And smart investors in South Africa know that now is that right time to invest. But what makes it so?
Successful investment is all about understanding market cycles and knowing how to use them to the best advantage.
All markets are cyclical in their behaviour: they go up, they peak at a certain point, they drop and then they bottom out - before starting a new cycle all over again. The art - or skill - of successful investment lies in reading the market's patterns, understanding the time lines and gauging the end of one phase and the start of the next. A good understanding of these cycles is vital to maximise investment returns.
Investors who understand how business cycles work know not to get carried away by downturns or booms, and rather to anticipate and understand the trends - to predict them, anticipate for them and then use them to their best advantage.
A good example of this was during the 2007-8 property boom. Rather than buying property during that time, the wise investor watched the market and waited for the downturn, so as to take advantage of falling property prices. Most of 2009 saw the downturn, and canny investors gathered property bargains like falling fruit.
The downturn segment of the investment cycle is a difficult one for many investors. Some hold on to their investment because it has fallen below what they paid for it, while others are forced to sell, fearing no reprieve in time to recover at least a portion of their investment.
This is often a sign for others - the more patient investors - to buy, and an indication that the bottom of the downturn is around the corner.
Most investors make the mistake of buying when everyone's buying, and there is much excitement about profits being made. This is usually an emotional buy, a peer pressure buy.
But as soon as the curve turns to become negative and investors start to lose money, panic sets in and 90% of investors rush to sell their stock. Ironically, this is exactly the time when wise investors get a glint in their eye, knowing opportunity is around the corner.
It is almost impossible to predict the peak and trough of a cycle. South Africa hit the bottom of the recent global economic crunch towards the end of 2009, and well into the first quarter of 2010 we started seeing the cycle turning, business positivity looking up and companies starting to show signs of profit again.
It is clear that the companies that will reap benefit from the upturn are those that invested in the market when the curve was at its lowest. Why so? The 90% of investors who had withdrawn from the market by that time had, for a range of reasons, not been able to withstand the storm. In a trough, there is little positivity, few sales, minimal business taking place, much cost-cutting and employee retrenchment. Disinvestment is rife.
The remaining 10% of investors are those who weather the storm - they use the business slump wisely to train up their staff, market their business aggressively and bide their time, waiting for the wind to turn. In so doing, they position themselves for the moment the cycle swings - they are visible to customers, their sales teams are active, and they can take advantage of the initial growth spurt of the upswing.
Most importantly, by being present and immediate, they increase their market share. If a company grows its market share by just 5%, and that market picks up by 50% or 100%, the company's sales will soar, simply as a result of its increased market share.
Now is the time to invest. While other companies are retracting, feeling demotivated and cutting costs, now is the time to train your staff and get your sales teams out there to grow your company's market share, ready for the inevitable - and imminent - growth in the economy.
Businesses need to prepare now to ensure they are part of that success.
