The past few weeks, we have seen the effect of politics on the stock market. The threat of persecution or even an ordinary blogger is enough to send the stocks downward.
This post is not about how Thinking Pinoy might be wrong in his assumption that the UP-Ayala is an onerous deal. If I may state my opinions, the Ayalas are one of those good guys we have here in the Philippines. This post is about the state of politics and how we as investors look at it to protect ourselves or to take advantage of it.
Politics is temporary
Business from the micro perspective should be an investor’s view. Politics is what we have to put up with. Politics may stir the boat temporarily but a great business (the boat) will survive any tide you throw at it because of its moat.
I am not removing the fact that sometimes politicians can mean the end of a business, but analyzing your chosen company should give you an idea if its moat is good enough to withstand the blow of politicians.
Things can be hard for the investor if there’s fear in the air. But by not being affected by it, you will clearly see what is the best decision to make.
Politics May Mean Opportunities
Remember the time when Nixon wants to shut down Washington Post and its stock price plummeted down to only 1/4th of its value. It was one of the great investments that Warren Buffett made. Its because a politician wants a business shut down.
But it didn’t happen. Though many are scared to buy into the Post because of the threat of then president Nixon, thinking clearly can provide with wonderful opportunities.
Of course, what happened then may be different now. But I think its still worthwhile to think about the similarities of what is happening today.
ABS-CBN for example is in a hot seat. Will they renew their franchise or not? I don’t know. What’s your bet?
Manila Water was one of those hit by politicians, as well as its parent company Ayala and rivals DMC and MPI. Should we be angry with politicians or should we thank them? It depends maybe on which side of the trade you’re on.
One thing I know for sure. A great business will continue to produce returns no matter who the politicians are. Its only the price that change in this state of affairs, the value doesn’t change much. So its up to the value investor at what price should he be willing to bet… That is, if he is still not yet affected by the fear.