6 LESSONS from the Rise & Fall of GLOVE STOCKS 2020-2021
The PAINFUL Lessons of Glove Stocks 2020-2021:
1. Mr. Market is brutal.
The ruthless Mr. Market showed no mercy to its victims. The beaten down glove stocks were battered down even further. Retailers who were badly bruised, pleaded for Mr. Market to stop. Ignoring their pleas, the manic-depressive Mr. Market continued the bloodbath...
Glove companies showed higher & higher profits, yet share prices plunged lower & lower. The majority of investors who bought glove stocks in 2021 would have lost money, judging by the strong downtrend. Early 2021 purchasers suffered even more.
Be mentally prepared that the stockmarket can be volatile. It doesn't care how much you lost.
2. Be fearful when others are greedy over-optimistic.
ASPs increased at an unprecedented fast pace due to severe shortage last year. Mr. Market became exceptionally optimistic on glove companies' future prospects. Glove stock prices quickly shot through the roof.
Fearing of missing out, investors bought glove stocks following each jump in share price or upon receiving bullish news about gloves.
Even some glove companies were no different from the euphoric crowd, spending substantial amounts of cash for share buybacks but did not achieve the desired effect of stabilising the share price.
Although less speculative than the infamous Tulip Mania, the gloves incident 2020-2021 shares similarities. When almost the entire market is optimistic & already holding glove stocks, who will be the new buyers to continue the musical chairs?
When the market is all but optimistic, the run-up in share price would have reflected all future potential, leaving little room for further upside.
3. The stockmarket is forward-looking & efficient.
If glove stocks could command a trailing PE of >50 and even >100 at some point last year, what's surprising when they have a PE of <10 this year?
How could AIRASIA & GENM's share price move up while they remain loss-making?
The stockmarket looks at companies' future performance, placing less emphasis on its past.
4. The luck factor.
Scenario 1: Buying glove stocks in May 2020 and selling in Aug 2020. Esp. those who got lucky with SUPERMAX. Feels like winning the lottery for them.
Scenario 2: Buying glove stocks in May 2021 and selling in Aug 2021. Utter misery.
Buying and selling at the perfect timing is rare. Luck swings both ways. Don't invest with the hope that stocks will go your way.
5. Keep an open mind.
Last December, JP Morgan was the most hated fund analyst. Glove shareholders cursed them day & night, dismissing JP Morgan's report.
Fast forward to the present, JP Morgan's concerns actually came true.
Don't dismiss opinions that you dislike.
6. Don't trust stock forum writers too much.
One year ago, one of the most prominent figures of klse.i3investor.com who is super bullish on gloves was very critical against Macquarie Bank and Maybank IB while writing many supportive articles on gloves stocks.
Having indomitable views is commendable. But take pity on your followers.
Wholeheartedly trusting forum writers to know better, followers find themselves in devastating losses shortly after. Forum writers could be wrong.
Always do further research. Don't rely solely on forum writers before any investment decision. (even myself)
"Sometimes you must hurt in order to know, fall in order to grow, lose in order to gain, because life's greatest lessons are learned through pain."
Disclaimer: This article is not tailored financial advice, but mere general stock sharing / observations. Please do further due diligence. The author disclaims all liabilities from readers. The author may have interest in some of the stocks listed above from time to time.
Always do further research. Don't rely solely on forum writers before any investment decision.