REA - A Straw Hats Buy

Stock markets were majorly over extended through 2020 and 2021 we can all see that now - drunk on free money. When the market unwinds like it has this year quality stocks get taken down along with all the overvalued junk.

Over-leveraged investors just have to offload, margin calls bring about irrational trading and many just give up on the stockmarket and/or get panicked into cash.

So there will doubtless be opportunities ahead to pick up quality stocks. The problem is getting the timing right. At the moment it would appear there are still too many retreating to cash and too many in cash on the sidelines for markets to be at our near the bottom (notwithstanding another bear market bounce on Wall St last night....or was it ?)

However

If there’s anything I’ve learnt in decades of stock market investing it is that waiting around for signs and signals to indicate its ‘safe’ to buy back in gets you nowhere. You’ll miss the first 10% or 15% every time. Those who pick ( or fluke) the bottom are those that buy when the market is feeling exceedingly ‘unsafe’

I’ve never held REA but it’s been seriously on my watch list for a couple of years. It got bid up to nose bleed valuations along with everything else last year and I had to file it under ‘love the company - not the stock’

I nearly bought in mid year but it was a ‘blink and you missed it’ opportunity at around $100. The rally back to $135 in a matter of about 8 weeks showed how quickly this stock can return to favour.

Now back around $113/$114 I’m comfortable buying into the stock (which I have yesterday) with a view to acquiring another tranche or two later this year or early next year. That’s not to say I think I’m picking the bottom - this may well head south of $100 again but I just think as a long term investor it’s a very good bet to be well above $113/$114 in 3 -5 years time given its growth trajectory and the inevitability of the property market returning to favour (even if it heads lower in the short term amidst this current anti property sentiment)

Obviously sentiment towards the stock swings with the state of the property market as well as the state of the stock market. I was never going to buy REA when the property market was flying but now that sentiment is poor towards property the timing for me is more comfortable ( the ‘straw hats’ philosophy)

You can never time it perfectly - I’m happy to enter these slightly ‘unsafe’ waters now. I believe REA is a quality company with excellent medium to long term prospects and good buying at these levels.