Columnist Alex Wong said in an article on Tuesday that many fund managers are now holding high cash positions while looking for speculation opportunities to ensure positive returns.
“The rule of value investing has been put aside,” he wrote.
Many retail investors look up to Wong as an investment expert. But I don’t agree with him this time.
For many years, people think of “buying cheap and holding for long” when they think about value investing.
Is this true? I remember an interview I had with V-Nee Yeh, the co-founder of Value Partners Group, several years ago.
I asked Yeh: What makes Cheah Cheng Hye (the other founder of Value Partners Group) special?
He answered: People don’t usually change the way they think, but the attitude and mindset. Cheng Hye used to pick stocks based only on low price-to-earnings ratio, but as the definition of value investing changes, he has also adjusted his idea. Value Partners’ focus was only on Hong Kong stocks in the beginning. But growth was limited. Later, the mainland financial market opened to us, providing us with larger growth potential. Then he started to put stocks with big potential in our portfolio even if they have high PE ratios.
It’s always right to invest in stocks with value higher than the price. But how to balance the allocation of cheap and expensive stocks, the geographic exposure and the investment horizon are questions investors should answer.
If Hong Kong and mainland stock markets are providing disappointing returns, should investors have to look at international markets?
Value Partners, as one of the best performers in the market, has stuck to value investing rules for 20 years and its assets under management increased to over US$1 billion. Do you really believe value investing is meaningless?
Generally the more you trade, the less returns you will receive. Staying away from the stock market is the safest way.
If an investor has an investment horizon of five years, do you think they can get better returns from “buy and hold” in big-cap technology companies or from making short-term speculations?
This article appeared in the Hong Kong Economic Journal on March 23.
Translation by Myssie You
[Chinese version 中文版]
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