Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held CLSA Premium Limited (HKG:6877) for five whole years - as the share price tanked 85%. And we doubt long term believers are the only worried holders, since the stock price has declined 49% over the last twelve months. Furthermore, it's down 32% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 16% in the same period.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
In the last half decade CLSA Premium saw its share price fall as its EPS declined below zero. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on CLSA Premium's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 17% in the twelve months, CLSA Premium shareholders did even worse, losing 49%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 32% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand CLSA Premium better, we need to consider many other factors. For instance, we've identified 5 warning signs for CLSA Premium (2 are significant) that you should be aware of.
Of course CLSA Premium may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.