Focusing on fundamental versus trying to find “the bottom” in 2009

by Ashik Shah on 30 April 2009

The quarter ended 30th April 2009 witnessed a huge degree of volatility as investor fear overcame the markets.  Mid-march in particular reflected very adverse opinions and over-reactions, which meant that many businesses were offered at very attractive prices.  Certain categories of investor were unable to buy due to lack of capital or requirements to redeem or settle debts.  Other categories were so worried about their paper losses, which sometimes resulted in almost no performance over 10 or 20-year periods in the market, that they simply decided to avoid the market.  Many investors felt that it was better to wait by the sidelines and wait until the market reached its bottom.

Kurm has been opportunistically raising cash, as well as buying into securities.  The most noteworthy investment activities in the US in the quarter have been the sale of Canadian Natural Resources and additional purchases of St. Joe Paper and Sears Holdings.  Oil price volatility and panic about real estate and retail led to these opportunities.

The Asian and UK portfolios have also experienced volatility, but businesses have remained robust in the public markets side.  Most of our Asian portfolio’s underlying investments are trading at single-digit p/e ratios of depressed earnings, do not have significant exposure to export markets, and have conservative balance sheets.  The UK public portfolio is exposed to consumer spending, but the three major investments have remained stable.’s share price has been volatile, but the business has remained stable, and generated cash.  The private equity portfolios have had mixed responses during this economic and financial turmoil.  However, the management teams are all focused on proactively managing the businesses during these times.

While prices have moved substantially ahead of their mid-March lows, it is not too late to find tremendous opportunities.  At the same time, while the financial crisis might seem a little less worrisome currently, there are still fundamental and sometimes growing economic problems in the world.  This will mean a degree of continue volatility and jitter amongst investor.  Euphoria may still be followed by panic.

A prudent investor focusing on business fundamentals and long-term value will stand to gain as others try to find the “bottom” of the market or try to read investor sentiment.  Those wishing to build wealth for their families will gain from a selection of carefully selected companies, which the market has undervalued through fear or ignorance.

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The views expressed and comments made on this website are not personal advice based on your circumstances. The purpose of this website is to provide information and analysis to help you make your own informed investment decisions. If you are not confident making your own investment decisions you should contact a firm which is authorised and regulated by the Financial Conduct Authority (such as Ashik Shah & Co. Ltd.) so that a qualified financial adviser, after considering your personal circumstances and investment objectives, can make personal recommendations of investments which are suitable for you. Whether you make your own investment decisions or prefer to follow the recommendations of a financial adviser you should always remember that your capital will be at risk and that investments can go down in value as well as up.

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