The snow falls quietly, the markets crash loudly?
Dezember 23, 2018 | Latest News
While the shops have been boosting the Christmas business for weeks now and customers who enjoy drinking mulled wine have been served at Glühwein stands, many investors are preoccupied with the question of all questions: Is there still a year-end rally? Why we don’t care about this question, and why you shouldn’t care about it either, can be read in our little Christmas article:
What do the big ones do?
While Microsoft, Alphabet (Google) and Amazon present gigantic figures, prices are falling for companies. Amazon has temporarily fallen by 25% compared to its annual high. Amazon is constantly announcing new records:
Amazon announces record-breaking holiday shopping weekend: Cyber Monday once again becomes the Single Biggest Shopping Day in the Company’s History with the most products ordered worldwide (…) Amazon Customers worldwide ordered more than 18 Million Toys and More than 13 Million Fashion Items (…) Sales by small and medium-sized businesses worldwide grew more than 20 % on Black Friday Year-Over-Year.
But not only US companies can look brightly into the future. Even if the bare figures don’t always reveal it, strong price losses are not always a bad omen. MTU Aero Engines is listed on the MDAX. This great company also suffered a price loss of almost 20% in just two months. But is this due to the company itself? MTU announced on Capital Markets Day 2018:
Better organic growth prospects in all segments
Continued investment in capacity expansion and automation
Long-term targets for profit and free cash flow confirmed
Most price losses are driven by speculative investors. Investors who try to make fast money and investors who follow the masses for fear – because they don’t know what they are doing.
The advantage of price fluctuation
The fact that “our” companies have also suffered price losses in recent months is okay for us – even an advantage. Price fluctuations offer us the opportunity to pay only 60 cents for the value of a share of 1€. Or to get for the value of a share of 1€ also times 2€. Fortunately there are these fluctuations. Fortunately, there are irrational market participants who buy and sell entire funds, ETFs, indices like wild, bet, hedge and “swim” in the market. And fortunately there are speculative investors who do not look at individual companies and follow statements à la: “Important support achieved in the short scenario”, “the bears are at an advantage”, “buy signals are scarce and the new low has clouded the chart”, “the price level has been defended on a daily closing price basis” – the stock market variant of “crow the cock on the manure, the weather changes or it stays as it is”.
Why signals are misleading
We do not look at the markets and only then judge where we are going. Nor do we look at the charts and buy or sell by “signals”. Rather, we take a close look at the individual company – to be honest, even for months and analyze it down to the smallest detail – and its competitors. And then we look at the price. We are value investors. If the price is okay, we buy the stock and hold it for years, as long as the company is doing well and the price is not 20€ if it is worth 10€.
And so we can live well with the share price performance of these healthy companies again this year: +30% at Amazon, +15% at MTU, -2% at Alphabet and +20% at Microsoft.
We therefore hope that you too are already a value investor and can look forward to the Christmas season in a relaxed manner. And if not, we would be delighted if you would join us in the New Year on this path and become a shareholder with our value philosophy.
Best wishes and a happy holiday with your friends and family.
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In the last two years (since April 2020), the stock markets have almost exclusively risen. There have been no notable setbacks, and the U.S. market in particular.
We don’t know when the next crash will come. Nobody does. What we do know is that a crash will happen again at some point.
We’re not pessimistic, just realistic. It’s a proven fact: Since 1950, the S&P 500 has seen double-digit declines on average almost every two years.