Jim Trippon: The perspective of many investors, including professional money managers, is that of ever shrinking time horizons. The concept of long term investing, which used to mean years of commitment by investors, has shrunk to mean perhaps months, weeks, or less. This development is understandable in that it has come about in a world where markets can wildly gyrate with the twitch of some news, real or imagined, half a world away. One thinks, for example, of the near panic which ensued with markets over the effects of the Japanese tsunami in the late winter and spring of 2011. Yet, typically of this short term thinking, more investors have probably forgotten about that or the dire predictions from some that it would be the end of Japan’s economy and stocks such as Toyota Motors (NYSE:TM). And yet, as the chart below shows, Toyota stock is alive and well.
Toyota Motors Two Year Chart
Source: Yahoo Finance
China suffers from this short term perception as well. Nobody—well, few, anyway, would recommend the absolute buy-and-hold of buying a batch of stocks and holding them forever. But few people, and fewer professional money managers, actually did this anyway. It has become overkill to continue to announce the death of “buy and hold” in US markets, and more so in some fashion for international markets, certainly emerging markets. John Templeton, the pioneer in international investing, was deeply committed to a value style of investing, which we are also, but he didn’t hold his stocks forever. When by his quantitative and qualitative analysis these investments reached full value or overvalued status, he would sell and take profits. Likewise, when Warren Buffett sold his PetroChina (NYSE:PTR) shares after four years, he booked a $3.6 billion gain on a $400 million investment. That was, and is, value investing also.
PetroChina Five Year Chart
Source: Yahoo Finance
China Worry Dominates Financial News
Right now many investors, professional and retail individual investors alike, are reacting with excessive worry about China’s economic growth. Many investors are worried that if the Chinese economy doesn’t grow at a 7 percent or 8 percent rate, it will somehow collapse. The perception is tossed around that this is a baseline figure for China which it absolutely must meet or its export-driven economy will fall off a cliff and there will be unparalleled social unrest. What is the basis for such analysis? Statistics? History? Dyspepsia? It’s a view that simply isn’t grounded in objective reality.
One of the most seasoned China investors, Mark Mobius, one of the most highly regarded China experts, Chairman of the Templeton Emerging Market Group, and arguably a successor to John Templeton, has a much quieter, calmer view of China. In am interview on Bloomberg Radio back in the spring, Mobius said China can withstand growth as slow as 6 percent and that its economy can still do well. Mobius has written and talked extensively of the structural shifts which China’s economy has been undergoing for years, as it moves and will move more to a consumer-oriented one from simply and export-driven one. Yet Mobius, just as Jim Rogers and others who have extensive experience successfully investing in and know China best, are ignored and drowned out by the shrill voices who predict doom because perhaps an obscure, small hat factory in an outlying province in China or some such thing has been found to have accounting irregularities. Yet somehow no one would apply this sort of “analysis” to any other market, even the most wide-open, wild-eyed frontier market, let alone the second largest economy in the world.
Bloomberg China-US 55 Equity Index One Year Chart
Value, Time And Events
Many have written and said that the time to make money in China is past, that investing there now and in the future will bring nothing but pain. But this really shows how far the analysis has strayed from investment history. The Chinese economy and its stocks, particularly those widely available either on US exchanges or through Hong Kong, which give a truer measure of value rather than China’s constrained domestic market in Shanghai, are in a slump. But as Mobius and Rogers have pointed out, if you are a value investor—and the abandonment of value by markets and professional money managers is a far bigger crisis than China—you will recognize that China is instead of collapsing, moving into position to provide a great value opportunity. Let the naysayers scorn. Let the critics and the doomsayers leave China stocks for those who understand value, time, investing and how patience can reward investors who understand this with great profits.
Related: Vanguard Emerging Markets ETF (NYSEARCA:VWO), ProShares Ultra Short FTSE/Xinhua China 25 ETF (NYSEARCA:FXP), iShares FTSE/Xinhua China 25 Index (NYSEARCA:FXI).
Jim Trippon, founder of Trippon Financial Media, Inc., is a maverick that has dedicated his investment career to helping investors make smarter financial and stock selection decisions. Trippon, an internationally recognized expert on global and value investing, has a deep passion for finding hidden value in global equity markets. Trippon started his career as a financial statement examiner with Price Waterhouse which allows him to dissect a public company’s financial picture and better identify hidden gems. Trippon’s savvy approach to investing and personal finance makes him in high demand by major media who seek his unique perspective on stocks and global economics. He has been featured in top publications both in the US and abroad including Bloomberg, Investor’s Business Daily, The New York Times, The International Herald Tribune, Stock Futures and Options Magazine, The Bull and Bear Financial Report and he regularly appears on broadcast television including as an on air contributor to CNBC, CNN, Fox Business, and Fox News.
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