Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Yue Yuen Industrial (Holdings) Limited (HKG:551) share price dropped 72% in the last half decade. That's an unpleasant experience for long term holders. And some of the more recent buyers are probably worried, too, with the stock falling 41% in the last year. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days.
If the past week is anything to go by, investor sentiment for Yue Yuen Industrial (Holdings) isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for Yue Yuen Industrial (Holdings)
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Yue Yuen Industrial (Holdings)'s TSR for the last 5 years was -64%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 18% in the twelve months, Yue Yuen Industrial (Holdings) shareholders did even worse, losing 35% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Yue Yuen Industrial (Holdings) you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Hong Kong exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
