Why It might be time to buy stocks, and how (II)

This is further to the article I wrote two weeks ago. Based on that article many are still questioning; what good is a bargain if the market, as it were, has not recognized its value thus far? What if prices will never come back to their pick days? Why is it that it seems like everyone is fleeing the market? Well, much as I hate looking simplistic, but, these are normal mood swings. This is how markets behaves, there are always ups and downs – depends on the circumstances that causes such swings. By the way, this is not the case for our market only – it is for many developing markets over these past few years – just look across. And so, if you look at the East Africa region for example, the oldest, largest, liquid and sophisticated market is currently year-on-year down by Kshs. 272 billion (equivalent to TZS. 5,500 billion) – that is, it has recorded a drop-in market capitalization and so investors have lost about Tanzania equivalent TZS 5.5 trillion in paper wealth in these past 12-months. And if you decide to look on the trend during these past six-years, their market has tanked over half of its value since year 2013. Now, let us take a look on the DSE market performance, in the form of graphs, during the same period:

Even though investors have lost TZS 2,381 billion of paper wealth in terms of total market capitalization at the DSE in these past six-years, but in terms of domestic market capitalization the market has gained TZS 3,086 billion during this period. Well, so what? Total market capitalization is the total valuation of the market being a factor of number of listed securities and prices performance for these securities. For example, the DSE total market capitalization is a combination of volumes and prices of all 28 equity listed securities (including 7 cross-listings), while Domestic market capitalization is a basket of 21 domestic listed securities’ volume and prices. Hence, the decline in total market capitalization could be argued to have emanated from the decline in prices of cross-listed companies whose primary listing markets are Nairobi Securities Exchange and London Stock Exchange, as well as decline in prices for the domestic listed securities.
At the same time the increase in domestic market capitalization is mainly a result of the increase in the number of listed securities (there has been 10 new listed securities during this 6-year period) and whose impact has outweighed the decline in securities prices, as can be seen in the table below:
NAME Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Today
TOL 310 550 760 800 780 660 660
TBL 8,100 14,090 14,800 12,000 14,000 12,900 11,400
TATEPA 650 650 650 650 600 120 120
TCC 8,600 16,740 15,950 11,500 16,800 17,000 17,000
SIMBA 2,020 4,500 2,670 1,600 1,200 640 600
SWISSPORT 2,680 5,010 7,350 5,450 3,500 2,660 1,600
TWIGA 2,660 4,000 3,000 2,290 1,460 2,060 2,000
DCB 490 720 570 400 380 340 340
NMB 2,620 3,400 2,500 2,750 2,750 2,340 2,340
CRDB 280 430 405 250 160 150 100
PAL 475 470 470 470 470 400 400
MAENDELEO 600 600 600 600 600 500 490
SWALA – 700 500 500 500 490 490
MKOMBOZI – 1,500 1,000 1,000 890 800 780
MWALIMU – – 665 520 500 500 500
MUCOBA – – – 400 400 400 400
YETU – – – 600 600 600 550
DSE – – – 1,000 1,120 1,400 1,080
VODA – – – – 850 800 800
TICL – – – – – 385 385
NICOL – – – – – 270 175
So, why should you invest? Reasons are many, but let us look on a few – GDP growth is expected to continue above 7 percent annually, interest and exchange rates are expected to decline, or at least stay the same and the political environment is envisaged to remain calm. Furthermore, bargains seem plenty – dividends yields are trailing at an average of 5 percent, etc.
As I indicated in the previous piece, if you consider yourself a “value-investor”, not a mere speculator, then just don’t be swayed by every opinion you hear and every suggestion you read. History records that whenever there are political, economic or social transformations — businesses and investments suffer hiccups, as they always have, but then comes long term prosperity for those who stay put. And so, by staying invested during this period – or by investing more – value investors can keep their portfolios on track in pursuit of their long-term goals. Sooner, or later the market will mirror the macro-economic strengths, bounces back and benefitting those stayed invested.
A final word: invest and stay invested in shares of a company not because you want their share prices to go up, but because of your motive to own that business. Value-investors have been successful not because they intended to be good in stock trading and speculating on stocks movements, but because they stuck with successful businesses.

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