FNArena’s Weekly Insights – June 27 2022

In this week’s Weekly Insights:

-Balancing Between Opportunity & Risks
-Conviction Calls
-FNArena Talks

By Rudi Filapek-Vandyck, Editor FNArena

Balancing Between Opportunity & Risks

If there is one strong universal agreement among investors of all kinds and colours it is that bear markets present opportunity for those who can look beyond short term volatility.

The flipside to this narrative is that when investors buy in too early, they can still suffer heavy capital losses and might then have to be patient for much longer to see their bravery rewarded, assuming they pick a company that will survive the economic downturn and the share price doesn’t get obliterated in the meantime.

Probably the most famous anecdote regarding the latter concerns Isaac Newton who, despite his revered intelligence, lost a financial fortune during what is today known as the South Sea Bubble of 1720(*).

But investors don’t have to go back that far into history to establish that time does not heal all wounds suffered on the share market. Plenty of sorry tales stem from the Nasdaq meltdown in March 2000. Today many might have forgotten but the second tranche in the privatisation of Telstra ((TLS)) back in 1999 was sold for $7.40 a share to retail shareholders.

More than two decades later and the Telstra share price needs to double to get back to that level, and that’s conveniently omitting the fact the shares surged a lot higher at that time. Luckily, the company does pay a hefty dividend, and it has done exactly that over the period since, but a pretty picture or a Grand Return it offers not.

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