The hysteria around where I am, is almost laughable. People are hoarding toilet paper like it will give them immunity to Coronavirus! So, get a grip!
So, I am thinking that if people hoard toilet paper as a gut reaction to a virus, then certainly everyday retail investors are capable of selling way beyond what the current situation calls for.
Unfortunately for me, I own a lot of lower-tier stocks, stocks that are in emerging markets and the cheaper stocks in developed markets. So my stocks have actually dropped farther than the market as a whole.
Below are four of my holdings. Notice that they all yield dividends way above average. All four of these companies have improved earnings. All four of these companies have increasing earnings. Tachibana Electech (8159:TSE) is in fact is a netnet. This means that it is worth more dead than alive! While I do realize that the coronavirus crisis will materially impact Tachibana Electech — the company issued a profit warning for the current quarter — nothing that happens this year should take 35% off the valuation!
Lewis | Tachibana | Riken | EUPIC | |
---|---|---|---|---|
Price | R 23.81 | ¥ 1248.00 | ¥ 1770.00 | € 3.38 |
Shares (M) | 80.3 | 26 | 23.6 | 27.5 |
Earnings TTM | 398.1 | 4422 | 3857 | 10.9 |
Marketcap (M) | R 1911.94 ($ 117.30) | ¥ 32448.00 ($ 306.11) | ¥ 41772.00 ($ 394.08) | € 92.95 ($ 103.17) |
ROE | 8.3 | 6.3 | 8.3 | 8.3 |
PE | 4.8 | 7.3 | 10.8 | 8.5 |
PTBV | 0.43 | 0.46 | 0.96 | 0.79 |
Div Yield | 10.46 | 3.85 | 2.2 | 3.85 |
Price / NCAV | - | 0.73 | 1.36 | - |
While we always suspect the market is due to get a shock that will cause a drop, where the shock comes from is near impossible to guess with any certainty. I never thought that when the 10 year run ends, the shock would come not from geopolitical or world economic events, but from a germ!
In 2009 when the world was suffering a financial meltdown, I read up on the great depression, and tried to draw parallels. I found there weren't that many similarities.
Fatalities | % of World | |
---|---|---|
1918 Flu | 50 M | 3 |
1958 Asian Flu | 2 M | 0.06 |
1962 Hong Kong Flu | 50 M | 0.03 |
2020 Coronavirus | 10,000 so far | 0.0001 |
Sure, the world economic output could be reduced significantly because of the Coronavirus, but probably only for two quarters. China, the vanguard in this crises, is already starting to stabilize its new infection rates. I wouldn't be surprised if things go back to 3-6 months there. And my feeling is the lessons learned when this crises is over will spur new economic activity in the health care and infrastructure sector to prepare for the next one. Also, lost production can be recovered when the world consumer market returns back to normal.
But many in the world will not try to rationalize the situation and instead make a sport of hoarding toilet paper and other necessities. It is in our human nature to do something active when danger is lurking and is out of our control. And really there is no harm in doing so. However, the same mentality cannot apply to retail investing, because the market will be rational in the end.
Today, the S&P 500 is down 25% from the peak because of a germ. I think this is definitely the time to be contrarian like Baron Rothschild, who famously said: "Buy when there's blood in the streets, even if the blood is your own.".