EAND, timing an investment for 100% ROI in 2 years (not a trade)

26 Agu 2023

EAND
In this post, I am featuring a multi-year investment opportunity. An opportunity to make 100% return over 2 years. This idea is for my investment account. It is for growing money steadily over time for retirement. If you are looking for a trade, then this is probably too slow for you.

Etisalat is a company whose sales are 10% of the UAE’s GDP. Normally companies of that size would be very cyclical, but Etisalat’s business (not stock) is only semi cyclical.
Cyclical businesses suffer when the economy takes a hit, it affects their bottom line. While the economy does affect Etisalat for sure, its impact on the business is diluted by the fact that Etisalat’s net profit margins are constant at around 19% no matter what. How could that be? You see Etisalat and Du are government approved duopolies. They have price control. This is why, they are not purely cyclical businesses. This means you can only hit their stock so hard before they ignore you and the economy.

My chart above is a monthly chart. It shows the entire life of Etisalat as an exchange traded stock. It has suffered thru many price retracements throughout its life. If we look closely, we will see some interesting trends.
In the early 2000s EAND took a 62% hit which corresponded with a peak-to-trough retracement to the 81% line. From there, and within 2 years, the stock moved up 96%.

The stock dropped again and formed a bottom in December 2008 after declining 63% (again) from its previous high. Then from there, and within two years, the stock moved up 70%.

In March 2020, EAND dropped to its 81% peak-to-trough retracement line again! but this time, the drop was only 45% in price from its peak. Then from there, and again within 2 years, Etisalat moved up a whopping 254%.

And now Etisalat is doing it again. They are dropping precipitously in price from their all time high. But they are not quite there yet. My price to buy EAND at 16.34 AED, is at the 81% peak-to-trough retracement level, which also corresponds to a 58% decline for EAND from its all-time high (see circled double arrows).
But if you recall, I showed above that Etisalat respects either the 81% peak-to-trough retracement level or the 62% drop from peak (which sometimes is the same level)? That is why I will average down at 14.84 AED if I get the chance (see green arrow on chart). It probably won’t happen, but this will make the investment more durable. This is called a two-tier entry.

Finally note, that around my highlighted entry price, you will find the most epic moving average in all Technical Analysis. The 200 Monthly MA. This is going to be an incredible level of support! Most companies don’t have enough data to give you the opportunity to buy them at the 200 monthly MA. But Etisalat does. Not to mention that it is falling from a massive divergence (distance) to the 200 MA.
Remember Etisalat will likely need a few more months to get to my price. Currently at 20 dhs, EAND is 20% away from my buy in level. But if you buy this stock at the right time, you have the chance to make a large return in a few years or you can even own a great company with a secured business into your retirement for an even larger return than holding for two years.
Note, at the above entry price, dividend yield would be 10% per year. Not bad if you ask me.
This is what I am doing with my money. You do you.

Good luck.

26 Agu 2023

Catatan

A correction to the dividend yield mentioned above. It would be about 5% not 10% at my buying price. Still worth long term ownership in a portfolio if that is the path taken instead of selling after 2 years. But either path is up to you.