Is it too late to enter the market now? The stock price has already risen significantly.

Is it too late to enter now? The stock price has already risen significantly.

In stock investing, particularly when referencing Warren Buffett's investment strategies, this concern is common. When Buffett invested in Japan's five major trading houses (Itochu, Mitsubishi, Mitsui, Sumitomo, Marubeni), he faced similar market timing questions. Below, we analyze whether it's "too late" to enter from the perspectives of investment strategy, stock price analysis, market timing, and risk management.

1. Understanding Market Timing vs. Value Investing Core Principles

• Buffett's investment philosophy emphasizes "value investing" over attempting to predict short-term market timing. He often says: "Time is the friend of the wonderful company, the enemy of the mediocre." A rising stock price doesn’t mean the opportunity is gone; the key lies in whether the company possesses long-term competitive advantages and intrinsic value.
• Regarding the five trading houses, when Buffett bought in 2020, these stocks had already rebounded from lows. However, he focused on their diversified businesses (e.g., energy, trading, resources), stable cash flows, and low valuations (P/E ratios were low at the time). If the price rise stems from improved fundamentals (e.g., global trade recovery) rather than speculative bubbles, entering now may still present opportunities.
• Conversely, if the surge is driven by market hype (e.g., short-term trends), caution is warranted. Assess current valuations: the average P/E of the five trading houses is around 8-12x, far below tech stocks' 30x+, indicating a remaining margin of safety.

2. Stock Price Analysis: Evaluating Opportunities After a Rally

• Historical Review: Trading house stocks have risen significantly since 2020 (some over 100%), reflecting post-pandemic global supply chain recovery and inflation benefits (e.g., rising commodity prices). When Buffett increased his stake (2023), prices had already risen, yet Berkshire Hathaway raised its ownership from 6% to 9%, demonstrating his confidence in their long-term value.
• Current Assessment:
  • Positive Factors: These companies offer stable dividends (dividend yield ~3-5%), have global business reach, and strong risk resilience. Buffett views them as "timeless businesses," similar to his Coca-Cola investment—he didn’t sell even after its price surged.
  • Potential Risks: Global economic slowdowns (e.g., intensified U.S.-China trade friction) could trigger corrections. Long-term, however, their "moats" (scale economies and network effects) support sustained growth.
• Conclusion: If your investment horizon is 5-10 years and the current price is below intrinsic value (estimable via DCF models), it’s not "too late." When Buffett bought Apple, its price had multiplied from lows, yet he still reaped massive returns.

3. Investment Strategy Recommendations

• Avoid Chasing Highs: Resist FOMO (fear of missing out). Buffett advises, "Be fearful when others are greedy, and greedy when others are fearful." If prices far exceed fair value, wait for a pullback (e.g., 10-20%) before entering.
• Dollar-Cost Averaging: Mitigate timing risk. For example, build a 20% position initially, monitor the market, then gradually add. This aligns with Buffett’s phased investment approach.
• Long-Term Holding: The trading houses suit a "buy-and-hold" strategy. Buffett held Coca-Cola for over 30 years; despite volatility, compounded returns were impressive.
• Diversification: Don’t concentrate all capital in the five trading houses. Build a balanced portfolio with other assets (e.g., bonds or index funds).

4. Key Risk Management Points

• Valuation Risk: Use tools like Yahoo Finance or Bloomberg to check P/B, P/E, etc. If P/E exceeds its historical average by 20%, it may be overvalued.
• Macro Risks: Monitor yen exchange rates, inflation, and geopolitics (e.g., Japanese economic policies). The trading houses’ high global exposure may benefit from dollar strength.
• Personal Risk Tolerance: New investors or those using short-term funds risk losses during high volatility. Buffett stresses the "margin of safety"—only buy when the price is well below value.
• Stop-Loss & Exit Strategy: Set rules (e.g., sell if fundamentals deteriorate, such as declining profit margins), not just based on price movements.

In summary, whether it’s "too late" to enter now depends on your research depth and holding period. If the trading houses’ business outlook remains strong and valuations are reasonable (e.g., current P/E remains attractive), following Buffett’s lead isn’t unwise. However, investing carries risks; consult a professional advisor and base decisions on your financial situation. Remember, Buffett’s success stems from patience and discipline, not perfect timing.