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We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example, after five long years the CITIC Resources Holdings Limited (HKG:1205) share price is a whole 60% lower. That's an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 35%. Furthermore, it's down 21% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Check out our latest analysis for CITIC Resources Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, CITIC Resources Holdings moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
The steady dividend doesn't really explain why the share price is down. It could be that the revenue decline of 46% per year is viewed as evidence that CITIC Resources Holdings is shrinking. With dividends up, but revenue down, some investors might be concluding that the company is no longer growing.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on CITIC Resources Holdings's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CITIC Resources Holdings's TSR for the last 5 years was -56%, 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 3.3% in the twelve months, CITIC Resources Holdings shareholders did even worse, losing 31% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 15% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Keeping this in mind, a solid next step might be to take a look at CITIC Resources Holdings's dividend track record. This free interactive graph is a great place to start.