Okay,
that was the first. The second is to have a future-oriented vision is useful
when we use the value investing method itself. As we know, the job of a value
investor is simple: find a good and cheap stock, then buy it, and then wait until its price goes up.
Meanwhile, if you don’t find those two criteria (good and cheap, because we are
usually in a condition where all good stocks are expensive), so you have to wait, alias keep your cash.
Note: This article is the second part of
the previous article which you can read it here.
So value
investors spend most of their time for waiting,
whether they wait to buy or wait to sell. But when they wait, they do not have
any vision, or cannot predict if the
price of a stock will eventually rise or fall in certain position. And they
only focus on the current stock price.
They usually become worried and eventually they make an error. Whether they
sell their stock in a hurry even though the stock can still go up, or the
otherwise, they buy it too fast, in a price where it may go down.
The real illustration
is, and I’ve presented it in the seminar class, in early 2015, a friend asked,
‘Mr. Teguh, is BBRI good to have in the long-term?
I
answered, ‘Yes BBRI is good, sir.’
Then he
asked again, ‘in its current (12,000’s) can I buy it?’
‘Not yet.
BBRI’s PBV is 3.0 times, and if it is based on my experiences, it’s
overvalued.’
‘So in
what price do I have to buy?’
‘It’s about
9000’s, sir. At that price, its PBV is 2.3 times, and indeed the lowest price
limit that BBRI ever have, especially when JCI is adjusted, its PBV is 2.3
times. Even it has ever reached 1.7-2.0 times’
‘From
12,000 to 9,000, it goes down 30%. Is it possible for BBRI to fall that low?’
‘Yes, it
is possible, sir. Indeed, it is more than possible.’
‘But,
don’t you say that BBRI is good? If a stock is good then how does it go down?’
‘Yes
indeed BBRI is fine, but it is overvalued at the moment. In value investing, no
matter how good a stock is it doesn’t mean that we may buy it at any price.’
 |
The logo of BBRI, which its stock is a must buy, every time JCI fell
|
But some
time later, BBRI rose again to 13,000 in April 2015. And that’s when my friend
asked about it again. I held my belief and said that unless it fell to 9,000, I
would not buy BBRI. However, because he might be afraid to miss the train, my
friend insisted on buying BBRI at 13,000’s.
But in
the same month, Jakarta Composite Index (JCI) went down, and BBRI also got adjusted to 11,000’s and kept
falling until reaching 9,000 in August. That’s when I bought it, although BBRI
sank once again to 8,000’s, but eventually it kept climbing reaching 12,000’s
in February 2016.
The
interesting part was in February 2015. As BBRI was in 12,000’s position and I
said that ‘BBRI will fall to 9,000’. But, no one believed in me, however one
month later, BBRI rises to 13,000s. Contrarily, when BBRI dropped to 9,000 in
August and I said ‘calm down, it will rise again’, but once again, no one
believed in me! Then the market was in a panic, and BBRI itself dropped fast to
8,000’s.
The main
point is when most investors only focus on a stock price at the moment without having any future idea in what position the
stock will move. Including that they won’t believe it if you say Stock A at
position of 500 will rise to 1,000, and the otherwise. Then few investors can
analyze the stock is undervalued or overvalued. Then, based on the analysis, then
he makes a vision the stock will finally fall or drop into a certain
position. Then why did I in February 2015 say that BBRI, which was at the
12,000, it would fall nearly to 9,000? Yes, because BBRI was at 9,000, based on
it’s the equity value then, it’s clearly overvalued. That’s the reason!
So that is, ladies and gentlemen, the importance of an investor to have
a vision, to be able to think far ahead! To value a stock not based on its current price, but based on its actual price. That is the point that makes the difference
between value investor with other market participants (growth investor, trader,
speculator, etc.). Another example is, if you notice, currently there many state owned enterprise (SOE) stocks move abnormally, some keep rising, and in a contrast, some keep
falling. And as usual, most market participants only value those stocks based
on their current prices, in which they keep buying SOE stocks doesn’t matter
if their fundamental is bad, while some of SOE stock which are falling down
are considered bad and their prospects are gloomy (usually because there are
bad news too), doesn’t matter if their fundamental are good, and they value
them as undervalued.
Well, now that you read this article, you know what
to do. Some tips, I mention a statement above ‘to see far ahead’. But often ‘to
see far ahead’ is not that far, but for the next few weeks or months. Based on
my experience, when you buy a stock at a cheap price, you don’t have to wait
for years like my story when I was a student. Then in order your vision (the
stock will eventually go up) to become true, its only in a few months. And
trust me, if you engage in the market for 2 – 3 years, then ‘a few months’ is
not that long. If you don’t believe it, now please check your calendar. It’s
now June! Or six months have passed since the beginning of the year.
What you should take a note is, some visions (in which whether the stock will rise or go down in
a certain price) sometimes it becomes
true, sometimes it doesn’t, but it’s
not a problem. Like explaining BBRI above, I only said that ‘unless it’s
price fall to 9,000, I will not buy BBRI’. It means that if after some moment
BBRI doesn’t drop from 12,000 to 9,000 but instead it keeps rising. And indeed
it is an case that an expensive stock keeps rising or in contrast, it is cheap
and its price keeps falling down. Then let it go, we don’t have to buy BBRI and
find another one, which its fundamental is equally good but its value is
cheaper. As a proverb says when a door is not open, and after we wait for a
long time it’s not still open, then we have to find another door.
But indeed, especially for the liquid blue chip
stocks, it rarely for them to keep going up or keep falling down, but instead,
they take turns to rise and drop in a matter of months. In other words, ‘the
vision’ you make is usually accurate, so the
risk is smaller than if you buy second liner stocks. In 2011, banking
stocks such as BBCA, BMRI, BBRI, and BBNI, moved stagnantly or fell down a bit,
as JCI at that year only increased 3.2 %, it even had a fall of 8.8% in a day
on October (but it rose again before December). But as their performances were
still fine, then only in a few months later in 2012, their prices soared
40-50%, when JCI only went up 12.9%.
Interestingly,
in 2016, most of the banking stocks have already gone down since the beginning
of the year when JCI rose about 5%, while their performance were still fine.
So what do you think???
Original article was written (in Indonesian Language)
in June 5, 2016. For inquiries,
please contact the author by email, teguh.idx@gmail.com.
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