Rob Coyte's Blog

So far this calendar year we have seen the return of “down” markets. Whether this has been as a result of sovereign debt issues in countries like Portugal and Greece, or because the Chinese wish to deliberately slow their economy, or the plethora of reason markets find to move either up or down on a daily basis.

As discussed we need to not worry too much about the market and really it is just a gauge to tell us whether a company is either cheap or expensive to buy. Naturally, after the market falls the business becomes cheaper so if after looking at the profitability and the fundamentals of the business and you like what you see it is obviously a buying opportunity. The classic scenario here in Australia was the banking sector which during the GFC the shares in which lost around 50% of their value however the profit for the one year only saw declines of about 5-10% for the banks. The decrease in valuation of these banks was not justified by the underlying fundamentals which saw share price increase dramatically to higher levels.

Placing the 10% fall from the highs in January in perspective is also important. The S&P500 (general share index for the broader market) in the US has risen 62% from the lows achieved in March 2009 to today’s closing price notwithstanding the 10% retracement. These retracements are natural and are not to be feared but to be embraced as buying opportunities.

Rob Coyte | Tuesday, February 09, 2010
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