Distress conditions create opportunities

By Capital TRUST Securities

It has been 10 years since the war ended and during this period there has been massive economic development in the country which has improved the economic indicators of which some are illustrated.

Shares are now trading at valuations lower than what was seen before the end of the war.However since the economic indicators are better than what it was during the war, we firmly believe that the present distress conditions have created an opportunity to accumulate fundamentally strong shares that are presently oversold. As a result of this decline, the dividend yields of selected stocks have exceeded the returns generated from fixed deposits and government securities.

It is important to highlight the fact that Investors who were bold enough to accumulate shares at bargaining prices few months before the war ended in 2009, generated extremely high returns; while those who were pessimistic missed a lifetime opportunity. 

We believe the present situation replicates a similar opportunity as witnessed in May 2009, since positive changes could happen at least by end of the yearin politics, economic policies and national security.This would restore investor sentiment and confidence which would trigger a strong upsurge in share prices similar to which was seen between 15-May 2009 and 09-January 2015. 

Note: lower Price Earnings Ratio (PE) reflects that the present share price is undervalued in terms of its earnings; and it’s a good indicator for value investing.