Being contrary and an opportunist

Column box-John Mangun-Outside the Box

Contrary: not being in conformity with what is usual, perversely inclined to do the opposite of what is expected. Contrarian: a person who rejects popular opinion.

Contrarian investor: decisively going against prevailing market trends by selling when others are buying and buying when most investors are selling. When people say the stock market is going up, it means they are fully invested without more cash to buy, and the market then goes down. When people predict a downturn, they have already sold out, and the market can only go up.

Over the decades of investing in the stock market, I have tried to follow certain principles. Buy when prices are going up not down. A stock price bottom is found when the price shows a sustainable/verifiable uptrend, which is why I prefer looking at longer term price action. It is better to be the last one “in” and the first one “out”. You won’t make as much profit, but you will never be left holding an empty bag. There are more.

Stock prices go higher because buyers are willing to pay a higher price. Stock prices go down because buyers are not willing to pay a higher price. Buyers control the market; sellers are just along for the ride. Any other analysis does not have a connection to real world. All a seller can do is hope that there is a buyer out there willing to pay the asking price. Who has more control over the revenues of the company: the Board of Directors of SM Investments Corp. or the shoppers who did not go to the SMBF Three-Day Sale this past weekend?

Every merchandise buyer for a department store knows how critical it is to understand and follow the consumer “herd mentality.” It is the same in the stock market. The retail buyer never asks why consumers are buying a particular clothing style or color, but only which style and color is popular. If the stock price of a company that you think is a “dog” is going higher and you can profit from that movement, why would you waste any time worrying about how dumb investors are for buying that issue?

To be successful in business and the stock market, this is what you need to be and what your investment strategy should follow. “Opportunist: someone who tries to get an advantage from a situation without thinking about what is right.”

The idea that the Chinese use two brush strokes to write the word, “crisis” and that one brush stroke stands for danger; the other for opportunity is inaccurate since that comes from a Western interpretation. Crisis, (wēi jī) where (wēi) indeed translates to “danger,” to endanger. However, (jī) by itself doesn’t really translate to “opportunity.” (ji hui) means “opportunity,” but an accurate translation of (jī) by itself is more like “a crucial point, when something begins to change.” Therefore, in a crisis, be aware of the danger but recognize the prospective opportunity.

I favor opportunistic companies and I want to own them. “Airlines and telecommunications companies are likely to be among the first to benefit from the amended Public Service Act, which raised foreign ownership limits.” No problem with that.

But wouldn’t companies that seized opportunities as situations changed be better than those who depend on externals to change to their benefit? Example: Companies that started within a couple of weeks of the lockdown in March 2020 to move to home delivery. Although, many companies were forced to close some if not many large mall stores and are now being replaced by opportunistic others and possibly at a lower rent.

Importers being hurt by a lower valued peso exchange rate? What about a company that produces locally and then generates 80 percent of its revenue overseas in US dollars? Sounds like a potential winner? And what about using part of those dollars buying into US companies to produce in the Philippines and again earn foreign revenues?

Being an opportunist essentially means being at or even a little ahead of the curve. Being a contrarian investor means being awake to how people are reacting to that curve.

E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.


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