Almost exactly 3 years ago, I made an analysis on CLI (Cebu Landmasters), I also said that I was buying that time and how I think that its a great investment. I also recommended CLI in Wayne’s Portfolio. You saw CLI during my portfolio updates. And I made it as a case study and example on the Intrinsic Value Course explaining that its poised to go up because its undervalued. There was no luck involved when I said that CLI was a great and undervalued company. Only that it took 3 years for me to be proven right. It wasn’t an easy job for an investor. Because during those 3 years, the stock also went down from my buying point, down to a maximum of -20%.
Some people might think that an investor is slow to accumulate wealth. As I needed to wait for 3 years before I could realize the 76% gain that I now have for the stock. Only traders would think this way or people who can only see the short term. The “I want it now!” attitude. But I don’t want to think that way. Gains can come and go. What’s more important is having more of a good thing. The good thing I mean, a good business. I would like to think that I had 3 years to accumulate and 3 years of increasing dividends. So its not exactly hard to wait if you get paid for waiting. My only regret is that I should have bought more.
So for all those long years, CLI increased its profits from 30% to 60%, but the stock price did not move. Only today when the announcement of a 123% stock dividend does the stock rallied, kind of makes you wonder if its all just luck, doesn’t it? Since the 123% stock dividend does not in anyway change the valuation of the company. It just increased the number of shares. Like the same pizza but more slices.
Graham said it best. It is the great mystery in our business, that something so cheap will remain cheap for such a long time without knowing when the time to be vindicated and rewarded is. But remember, whatever the reason may be, it will happen. Value will ultimately show itself in the stock price.
Is CLI Overvalued or Undervalued now?
But is it reflected now on CLI? Is the price today of 7.23 the intrinsic value of CLI?
Honestly, I’m not sure.
I think CLI is still undervalued. But I am not so sure what is the correct price for CLI just yet for me to make a move. In other words, its a lot harder now than it was before. Because before, I was sure that its cheap and there is less risk. Like a brick falling on my head, a no-brainer. Now that the price has rallied, it is now riskier and less cheap. Which makes me more cautious.
Subscribers of Wayne’s Portfolio will know when I finally make a decision, and can follow me if they like.
When to buy CLI?
I’m sure that the main reason that the stock price rally for CLI is not just all fundamentals. Its more psychological and traders doing their thing, trading in a zero sum game, being FOMO. They have entered the stock to get the 123% stock dividends, and for sure, once the ex-date arrive they will sell the stock.
But that’s a very dangerous game to play. What makes you think you’ll be able to sell at a profit if all other traders are thinking the same thing? You don’t have an edge if you’re a trader, for you to win, you just have to be fast.
While investors might buy or add to their positions in CLI when the ex-date drop comes. I’m still not sure if this is the smart thing to do. A drop in price in a great company is a blessing for sure. But I’m still not sure by how much it will drop and if the drop in price will make me want to buy more or put the money in other investments like investing in the US or putting in income generating loans like SeedIn. I really hate rising prices, it makes me cautious.
I need your opinions. What do you think? Is it better to buy now or wait for the ex-date price drop? Leave your comments below.