Jausty1919,
The views you express are those of a true value investor: one who derives a fundamental valuation for a company and then buys its shares when they are at a sufficiently low market value compared to the fundamental value that was derived.
But, as all fundamentally-minded value investors worth their salt will know, things that are undervalued, can become even more undervalued. (In fact, this happens far more often than not, because if it didn't it would mean that one would be able to buy shares right at their exact low points every time which, as we know, is not possible.)
So the mindset of the value investor is always,
"
The stock is undervalued, so I am happy to invest a certain amount of my capital in it.
And if the stock falls further such that the undervaluation becomes greater, then I should find it to be an even more attractive investment, so I should therefore have a greater portfolio exposure to it.
So I will buy more of it."
By way of example, given the type of company, the industry structure and market in which it operates, its position on the corporate evolution scale, the business risks, and based on fundamental precedent, I believe that CYB should trade at a P/B of around 0.6x to 0.7x (let's say 0.6x, to be modest)
With book value of around 380 pence per share (the company's accounts are denominated in GBP), that means fundamental value in my mind, is around 380 x 0.6 = 230p.
That equates to around A$4.10, say $4.00/share.
I initially started buying the stock, at around $3.20/share in January this year.
At that price, it represented some 25% to 30% upside to my assessment of fundamental value.
25% to 30% upside, while reasonably attractive, was not mouth-watering stuff, so to reflect that, my portfolio position at the outset was quite modest, namely a ~2% exposure.
When the stock reached around $3.00/share, that represented more than 35% upside, which warrants having a greater investment, so I added a further 50bp, to 2.50%.
At $2.80, I think the upside its 45%, warranting a 3.0% portfolio position.
Today, at $2.60/share, I have a 3.5% position.
Should it fall to $2.20, I will have 4.0% of my capital invested in the company.
At $2.00 a share I think the stock is undervalued by a factor of 100%.
I'd have more than 5% of my wealth in CYB shares if it got to that level (which it might well do, who knows?)
The point being made is that, for value investors like us, a lower share price does not worry us, nor cause us to question our investment (it shouldn't do, if we have done our fundamental homework properly).
Instead, it should make us even more happy, because it means that something which we liked at a certain price, has now - for whatever reason - been offered to us at an even better price.
My long-made observation is that investors who apply this sort of investing philosophy are in the absolute minority and some people - as attested by some of the manic posting by a certain individual on this very forum in recent weeks and days
[*] - will, I am sure, never "get" it, no matter how much effort goes to explaining the concept.
[*] I shouldn't be so cynical; maybe there are other members in HotCopper who derive value from knowing what the stock price is doing every night in London and how that compares to the way it ticks along on a daily basis by comparison in Australia, and what an idiot Boris Johnson is.
In closing, apropos your reference to "Rubs hands together greedily": I hate to admit it (because it comes across as a bit vulgar) but that is exactly what I was doing in my mind's eye when I came across the following eye-catching headline today on Yahoo Finance (along with a photo containing some austere and threatening storm clouds for added dramatic effect):
View attachment 1692541I remember 2011 well.
It was when Greece was going to default on its debt and bring the whole EU down with it.
It was the best buying opportunity for equities since the GFC itself.
I've seen enough of these "gloomy" times to know what they mean in terms of throwing up great investment opportunities.
Secretly, I find myself hoping for them.
(I wonder if that makes me evil?)
As a case in point, if things in the UK weren't gloomy, CYB would be trading at a level approaching $5.00/share.
And, not being a subscriber to the "This time is different" school of thought, I am 100% certain that at some point in time over the next few years, the pall of economic gloom will lift. Just like it always does.
Some people say, "I don't want to buy the stock because I'm concerned about all the gloom."
Me, I think, "I am buying the stock, not
despite the gloom, but
because of it."
(20min delay)