The Magazine for Asian Investors
What amazes me is when people who invest in stocks follow the calls of the media. The tendency to follow the latest trends of the stock market only because mainstream media brings it felt 24 hours a day is probably a well-known trick of the psychology of the masses. The problem is that by the time the mainstream media recognizes the trend, the big money has already flown and the stock may already be overpriced. That’s the way it is with stock market crashes when the media is all over the place about the carnage, but experienced investors know that this is the perfect time to get solid companies for discount prices.
Then why do small investors buy mostly when the stocks are overpriced?
Maybe you should look at it from the other side. For example, when I go shopping, the items that have discount prices are the most attractive to me. So why not apply the same mindset when buying stocks?
Does it make sense to buy an overpriced stock just because I know the brand? Probably not.
Should I base my investments and investment strategy on mainstream media news? Absolutely not.
I think you will understand that absolutely no one in the media or Wall Street has an interest in maximizing your stock gains. So it’s up to you to do your homework and not be swayed by trendy glitzy media reports about the latest stock trend.
For me personally? The best results I have achieved have been in sectors that were hated or that no one on Wall Street was interested in at the moment.
Because those very sectors that no one was interested in at the time were available at absolute discount prices. To name two recent sectors where I had more than good results were hydrogen and uranium. The stocks in the uranium sector, in particular, were absolutely cheap and the fact that they were hated for a long time, but are essential to our electricity production, was actually a no-brainer.
And if you take a closer look at which commodity did best this year, you’ll find that hated thermal coal did best this year. The price of natural gas has skyrocketed and of course, good old crude oil has been steadily rising since the COVID pandemic. Fossil fuels are at the top of our governments’ list of most hated things right now. Unfortunately, the average citizen likes his car to start, his electrical appliances to work and he likes to be warm in winter.
What is added is the risk factor that most have in mind when investing in stocks. Now if you have studied a company and you are absolutely convinced of it then the biggest risk for you is probably to buy too expensive. If you buy the stock at the high then the probability and also the risk is high that you will never make a profit. Don’t worry, I made that mistake more than once in the beginning and I am not proud of it. When I invest in a company I am convinced of, the biggest risk for me is to buy too expensive.
So look at the financials and look at the metrics. Good indicators for me are the P/E ratio, cash flow, earnings, assets, debt situation, insider purchases, or even the cost structure and the cost structure of the industry. An industry or company whose costs are higher than its earnings cannot survive for long. For example, if oil producers need a minimum oil price of $50 per barrel to cover their costs, but the oil price is only $20 per barrel. Then in the long run there are two scenarios, either we stop using transportation that requires gasoline or the price has to rise. Given our current society, only the second scenario can be possible.
I think you understand what I am getting at.
Find good solid companies and buy them for a discount price and you will in all likelihood be well off.