Some UAE stocks are outperforming global indices – and need to make it loud and clear


What is the best way to think of a company presenting its business plan on its ideas for the future? At its simplest level, one could take the “what you see is what it’s worth” approach.

Then the math is simple: add the assets, subtract the liabilities, divide it by its parts and you have the price. Another approach would be that the price of the stock is worth what people are willing to pay for it – the Humpty Dumpty method of picking a stock. We know, however, that there is more to a business than it owns and that is where the valuation issues come in.

The standard approach to evaluating price is the “number, weight and measure” methodology, which is another way of saying that the most important variables are the change over time and the probabilities of potential outcomes that could occur in the price. part of getting the right share price value.

According to this metric, investors should assess how much money any investment choice would make for its owners. Wrapped up in this decision making is the amount of dividends/redemptions that would accrue to shareholders.

Western Stock Measures

Not surprisingly, much of the commentary regarding financial markets has focused on the West and, in particular, new and emerging sectors in recent years. We saw a similar phenomenon in the late 1990s during the dotcom era. Skeptics were then mocked for their short-sighted approach in evaluating these companies and, in the recent craze, skepticism was once again mixed with disdain.

As a result, commentary in other capital markets such as the UAE has been sparse, despite a number of companies easily beating the Nasdaq/S&P benchmark. These names (even if we have to exclude the oil and gas sector) include stocks such as IHC, FAB, ENBD, Tabreed and others.

Cushioned against headwinds

It was the performance of these markets that led to the mega IPO offerings (which, despite their fanfare, were met with disappointing accounts due to their “sluggish” secondary performance). It is critical to remember here that many of these IPOs have near monopolies in the companies they run and are therefore protected from downside during the headwinds we face.

As the offerings grow, so does investor confidence given the growing liquidity that comes with a rapidly expanding base. No capital market can replace a domestic investor base, and this only begins to happen when there is an expanding knowledge and information base. This then becomes the “expanding bubble”, a similar phenomenon that has been observed with the development of real estate markets.

When we talk about national capital markets, there is no common language or information base to rely on, as there is with real estate markets. Or for that matter, with foreign markets.

Missing out on local action

The median investor knows a lot more about the latest moves in the Twitter saga or Bitcoin’s crash than the revenue base these national companies generate. Look under the hood, however, and you see that, company after company, there is a gradual increase in the number of retail business owners as well as the percentage owned by foreign nationalities.

This suggests a continuous shift in capital and approach in domestic capital markets. Mathematics, or quantitative reasoning, however, can serve as a rhetorical gambit because those who speak are trying to persuade as much as they are trying to convince, in the context of a population that is more interested in “stories” than numbers.

However, the story is there, and very slowly, as people begin to pay attention to the dynamics of the national economy rather than the micro-factors that dominate the headlines, but relate to a singular stock. Capital is allocated to national successes as an expanding population base (bolstered by the number of Golden Visa holders) seeks to allocate savings to more successful players.


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