Blog

More concept, ideas and investment strategies with Jitta

At the beginning of each new year, it’s been our tradition to show you last year’s Jitta Ranking performance.

This year is no difference, just more special. Because we’ve got a full 10-year’s worth of backtest data, and 5 years of forward-test, beginning in 2014.

And with stock markets around the world taking a nosedive due to the Fed’s interest rate hike, President Trump’s trade war with China and the global economic slowdown…

It’s even more interesting how Jitta Ranking performed last year and in the long run, about 5 to 10 years. Can Jitta Ranking still beat the market?

But before we get into Jitta Ranking performance, let’s talk about volatility. Such a volatile market can seem daunting for novice investors. They may feel down, scared, or confused, questioning whether or not they’ve come the right way…

If you ask someone who’s spent 5 to 10 years in the stock market, however, they can similarly tell you that such volatility is typical. Like a “January blizzard in Colorado,” according to Peter Lynch, it sure happens, though no one knows the exact day. After it wreaks havoc, it dies, leaving us with damages, pain and valuable lessons to prepare better next time.  

The stock market is the same way. No one knows when it is going to rise or fall. All we know is both happen and, statistically, there are more good years than bad. A 10-year cycle on average has 7 bullish years and 3 bear years.

So if you want to be in the stock market, you must make peace with volatility. Don’t let a bull market tempts you into making rash decisions, but let it prepare you for the impending storm.

When the storm comes, stay calm, knowing that “if you’re prepared, it can’t hurt you. A decline is a great opportunity to pick up the bargains left behind by investors who are fleeing the storm in panic,” says Peter Lynch.

Warren Buffett himself also has some harsh words of advice for anyone spooked by the recent market downturn: “Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”

The market will return to normalcy sooner or later, just like spring that comes after every winter. If you’re still investing with a solid strategy, or with Jitta Ranking, your portfolio will return to normalcy as well.

Speaking of Jitta Ranking, let’s take a look at how our “wonderful company at a fair price” stock-ranking algorithm performed this past year!

Jitta currently serves 7 countries, including the U.S., the U.K., Japan, Hong Kong, Singapore Thailand, and Vietnam. None of these markets yielded a positive return, averaging around -11.03% loss. The U.S. took the crown for the smallest loss of -6.24% while Japan took a hit, presenting the heaviest loss at -17.80%.  
Jitta Ranking Top 30 similarly yielded a 7-country average of -14.49% loss. The top performer is Vietnam, at -1.49%, and the top loser is Japan, at -28.95%.

In the longer term, Jitta Ranking 5-year compounded annual returns still outperform the indices in all 7 countries, averaging 8.90% compared to the indices’ 3.71%.

Jitta Ranking performs best in Vietnam, yielding a 5-year CAGR of 19.22%, while the VNI index manages to earn 12.08% a year.

Even in countries whose stock markets underperform in the past 5 years, like Singapore’s -0.63% yield, Jitta Ranking still squeezes out a positive CAGR of 5.43%. It seems that Jitta Ranking is quite consistent in generating better returns than the market average.

When you step back to look at the big picture, a complete 10-year cycle, you will find that a good investment strategy such as Jitta Ranking’s “buy a wonderful company at a fair price” will grow your portfolio in spite of short-term volatilities.

The 10-year CAGR of Jitta Ranking is 15.30%, a 7-country average, compared to the market average of 8.01%. The top 3 performers are Thailand, the U.K. and Vietnam, respectively.

Visit https://library.jitta.com/ranking for a complete annual list of Jitta Ranking Top 30 stocks and country-specific yearly returns.

Even though the U.S. economy was on track to reach the highest growth rate in 13 years, but tensions between the U.S. and China along with rising interest rates spread fears among investors, resulting in the Dow dropping by -5.63% and the S&P 500 -6.24%. Jitta Ranking Top 30 trailed closely behind at -19.63% but its 5-year CAGR of 7.14% still outperforms the S&P 500.

First, Brexit, then the trade war, leading to the worst December in 16 years for the London Stock Exchange. The FTSE 100 lost -12.48% last year, -13.05% for Jitta Ranking Top 30. Still, Jitta Ranking crushes the FTSE 100, yielding an average of 7.29% per year for the last 5 years, while the FTSE lost -0.06% a year.

Japan couldn’t withstand all the bad news and stronger yen, which affect exports. The Nikkei 225 hit its lowest point in 15 months, ending the year at -12.08%, while Jitta Ranking lost -28.95%. Yet, for the past 5 years, Jitta Ranking grows 6.73% annually, outperforming both the Nikkei, at 4.20%, and TOPIX, at 2.79%.

It was a rough year for Hong Kong investors as well, as the Chinese economy slowed down amid trade war tensions and rising interest in the U.S. HSI dropped -13.61%, but Jitta Ranking did a bit better at -11.43%. In terms of annualized 5-year returns, Jitta Ranking also outperforms the HSI 5.66% to 2.09%.    

Singapore’s STI also posted a loss at -9.82%. Jitta Ranking was close behind at -13.35%.  But Jitta Ranking does better when it comes to 5-year CAGR, growing at 5.43% per year, while the STI underperforms at -0.63% per year.

The Thai stock markets were on fire at the beginning of last year, reaching an all-time high of 1,830, then made a U-turn and ended the year at 1,563.88, a -10.82% loss. Small- and medium-cap stocks were hit harder than larger-cap ones, with the SET 50 index posting a smaller loss of -7.95%.

Jitta Ranking Top 30 experienced a similar loss at -13.51%. But it outperforms the market in the long run, growing 10.85% per year for the past five years, compared to 3.41% generated by the SET 50 index.

Though many analysts agree that Vietnam is the winner in the U.S.-China trade war, the country’s index ends up suffering from investors’ panic. The VNI finished the year at -9.32%, losing to Jitta Ranking Top 30 at -1.49%. Jitta Ranking maintains the lead over the VNI with a five-year annualized return of 19.22%.

How to invest in 2019

Although global markets didn’t perform very well last year, we believe that facing such volatility early on in your journey is good for long-term investing. It helps you make sense and understand the cycle of the stock market, so you can continue investing more mindfully and carefully.

Besides, the bad years make it easy to validate your investing strategy. During a market correction, when people sell off their assets in panic, your holdings can lose a lot of their values if they weren’t of good quality. The profits you’ve made in the past 2-3 years could be gone in a flash.

For example, last year the market dropped around 10%, a typical correction, but some investors saw their stocks lose more than 50% of the values, so they felt the market was particularly cruel.

Choosing a wonderful company at a fair price is a proven method to help you get through market corrections and volatilities with a peace of mind. You can get started by

1. Review your portfolio, identify the winners and losers, and know the pros and cons of each. Use that lesson to improve your strategy.
2. Sell bad stocks and reinvest that money in better businesses that are still undervalued, or hold on to the cash if you can’t find anything that meets your criteria.
3. Educate yourself. Read financial statements and familiarize yourself with good business models to enhance your business analysis skills.
4. Act when others are afraid, and make the most of a down market. Find wonderful companies at fair prices that often surface during a volatile market and be prepared to buy.
5. Be patient. Let your business grow and the price will follow.

Follow these steps and you’ll understand why investors are happiest during a down market: it offers a good opportunity to learn and invest in good businesses at discounted prices.

And if you continue down this road, you have no reasons to be concerned with stock market frenzies. As long as your company grows more profitable, so will your portfolio!

Stay patient, and the big prize will be yours in the end!