Why It might be an Opportune Time to buy DSE Listed Stocks, and how?

Year-on-year the domestic market capitalization and Tanzania Stock Index is down by 13 percent following the sell-off pressure which is partly informed by some factors, such as the real liquidity need by some investors, market psychology for some, declining expected returns and looking for alternative better returns by some investors, and/or just following sentiments and becoming emotional to some investors. While this may be case especially on the securities supply side, such pressure hasn’t been matched by similar pressure on the demand side — hence the decline in stock prices almost across the board which then impact the market capitalization and indices, relatively — this is not a good sign.
As it stands the market looks vulnerable and should this pessimistic view and bear run continue, more market swings could become prevalent. But as I wrote a few weeks ago, there are many reasons to be upbeat on some of the listed stocks and for the market in general even as the market battles its way to stay optimistic and probably return to the bull run not long time to come.
Yes, though the sell-off may have knocked down a significant part of investors worth over this past one year or so, but the more extreme overselling conditions could actually put the market back on track – why? When darkness increases – the light is near, but of course this can be possible if also supported by other pro-active measures, such as the recent changes of DSE rules in order to motivate liquidity and volatility in the market.
All said and done though, this is actually the good time to be on the market, for those who understand the concept of “value-investment” – the Warren Buffet way. This is the time to put your money to work. And so, in this article I share a few tips on how to turn the current weakness into great opportunity, as you buy on the cheap.
First, do your analysis and a bit of research, if you can’t – request this from your stockbroker or investment adviser, then focus on picking those stocks which embed quality brand names but are selling at compelling prices. Look to buy on the dip, while concentrating on the underlying principle that behind that cheap stock is the strong business performance, growth in profits, strong balance sheet, stable cash flows, good management and foreseeable demand of that company’s products and services. I sometimes wonder, why don’t somebody see that it is too cheap to be true for one to buy stocks of a strong bank at a price earning ratio of 2 times. It is in very rare cases that your luck will meet such an opportunity. In such stocks, you may be in the pain for a short while, but you surely will come out of it strong – so then, why the run from it?
Secondly, I will encourage you to also take a deep look into those stocks which are currently undergoing transformation – whether a managerial transformation or an operational transformation or a strategic transformation – either way, just search and analyze, see what is around you – sector-wise, company-wise, etc. Some investors may have overbrowned their concerns and in the process have pulled many other investors through under the name of market psychology and/or market sentiments. The key point to note here is that, if you are not in some liquidity constraints and pressure, just stay positive and hang in there and if you are not under liquidity constraints accumulate your holding position on these stocks. As you do this, it fair that you also take a keen interest on companies that have lost their competitive advantage, these may not go back into their glorious days.
The third and last important point to note is that, during this time is also a time for rebalancing your investment portfolio. This can be achieved in two ways – one: selling some of the good stocks which still trades fairly relative to their fundamental values and buy those selling on the cheap; and two: if you bought stocks of a similar counter during the time when they were selling on the high, i.e. during bull run where the market was optimistic – you may now rebalance by buying on the dip targeting to achieve a weighted average value or price that is closer to the current underlying fundamental value of that company.
What have I just said, I was trying to draw our attention and submit into us that yes, these may seem like pessimistic moments for the market, but this same moment provides a good environment and opportunity to be on the buying side – that is what is called “value-investment”. You do not unnecessarily have to follow the village, the village may be on the wrong path, and just do not be emotional. However, as I say this, I also urge you to be deliberate in your choices. Your need to be selective, basing your selection on the fundamental analysis and research of the company and the stock you consider to be a good buy.

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