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How To Get Your Timing Right

If we get our timing right it is possible to arrive at the Singapore Zoo just as the animals are being fed. It can be quite an education.

A few weeks’ ago I watched with interest as some of Singapore’s orangutans were being given their morning feed. As you would expect, the long-haired primates devoured just about every piece of fruit and every morsel of nut in sight.

Or so you would have thought.

A few minutes after the great apes had sated their appetite, a flock of Asian starlings descend from the trees above. They had been waiting patiently from the overhanging branches.

They pecked away at the foodstuff that the orangutans had decided to leave behind. There was still plenty to go around.

Market noise

Stock market can sometime feel a bit like a zoo, too.

The noise and constant chattering can be quite deafening, when hungry traders and institutional investors wade in with their large orders and millions in cash.

But guess what? There is plenty to go around, if we are patient. We don’t have to join in the feeding frenzy.

Just as the mynah birds were prepared to let the apes have their fill first, we can do likewise, when it comes to buying shares.

It is unlikely that those large and active investors will be able to buy everything in sight. Sometimes, it might feel like they can. But in reality they can’t.

In fact, there are some stocks that will never be of any interest to institutional investors. It could be because the companies are just too small for them to bother with.

Large institutions need to buy meaningful quantities of a stock to move the needle on their portfolios. So, smaller companies tend to fly under their radars, which is to our advantage.

Have their fill

Investing should never be about doing the same as other people. We have to think differently, if we are to succeed in the stock market.

Warren Buffett once said: “The dumbest reason to buy a stock is because it is going up.

Instead we should wait for unusual circumstances when good businesses experience a one-time event that depresses their market value in relation to their true value.

That can manifest itself in all sorts of different ways. But it can happen when we least expect.

A good test of a real investor is whether we are prepared to take advantage of those special situations. It is never an easy thing to do, though.

How many, I wonder, have the courage and conviction to buy Singapore Real Estate Investment Trusts right now. Their share prices are depressed. Their yields are high. But many still hesitate.

To succeed in investing, we need to arm ourselves with more information than the next guy. We also need to analyse it properly and using it rationally.

Conviction buying

We can’t do that unless we can think independently.

If we believe that a stock has been unfairly punished by the market, then we should have the conviction to buy.

Cash combined with courage is priceless.

The most common cause of low prices is pessimism. The causes of pessimism are manifold.

Sometimes it is specific to a company. Sometimes it is specific to an industry. Sometimes it is specific to an entire economy.

But pessimism is the friend of the long-term investor. It is optimism that is the enemy of the rational investor.

So never be troubled by bad news, whether it is a new man in the White House or crucial parliamentary votes in the UK or elections in Europe.

Instead ask what is worth buying in the market. It is the one question that will help you make money from shares.

A version of this article first appeared in Take Stock Singapore. Click here now  for your FREE subscription to Take Stock – Singapore, The Motley Fool’s free investing newsletter.

Written by David Kuo, Take Stock - Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.