As fear lingers around the latest Coronavirus outbreak in China, I have chosen not to hop myself into the bandwagon of 'buy buy glove sector confirm rocket since China virus glove and plastic demand confirm up'. Glove sector was one of the few sector that I put in a lot of hours and here are a few reasons that I don't join the "rocket":
What style of investor are you? There are many types of investors around the world, but i group them together which is Value Investor, Growth Investor, Dividend Investor, and finally, Trader.
Value investing was largely made popular by Warren Buffet and his teacher Benjamin Graham, using Golden Rules such as buying a stock when they are under their intrinsic price or actual value, only buy the business that you understand, and buy businesses that has good future prospects.
Growth investing is an investing strategies that ignore high price-to-earning (P/E) ratio and continue to buy in trending stocks or sector that has bright prospect. A growth stock like Netflix as of January 2020 is at 108, but still gives a return of over 300% over a course of four years. Revenue is another great example of a growth stock, with its P/E reaching 60.
Dividend investors are normally consisted of investors with huge capital, investing in real estate investment trust (REITs) and seek dividend return over the years. Capital appreciation is minimal in this kind of investment.
Traders are those who use technical analysis and looks at candlesticks and charts to find uptrend or downtrend signals, like MorningStar, Evening Star, Doji, and etc. Typically traders hold for a short duration and seek for fast return.
I started as a value investor earlier in the days, and started to mix it up with growth investing together with some fundamental analysis. If you looked up in those groups, these are becoming more like a trend now. They call themselves "trending investors". I always remember words that I read in William O'Neil's How to Make Money in Stocks, it says When everyone is using that strategy, it's not going to work anymore'. That's the fact, you earn money by winning from those that loses. Of course when you have a lot of capital, you can control the market waves and sentiments, you can hire a team of analysts, get the fastest insider news, but what if you have limited capital, like me?
'If you can't hold a stock without looking at it "I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."
Yes, a virus outbreak could spur the demand in latex and nitrile gloves, but does it really improve the future prospects of the glove industry in long term? Does that increment in demand can offset so many uncertainties that the glove sector are still facing? Increment of raw material and packaging prices, natural gas prices, US dollar to ringgit exchange rate, labour rates wages increment... and so on. Will this outbreak really outshine all the uncertainties that the glove sector currently face? If you are still joining the rocket, I will not recommend you to not go 'all-in', but some Angpao money is always nice for Chinese New Year. Always remember average-down strategy!
well written...
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