Investment is best understood as a journey or an odyssey with various fluctuations and challenges. Navigating the ups and downs is essential for achieving successful outcomes in the long term.

Ups and downs in business are normal. But sometimes, the downsides are seen too much, which can cause panic in most investors who don't have the correct framework. The company is in trouble, and its stock price is falling. We call it a bad time.

Contrary to market sentiments in our general lives, there's wisdom in stocks: "Buy (invest) in bad times, sell in good times, and you will get rich". This wisdom holds a beacon of hope for investors, suggesting that bad times can be a gateway to wealth. It means a lot, especially for investors, to help them stay calm and logical when bad times happen to the business in which they have invested or are about to invest.

Sadly, it's easier said than done, especially when it hits your psychology (patience).

Bad things happen

During challenging times for a business, investors should maintain their composure and confidence. A savvy investor will decisively assess whether the difficulties are temporary setbacks or signs of a looming decline that could threaten the company's future.

The key to staying calm is understanding the business's fundamentals. It means being deeply aware and comprehended of what happened to the company and evaluating its capacity for endurance, survival, recovery, and potential growth.

As prudent investors, we see bad times as opportunities. But remember, not all bad times are opportunities. Some can be great opportunities that give you big wins, some can yield just small wins, and sometimes, they're just really a bitter pill to swallow.

The homework is always to deeply analyze the company and key variables related to it to determine whether this is a good or bad opportunity. If you diligently and thoroughly do the homework, you may earn outstanding profits by buying stock in bad times and selling it in good times.

SMDR in 2020

Let's see the example of what happened to Samudera Indonesia Tbk (SMDR) in 2020 when the COVID-19 pandemic hit Indonesia.

In 2020, SMDR's first-quarter profit was less than 100 billion IDR. People saw that this shipping business had no future and mostly was not interesting to focus on, mainly because of oversupply, where there were more ships and fewer orders.

Additionally, the economy was experiencing a slowdown. People could not predict what would happen next or how long this trend would continue.

Surprisingly, there has been a notable shift in consumer behavior, as individuals have increasingly turned to online shopping in response to lockdown measures and concerns regarding the transmission of COVID-19.

As a result, online shopping has grown significantly. The demand for shipping products from abroad is also skyrocketing. Following this condition, the shipping index price rose 2 - 5 times, averaging 4 times from level 500 to 2.000 points.

Moreover, the SMDR index doubled following the index from China (because SMDR has done lots of shipping to China).

During the pandemic, the shipping industry experienced a shift from oversupply to undersupply due to a significant increase in demand for shipping, which rose by 2 to 3 times. This surge in demand led to a shortage in 2021, as adding more ships required waiting for production, which can take 2 to 3 years per ship.

Despite the shortage, it is manageable. SMDR demonstrated impressive performance in Q1 2022, achieving a net profit of 800 billion IDR, which was followed by an increase in its stock price.

We remember that during the pandemic, SMDR was still not under the radar of the majority of investors in the market. At that time, THINK had already seen the rate index and was aware of the potential in SMDR's future business performance even before the financial statements were released.

Accordingly, in 2020, the company faced significant challenges, including substantial losses, a decline in stock prices, and low product volume due to difficulties collecting orders. Despite these setbacks, we recognized SMDR's considerable potential. This situation presented an ideal opportunity to "buy in bad time."

In fact, investors who bought SMDR really cheaply in 2020 gained a significant return in 2022 since the stock recovered 5 to 7 times.

Even investors who purchased SMDR stock after the Financial Statement was released and the price had already increased, still made significant gains. This was considered a major success, as the price rise was expected to continue not just for one quarter but potentially for the next two years.

For your information, SMDR's shipping rate started to rise in 2021 and reached the peak in 2022. Its net profit has shown really good growth, from under 100 billion IDR in Q1 2020 to 800 billion IDR in Q1 2022.

TOTL in 2020

Another example of our own experience is when Jonathan Daniel, our Analyst Manager, bought TOTL (Total Bangun Persada).

Construction is a cyclical business. Jonathan discovered in the TOTL financial statement that the new contract for 2020 was only 1 billion IDR. TOTL consistently recorded contracts valued at about 2 to 3 billion IDR in previous periods.

In fact, Jonathan already knows the business model of TOTL. He also comprehends the key variables, making it easier for him to predict the future.

In the construction business, new contracts are recorded as Revenue as percentage of completion method. This means that in the next 2 - 3 years from 2020, TOTL will record a lot of revenue.

ERAA this year

The freshest example nowadays is Erajaya Swasembada (ERAA). ERAA is a company that focuses on selling gadgets and accessories. It also has many subsidiaries that operate in various segments (from gadgets to fashion to electronics appliances).

Recently, MSCI (Morgan Stanley Capital International) reshuffled its lists, and effective 3 March 2025, ERAA was delisted from MSCI Global Standard Small Cap Index.

We know that many companies hope to be listed on MSCI since it is an index used as a standard for investors from abroad to invest in curated, great companies, in Indonesia. Since international investors can't evaluate companies in Indonesia alone because the country is small and the International investors don’t have time to assess the company one by one, they will only see the top list from the index.

In order to achieve listing on the MSCI, a company must comply particularly in three metrics: market capitalization, free float, and transaction value.

The delisting of ERAA from MSCI marked a significant drawdown in the company’s stock price. However, it also created potential opportunities for investors to explore.

Let's take a look into ERAA business. In 2024, 80% of its revenue came from the smartphone trade, 12% from gadget accessories, and the rest from other sources.

Additionally, ERAA's Gross Profit Margin looks like a flat line because it's stable at around 9 to 11%. Digging into its sales volume, we can see it declined from 16 million smartphone units in 2018 to 10 - 12 million in 2024 (annualized).

The reason for this decline is not a bad sign since the company has actually decided to shift to a premium class, selling more iPhones and flagship smartphones from premium brands.

ERAA started with six store branches. Now that it has more than 70 distribution centers, opening a new branch is no longer a big deal for the company.

As we deep-dive into the company, we still believe in ERAA because we know how good this business is. It is stable and easy to predict, faces high demand, offers a wide variety of products, and allocates 1/3 of its profit for dividends.

The current hot issue at hand is that ERAA encounters more challenges as they still can’t sell the iPhone 16 in Indonesia. This affects the company's revenue and profit. However, THINK sees this issue as a temporary problem that may actually appear as a best chance to buy the stock whose price is declining, especially in week 2 of February when it reached the price of 312. Our analysts have thoroughly evaluated the potential profit ERAA could generate if they are ultimately unable to sell the iPhone 16, allowing us to fully grasp the downside risk involved.

Wipe your googles to have a clear vision

Bad times for the company can be good times for investors. Such times may represent a perfect moment to execute significant stock purchases. However, it is imperative to ensure that this action is guided by a well-defined strategy. But remember, you can only do that if you have a clear vision.

First thing first, it is essential to determine whether the company is good or bad. We've taught about how to assess a business in our curriculum, "Business Interpret," "Business Metrics," and "Business Analysis," which are available in THINK Tank. THINK Case can also be your guidance since it provides examples of implying the golden standard in analyzing a business.

After that, we have to know the business's intrinsic value. We can learn it in “Timeless Valuation” on THINK Tank. The key is understanding how to calibrate and having the vision to see more clearly in the long term. This is useful to know whether the business has the power to recover and will be more profitable in the future.

If you already have the conviction that the business is good, you will have the courage to buy when the bad times come, and you are confident that the company will reach good times again, at which point you can sell to gain more profit.

It is essential to remain aware of timing by diligently monitoring the key variables of the business to ensure that you are not late to seize opportunities. If the price declines and you know where the level is considered a good discount, put your doubts away and buy before it's too late.

We have more examples of this framework in THINK Case, THINK Dex, Articles, and Bootcamp. Join our Free Trial to find out more, or directly join our Full Membership Program to get full access to our investment club.

This article is presented for knowledge-sharing purposes only. It does not offer a fixed conclusion or recommendation to buy or invest in any particular stocks.