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Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Imagine if you held China Resources and Transportation Group Limited (HKG:269) for half a decade as the share price tanked 99%. And we doubt long term believers are the only worried holders, since the stock price has declined 63% over the last twelve months. The falls have accelerated recently, with the share price down 12% in the last three months. But this could be related to the weak market, which is down 11% in the same period.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
View our latest analysis for China Resources and Transportation Group
China Resources and Transportation Group isn't a profitable company, so it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over half a decade China Resources and Transportation Group reduced its trailing twelve month revenue by 51% for each year. That's definitely a weaker result than most pre-profit companies report. So it's not that strange that the share price dropped 64% per year in that period. We don't think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor - but only if there are good reasons to predict a brighter future.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of China Resources and Transportation Group's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 7.9% in the twelve months, China Resources and Transportation Group shareholders did even worse, losing 63%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 58% over the last half decade. 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of China Resources and Transportation Group by clicking this link.