I have a monkey mind which yearns for action and immediate results. I check the stock price frequently, hoping to see some movements. A lot of time as I put in our money in an investment idea, I hope to see it moves up soon. Of course, having been in the market for many years, I know the above doesn’t work. It just does not make sense that the market will move in my favour, just because I put my money in it.
I am not going to resist my monkey mind but being aware of it allows me to take actions so that I am not affected by it. In my journey of investing, I think that one way to stay unaffected by daily price movement is to set a time frame in mind when putting in the money. If you believe investing is being a part-owner (though an extremely small one), then the focus will always be on the business. And if you are a business owner, it is hard to fathom that one would expect the business would grow linearly every year.
Last week, I decided to take a look at Valuetronics price movement as it has been pretty volatile over the past month. I computed its price over the past 20 trading days, past 12 months and past 12 years and the diagram below shows its movement.
As seen, the daily and monthly charts show a lot more volatility, while the year chart show a general uptrend. Basically, if one check the price once a year, he would have miss the dramatic rise/drop of the prices. It also means that he won’t be able to pick it up when market offered it at $0.68 or sell it when market priced it at $1.08.
However, one would still earn a superb CAGR of 20% if he has bought it at $0.23 in 2011 and sold it at $0.83 last Friday. And that excluded the dividend received over the 6 years. I would have taken such return any time.
Valuetronics is a good example to the following statement made by Benjamin Graham.
“In the short run, the market is like a voting machine–tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine–assessing the substance of a company.”
A look at the corresponding fundamental data from Valuetronics shows that the company indeed has grown over the years.
The big jump in revenue and/or net profit came in the periods of 2011 – 2012, 2013 – 2014 and 2016-2017. Interestingly, the share price did not jump in 2012/2013 but the market re-valued the company in 2014/15. It is also interesting to note that its stock price did not drop from 2015 to 2016 when the group exited the mass LED market in 2015. So it can be seen that the market might not re-value the company immediately but it does eventually.
Going forward, setting a 3 to 5 years time frame for each of my investment idea will continue to be my approach. I know my monkey mind will want to see actions which I will just quietly acknowledge it. And the strategy of setting a time-frame will override my monkey’s mind desire.
1. Having a 3 to 5 years time frame does not necessarily mean I will hold the counter for that period of time. A lot still depends on my regular assessment of its business and the management of my portfolio.
2. This is not a call to buy Valuetronics. The recent drop in price is due to lower guidance from its main customer Philips Lightings. With the results coming this Friday (25 May), I do not know what Valuetronics will report and its outlook for the next financial year. So its price might not continue the yearly uptrend that it has shown.