For those of you who have held on to their equity in the stock market, it’s been a pressing matter for quite a while now: to sell, or not to sell,. If you ask your middle people for advice, their answer will be anything but objective, since brokers and investment-fund managers worry about - as well as benefit from - the spread of their word of mouth. None will tell you, for that matter, when is it time to run, and when to stand still to watch. But more than one will be generous with advice to leap and reap. A broker never tells you to bear-out, because if the bearish attitude becomes viral his job will be on the line. But then again, the equity holder would have to be bat-blind not to see that the whole world has been bearish for some nine months now, which makes holding on more challenging.
The question of whether to sell-out your stocks and wait until better investment opportunities lurk really depends on how proportionate your stock-exchange income is to your total expenditures. In plain English, it depends on whether you live off speculation. Those who hold equity for long terms; (i.e. for purposes of gaining dividends, not speculation) probably do more analytical research prior to obtaining any equity, so as to invest in the profitability of these companies and their expected yields. And if such, they will know whether these companies’ profitability is at stake because of the global-recession, or whether they maintain their worthiness and will rise again as soon as the tide subsides. Such decisions are built on sound analysis, but they try your perseverance. For an investor to be able to stand still and watch for as long as the current recession has been going on means that he does not depend on his investments for current living expenses, and that he does not care if the stock prices drop sharply as long as the companies in question maintain profitability.
So where do opportunities lie in a situation like this?
For a sound investor to see any opportunity in a recession takes two conditions: first he has to follow a minimum-liquidity percentage policy, and second he must do due diligence in order to identify strong potential stocks despite the dropping prices.
Stocks like PRES (Jordanian Press Foundation), for example, is one of the most lucrative stock investments in the bourse. For two consecutive years they have been the only company to pay out dividends of %100 of their share’s nominal price; the highest ratio in the market. And to see this as an opportunity you have to relate it to the now-low price of JD 13+, given that the company retains its operational and financial strength.Stocks like JOPH (Jordanian Phosphate Mines), APOT (Arab Potash Company), and JTEL (Jordan Telecommunications Company), could prove to be very lucrative long term investments. And to see them as opportunities, you have to relate their current market prices, to the fact that they have retained their operational and financial strength despite the recession.
If we apply this rationale to all the strong companies whose profitability has been only mildly affected by the recession, we will find that they are selling at very low prices, which makes them quite good catches for the future. A bright look towards the future might just be the flex-back that the ASE needs, especially now that brokerage firms are more eager to lend money for investors to take chances on the current situation.
No matter how long a recession goes on, the economy is bound to bounce back again. The fall of stock prices to their current bottoms is an opportunity for those of us who believe in the coming future. The bourse holds some of the country’s strongest investments, some of which have stood firmly strong, and retained their potentiality against the current recession.
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