Thinking about KOSDAQ - supply and demand

Thinking about KOSDAQ - supply and demand

KOSDAQ responds sensitively to changes in small supply and demand

Recently, KOSPI has been cruising with the highest price ever, but the KOSDAQ is also very open. 

The KOSDAQ index climbed to 900p and climbed to its highest level since April 2002, and the annual rate of change (January 26th) in 2018 was 14.3%, much higher than the KOSPI's 4.3%.

The stock market is the place where it rises or falls, or there is always a lot of talk, but there is a lot of rumors about the toxic KOSDAQ. 

'Is it possible for the government to change the paradigm of the government?' 'The trial of the dot-com bubble, in which the government's harshness hurt investors, There is a concern that 'it can be' and there is a view pointing to 'excessive bio-migration'.

As a general opinion on these concerns, please refer to the above-mentioned "I think about KOSDAQ ① and ②", but I think that the demand base of the KOSDAQ market is expanding to 100% in the market. 

There is an expectation that the pension fund will increase the purchase of KOSDAQ stocks. Actually, pension funds are buying stocks. 

The pension fund's KOSDAQ acquisition expansion is likely to lead to buying and selling by other domestic institutional investors. 

Since the end of the fund boom in 2005-08, the influence of domestic institutional investors in the private sector has narrowed considerably, while the impact of large player pension funds has increased significantly.

There may be various opinions on the purchase of KOSPI stocks in pension fund, but once decided, it would be nice to accept it as a condition to consider in investing. 

The KOSDAQ is a very small market. 

The number of listed companies on the KOSDAQ is 1,267, which is much higher than the 747 listed KOSPI stocks. However, the sum of market cap of KOSDAQ listed stocks does not reach the market cap of one of Samsung Electronics' stocks. The relatively small amount of capital inflows can increase the market's amplitude.

In addition, the fact that it is difficult to assess the value of growth companies is also a factor in the volatility of the market. 

This is also the case with the latest password currency controversy, but it is very difficult to assess the value that technology transformation will bring. 

In this area, the amplitude of the price is very large and the probability of bubble formation is high. Traditionally, the KOSDAQ index was larger than the KOSPI, and the US Nasdaq was more volatile than the Dow.

The KOSDAQ market is a growing market with a small market capitalization. 

When you climb, you can go higher than expected, the amplitude of the median adjustment is very large, and if you turn to the declining trend, it may fall horribly. I think the KOSDAQ index will go up, but I expect that the process will go up through moderate adjustments, which are very amplitude rather than smooth.

Growth stock price is determined by the degree of acceptance of a specific 'concept'

Warren Buffett recently announced his regret that he had to buy Amazon, not IBM. 

The Amazon stock has risen more than 600 times since the IPO, rising to $ 1,300 this year. 

Amazon has become a legend to survive as a leader in the era of 'fourth industrial revolution' in the 'dot-com era'.

In the long run, Amazon shares have risen sharply, but the mid-curvature is very deep. 

Especially after the collapse of the IT bubble, there was a sharp drop of more than 90%. Amazon would have been a start-up at this time, as investors looking at 'growth' got colder, so stocks plummeted as if they were bankrupt. 

Even today, when the dinosaurs have gone beyond start-up, Amazon's PER (return on equity) is over 300 times (based on 2017 earnings). The 2018 P / E does not fall below 200 times.

Although expectations for growth are overwhelming the valuation burden, share prices will fluctuate once the market sentiment changes. 

There is always controversy in evaluating growth stock prices. Some will say. 

"It's a bad thing to buy a PER for a company like Amazon," he says. 

On the other hand, there may be a view that 'Judgment Day will soon come on because there is a bubble that is hard to sustain in the long run.' 

The current situation is dominated by the former logic, but investors holding stocks with a PER of over 300 times are unlikely to feel comfortable.

Korea's growth stocks including bio stocks are no different from Amazon. Expectations for growth support the share price. 

The fundamental dilemma inherent in growth stocks is that we can not know in a short time whether the expectations of the market are realizing. 

Investors who are forced to work on a stock price that changes every day want to quickly find clues to growth, but the time horizon of business activity is much longer. 

This is because the DCF (cash flow discount) model, which estimates the appropriate corporate value through cash flow estimation, assumes a 'going concern' that the company's business activities will last forever.

Technology companies that are leaning on unproven growth values ​​will have many twists and turns in the process of becoming bigger, and stock prices will dancing as if they have bipolar disorder. From this point of view, it is very difficult to fully enjoy the performance of long-term growth stocks. 

Being the founder of a company like Amazon's Jeff Bezos will be able to withstand that bend. More precisely, the founder does not have a choice of options, so he can enjoy all of the incremental value of the company as a result.

In fact, 'to endure' is an investment required. Many value investors endure hours until they buy undervalued stocks and sell them for a price. 

However, they can wait and wait for time because they have explicit assets in the business (low PBR) or a belief in a relatively vis- ible near-term cash flow. 

Growth stock investments that are not seeing a deficit, or even sales, are a completely different story.

It is very difficult to estimate the fair value of growth stocks. 

Although it is not intended to be a theory of analytical discovery, it does not mean that 'growth of new industries and divergence of success of individual companies', 'attributes of venture businesses that a few companies surviving in the failure of many companies to change their industrial ecosystems' Difficulties in evaluation 'and so on.

Even if you value growth stocks in your own methodology, you should not think that the conclusions drawn from them are the answer. 

Because very uncertain assumptions are used in the valuation process. It is only a tentative conclusion, and we must constantly revise it to reflect the changing situation.

I think growth stock prices are determined by the acceptance of a large number of market participants for a specific concept of growth, rather than valuation. There is a lot of controversy about the right value of growth stocks, but the truth of the dispute is hard to verify right away. 

Acceptance of concepts may be a matter of faith. Technological optimism on the Nasdaq that emerged from the dot-com, bio, and fourth industrial revolutions was the biggest influence on the beliefs of global growth investors. 

So far, the Nasdaq's halo effect has had a positive impact on the KOSDAQ.

In addition, the cycle also affects the sentiment of investors looking at growth. If the economy falls sharply, the entire risky assets like stocks will be negatively affected, but a moderate recession is favorable to growth stocks. 

When economic growth slows, there is a paradox that investors want to grow.