instead, the usual modus operandi is aggression and defensiveness so that no one learns anything and no one adds to their overall knowledge.