Executive Investment: Why I like retail stocks

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Executive Investment. (Photo credit: Wikipedia)



The constant feed of information is one of the reasons why retail stocks are likeable, albeit the volatility may not be for the faint-hearted. Take a stock say Capitaland (Singapore) and you will see its ebb and flow performance over an entire year that goes from close to S$2 to as high as about S$4. A difference of S$2 represents both potential earnings as well as heart-stopping/wrenching situations. Some people think that the more information they have, the better it is for them to capitalise and trade; therein creating a great deal of volatility, which is what they detest. Although there is a thin line between investors and gamblers in this sense, I would personally define investors as those with a longer time-horizon. In essence, feeding off a minute-by-minute move as a retail investor puts you on the same page as one betting on a horse race.


You have to understand as a retail investor that there is a macro environment affecting the market and if you are going to deal with it, you will have to be prepared to live with the consequence of taking too short-term a view, because there is no mercy in this environment. Remember that no money is “lost” in that sense; it only trades hands. Whatever the trading times is, the fundamental of trading remains unchanged and this is your opportunity gap. You must learn to read and ride the wave. When plunging, don’t start pulling the trigger. The key is patience, which lies in waiting. If you pull the trigger on the investment at this point, you might as well join the folks at the races. Treat volatility as an ally, not an enemy to be feared.


Ok, when should I dive in?


Wrong question. This seems like a gambler’s bet, which you must be prepared to lose. Check the fundamentals, and diversify. This is a standard view. A renowned investor once said that he does not like to diversify because if he knows that something is good, then the point is to step into it fully. Let’s leave that perspective to that investor, because the truth is if you put all your eggs into one basket, you are guaranteed nothing but broken eggs when the basket drops. Pick one company with good fundamentals, and when they have missed something in a season which is reflected in earnings, get in, and when you do, do so for the long term. Customers of that particular company will continue to be buying from it because of its fundamental product/services, and will be doing so in the long term, so your entry point should be decisive. If it has retail outlets, visit a few stores and see how their items are discounted during a sale, and the length of the queue. This gives you a sense of the heartbeat of the business.



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