ECONOMY

The long-term investors are not necessarily the winners

It is a myth that long-term stock investors will always win in the end. To claim that share investments are better than other forms of investments represents a virtual reality, even today when interest rates for bank savings are at such low levels. The last two difficult years at the Athens Stock Exchange (ASE) have made some things very clear. One is that risk is always present in the stock market and that luck is not necessarily always on the side of the daring. Another is that not all stocks are the same and that long-term investments are not necessarily a correct strategy. Most importantly of all, investing in the stock market is a tricky business and requires a professional approach. The developments over the last two years have dispelled the myths surrounding the stock market. According to statistics compiled by Attiki Kerdos, Hermes Securities on the yield generated by stock investments over the periods December 18, 1991 to December 18, 2001 and December 18, 1996 to December 18, 2001, showed that in both cases, long-term share investments offer opportunities for profits but do not guarantee them. Over the 10-year period, of the 132 shares traded at ASE, 33 showed a negative return; in other words, their current market value is below their 1991 worth. Twenty-three companies reported a positive yield, up by only 50 percent, which does not cover inflationary costs and dividend payouts. The study of stocks over a five-year period was also enlightening. Of the 222 companies listed on ASE on December 18, 1996, one in two did not offer any return. Fifty-five companies saw their value decline, some by as much as 70.5 percent while 39 had a positive yield, an increase of less than 30 percent. In reality, the situation is even worse if we take into account other factors such as company bankruptcies, the suspension of some shares and the expulsion of others. Despite all these, there were some high-performing stocks in both periods under study which could be considered exceptions. Of the 222 listed companies in the five-year period, 37 reported a yield increase of more than 200 percent and only 24 saw their returns rise by more than 300 percent. For the 132 listed companies covered in the 10-year period, only 31 showed a rise of more than 200 percent in their yield and 18 an increase of more than 500 percent. Only one company, Kekrops in the five-year period, and five stocks – Kekrops, Tria Alfa common and preference shares, and Klonatex common and preference shares – in the 10-year period, reported 1,000-percent yield increases. For the steady long-term investors who can exploit market volatility, stock investments can provide enormous profits. Shares at the Athens market have undergone a series of massive upheavals, according to the study by Attiki Kerdos Hermes Securities. For example, top performer Kerkrops which recorded a yield of 1,395.8 percent over a 10-year period saw its share fluctuate between 1.95 and 262.93 euros, marking a divergence of 13,383.5 percent! Undoubtedly the Athens bourse has presented a number of opportunities, especially to those who monitor the market closely and possess the knowledge and experience enabling them to exploit the situation and able to identify worthwhile stocks. However, these are the exceptions.