Investors are seeking stocks to prepare for new growth cycle

Mrs. Tran Thi Thuy Duong, Business Manager, SSI Securities Corporation

Many investors think that this time is the sell-off cycle of the stock market, but there are also many that think many good fundamental stocks have long been neglected by cash flow. Now is the opportunity for these stocks to come back, giving strength to the stock market.

To help investors to get more information for assessment, Mrs. Tran Thi Thuy Duong, Business Manager, SSI Securities Corporation shared valuable experience.

As many investors don't know whether to buy or sell stocks, what are your opinions on the investment opportunities in the future?

At any time when participating in the stock market, we all have a chance, because the businesses on the stock market are the best representatives of the economy.

In the past, the market has seen some shocking ups and downs, which I thought was the development of all financial markets in the world. This could happen in all cycles, both bullish and bearish. Even, in a sideways market cycle, this state sometimes occurs due to the short-term expectations created by investors. Investors should look deep inside the movements of the market, find more support to be able to choose better stocks, get an orientation to choose good businesses to invest in the long cycle, not just look at the index's movements in a narrow time frame.

Many stocks have doubled or tripled in the past two years and now is the time to sell. In your opinion, is this reasonable?

I completely disagree with this point of view. As I have said above, currently, on HoSE, HNX, and UpCOM there are about 1,800 stock codes. While each ticker has its own peculiarities, with some doing well and some in the opposite direction, overall, those 1,800 businesses were the best representatives of the health of the economy. So at any time, we can also find undervalued assets to invest in.

I was seeing a lot of investment opportunities when the economy reopened and state policies were supporting economic recovery. We realized that there were many businesses that had prepared very well for this new cycle, and I thought that they would develop very well in the future. Investors should always remember that, at any given time, there were industries and businesses that benefit from the new economic cycle.

Can you cite some stocks with those characteristics?

As an investment asset management consultant for clients, I am in the habit of sharing in-depth the industry and the companies that are doing well in that industry when recommending investments. I don't want my clients to receive inaccurate investment information that leads to undesirable results.

It will be difficult for me to share all the information about many stocks. I just give an example here of a stock that many people know and many people have discussed in the past is Vinamilk's VNM stock.

Recently, I have received many questions about whether or not to invest in Vinamilk.

Perhaps, when asking this question, the people who ask are also seeing that there is something irrational with the stock price of a good business going down. When asked, I know investors are also trying to find more reasons to buy but are not sure if they should find other arguments to support.

In fact, many investors are uncertain because their mindset is leading them to invest in Vinamilk because VNM is a stock with good fundamentals, sustainable development, and good governance but their short psychology is leading them to the actions that do not match their thinking.

They look at the short-term movements of stock prices, the general market performance and the performance of other stocks and then make comparisons that lead to somewhat influenced investment decisions.

I see many comments that Vinamilk is under pressure on raw material prices, and high logistics costs. Is the investment risky?

Regarding the price of raw materials and logistics costs, we all see how it has impacted the economy and manufacturing businesses. I emphasize that the impact on the economy also causes an impact on many industries, not only Vinamilk.

In my opinion, investors should choose enterprises that have been controlling input costs like Vinamilk. Vinamilk has managed input costs quite effectively when the gross margin has decreased less than the price growth rate of input raw materials (the price of raw milk increased by 50% while Vinamilk's gross margin decreased by only about approx 5-6%). If looking closely at Vinamilk's strategies in recent years, I think that Vinamilk has prepared scenarios very carefully.

For example, when sugar is a key input material in Vinamilk's production, this company has made a move to buy Vietsugar to proactively respond. Similar to dairy materials, Vinamilk has invested heavily in building material areas to reduce the impact on business performance.

According to Vinamilk's report at the end of 2021, the total amount of fresh milk supplied in 2021 is the highest ever, reaching approximately 380,000 tons. Besides that, by having new farms such as Quang Ngai farm and a complex project in Laos (the scale of phase 1 is 8,000 heads) which are expected to be put into operation in 2022, the ability to be self-sufficient in raw materials will also be increased. Vinamilk also often signs forward contracts with raw material suppliers to reduce the risk of price fluctuations.

Vinamilk's flexibility in each stage of the economy also shows that the company has been deeply involved in the supply chain from the raw material area to the product distribution stage, with good control of costs from input to output. We won't have to worry much. Even investors must see this as a good investment opportunity when other businesses do not have that advantage.

Milk products of Vinamilk are displayed in International Food Expo in Shanghai.

After realizing the potential of the industry, investors should look at VNM again. Many people say that VNM is out of high growth when it has approached 50% of the market share of the whole industry, but they have not considered two factors:

Firstly, Vinamilk is promoting its presence in Asian countries, especially China with the world's largest population. Vinamilk's export segment is also highly expected thanks to continuous double-digit growth over the years, profit margin is even higher than domestic growth. In 2021, the company has developed two new export markets and brought the total accumulated export markets to 57.

Secondly, Vinamilk has been planning to expand its product portfolio and many products besides cow's milk such as fruit juice, nut milk, and beef. Especially, in phase one of the beef project which is expected to be put into operation in 2023-2024, with a capacity of 30,000 beef cattle/year, the revenue of the first year is expected to be VND2,000 billion. Hence, according to my analysis, we will see strong growth in the revenue of the company. Vinamilk in the future will not only stop at 6x trillion, but also can reach higher numbers in the following years.

Normally, for businesses with few "commodities" like Vinamilk, which group of investors will prefer?

My advice to any investor when entering the market, we must have a clear direction with our capital when disbursing. If you determine that capital is for commercial investment, you should look for stocks with strong volatility. That volatility will create opportunities for you to make money quickly. But if you define that capital as an investment, then choose good assets to hold for a long time, where we have safety and can disburse with small to large capital in the long term.

Thank you!