Dear all, due to last Friday surged in buying volume and share price ascend of glove makers across the board, the KLCI index turned positive by 1.9% to close at 1630. What is impressive is not only the magnitude of purchase but the rally upwards. Over the weekend, I received many calls, emails, messages asking me whether is this the start of the glove mania again. Should investors consider taking a position in Gloves?
I am sure most readers have noticed by now that I am not a short term thematic investor. I do not look to invest in stocks week by week or month by month. The past 2 months, the sell down of gloves have been very frightening even for the most seasoned investors. I have friends around me who actually cut loss last week, throwing in the towel despite my repeated advice to them to hang in there. These are not new investors with minimal investment experience. They are investors who have the market knowledge and view but could not withstand the frightening selloff for the past 2 months which worsened when short sellers came in last week.
It caught many by surprise considering early in the week, the massive short selling flooded glove sector to start the year. When they saw what happen on Friday, they called me. They couldn't believe what happened. They felt cheated. But I did not rub it in. I simply told them, believe in fundamentals, believe in the logic and believe in the rationale of investing. Do not be swayed by market sentiment and noises. Otherwise, there is no point investing, just put the money in FD and lock it away.
We have seen many rejoicing, gloating and showing off with the glove superb rebound last Friday. However, I did not write any articles over the weekend. There are 2 reasons :
1. I do not think this overnight rebound should be misconstrued that "Gloves are back". I believe it will be a very tough fight between the bear and the bull upwards. This is especially so when the short sellers have plenty of ammunition. Definitely, the stock market do not move in a straight line so there will be gyrations on the way up just as there is the gyrations downwards. To be fair, gloves should never have been dead in the first place. There were too many non-rational investors and commentators in the stock market providing input on this subject. Everyone is like an expert. Who do you trust?
2. I do not believe in "Gloating" or "I told you so" mentality which is unhealthy for the investment community. In fact, we should all work together and study why and how the experience of glove selloff in the past 2 months should become a guide towards the future.
As per my title, all things being equal, are gloves back? My humble view - investors should consider whether do you have the stomach to continue holding on and soldiering on believing the fundamental quality of glove stocks. If the answer is yes, then you can still ride glove stocks no matter what happen next week (MCO / Politics / Vaccine etc). If the answer is no, then investors should sell on strength because we know short sellers are back in droves, this round it is unlike 2020. So it all comes down to your investment horizon, risk tolerance and mindset of investing which will determine if you should continue holding or otherwise. As for me, my favourite glove stocks especially for long term investment remain to be Riverstone and Hartalega. This shall be a topic for another day.
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Food for thought: