Translated by Andrew Vanburen from: 現金為王也需止蝕機制 (中文翻譯, 請閱讀下面)
NO ONE would deny that having a few extra twenties in one’s wallet is a comforting feeling.
However, the notion that ‘cash is king’ can sometimes backfire for equity investors if they don’t have a build in stop mechanism, ie: spend like drunken sailors.
Someone with a lot to say on this is Mr. Isaac Sofaer, one of the best eyes in the business on spotting suspicious financial statements and accounting irregularities.
Mr. Sofaer himself has been a weekly contributor to online financial news portal Quamnet for over two years now, and he has recently been holding well-attended investment seminars to which I have been party at times.
His stock picks, from top to bottom, all have one thing in common: they are recommended ‘buys’ for their own intrinsic value and do not fall prey to macroeconomic conditions or negative trends overhanging a particular sector.
In other words, if a particular lender has a stellar balance sheet, strong earnings history and rosy outlook, what the People’s Bank of China decides to do Fridays after markets close does not affect how Mr. Sofaer feels about that particular bank pick.
He put forth an instructive snippet by way of explanation, citing a recent attendee's question.
“It is very hard to swim against the current in any facet of life. The background chatter can sometimes be deafening and often drowns out the truth of the object under scrutiny. With the downward spiral in valuations in Europe and the US and the growing clamor for those allegedly responsible for the failures to serve time, does this also mean cash should be shackled as well? Are not plummeting share prices a good time to jump into the market?”
Sofaer replied: “Opportunities come and go, often in the blink of an eye. Cash is indeed king, and I would never stand in the way of someone’s freedom to do with what is rightfully theirs as they deem fit. But before committing, you should ask yourself: ‘Is the crisis at its logical end? And is the price at its natural nadir?'
“Many investors will wait on the sidelines for ages after pulling out, always believing that their patience will pay off as the true bottom is only a trading day away. However, after sitting near the water’s edge watching the daily ebb and flow of the waves, before they know it the high tide is in and they are underwater with no chance to ride out the latest rise safely."
I believe one of the most salient points Sofaer makes is this:
“When a stock is reaching its perceived peak, most people bail out prematurely. So why does this same majority make the same mistake by latching onto a counter before it hits the floor? In fact, there is no such thing as the perfect buy-in time. It is all illusory and situated upon a shifting foundation.”
He adds that there are also no universally applicable litmus tests for determining when is the most ideal buying and selling opportunities, with conditions varying by sector, scale and individual investor characteristics.
And how does this all help investors in the Hong Kong stock market (or any other market, for that matter)?
Perhaps it does less to point to particular picks than it does to help instill discipline in our investing behavior.
Given the financial and budgetary crises enveloping major economies of the world and the subsequent heightened expectations we have for Wall Street, Fleet Street and financial institutions everywhere to show more accurate accounting and market discipline, it is not therefore reasonable to expect individual investors to display more discipline as well?
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(文: 黃國英, 豐盛融資資產管理部董事)
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