I mentioned back in early 2019 that investing in the Portuguese stock market has not been a profitable venture for anyone who've stayed invested in it over time. Looking at the chart, it's impossible to find an entry point that would have given an investor a better return on their money than gold. The index is up 100% over its 30 years in existence, which is far less than inflation. Gold is up more than 400% in the same period.
However, this is not to say that I'll never invest in Portuguese stocks. I live in Portugal, and I like the place, both its culture and its stability. I don't see why I shouldn't invest in Portuguese stocks if I one day decide to rotate out of gold and into stocks.
Buying the PSI20 index would hold true to my philosophy of investing in local things. If I have enough faith in Portugal to make this place my home, why shouldn't I put some money into it? It may not be the best decision I could have done, but it's not going to be all bad either, provided I get my timing right. The fact that Portugal is less developed than other nations is no argument against investing here, nor is a lack of efficiency any argument against it either. Those things give room for improvements and can therefore be turned into an advantage for the investor.
A curious thing about the PSI20 is that it contains only 18 companies. This was the case back in 2019 and is still the case. However, I didn't note down which companies were in the index, so I'm not sure if the index contains the same companies now as it did back then.
Companies come and go, so an index is not unchanged over time. Owning stocks requires more attention than owning gold which we don't need to rearrange every now and again. In the case of the PSI, two companies appear to have gone away without being replaced.
If I enter the stock market, I'll do so after a big drop in its price against gold. Such an event is likely to flush out overleveraged and vulnerable companies, leaving only the strongest companies in the index. It's also likely that there will be newcomers which have somehow thrived during the downturn.
I'm therefore tempted to buy individual stocks rather than the index. That way I can build a portfolio that is more weighted against promising newcomers than old and struggling companies. The main thing about investing is after all timing. There's no point in owning an index per se. The trick is to buy, hold and sell at favourable times during a super-cycle that typically lasts about ten years.
With the Dow/gold ratio still around 20, there's a long way to go before we reach 4, when I will start rolling gold into stocks, so I'm in no rush to make any decisions. However, a list of the companies that constitute the PSI20, together with a short description of what they do may come in handy, not least because it will tell me which companies survived, and which didn't once the downturn is well under way:
- EDP Renovaveis | EDPR - Spain-based company active in the renewable energy sector.
Market cap = €21.03B - EDP | EDP - Portugal-based utility company.
Market cap = €17.99B - Jeronimo Martins | JMT - Portugal-based company engaged in the food retail sector.
Market cap = €13.45B - Galp | GALP - Portugal-based holding company engaged in the oil and gas industry.
Market cap = €9.34B - Navigator | PTI - Portugal-based company primarily engaged in the paper manufacturing operations.
Market cap = €2.76B - BCP | BCP - Portugal-based privately owned bank.
Market cap = €2.24B - NOS | NOS - Portugal-based company engaged in the broadcasting and telecommunication industry.
Market cap = €1.96B - Sonae | SON - Portugal-based holding company primarily engaged in the retail trade of food.
Market cap = €1.84B - REN | RENE - Portugal-based holding company involved in the energy sector.
Market cap = €1.7B - Corticeira Amorim | COR - Portugal-based holding company engaged in the cork industry.
Market cap = €1.18B - Semapa | SEM - Portugal-based holding company engaged in three business segments: Paper and Pulp; Cement and Derivatives, and Environment.
Market cap = €1.13B - Altri | ALTR - Portugal-based holding company primarily involved in the production of bleached paper pulp from eucalyptus.
Market cap = €1.11B - CTT | CTT - Portugal-based company principally engaged in the provision of courier services.
Market cap = €0.47B - Mota Engil | EGL - Portugal-based company primarily engaged in the construction industry.
Market cap = €?B - Ibersol | IBS - Portugal-based company primarily engaged in the operation of restaurants.
Market cap = €0.24B - F Ramada Investimentos | RAM - Portugal-based holding company primarily engaged in the production and sale of steel products and storage systems.
Market cap = €0.17B - Novabase | NBA - Portugal-based company active in the provision of information technology (IT) solutions.
Market cap = €0.12B - Pharol | PHR - formerly Portugal Telecom, SGPS, S.A., is an open company.
Market cap = €0.05B
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| Sovereign |
By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link
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