I have a problem.
No, not that one.
Or that one.
Yes, that's a problem, too, but not the one I'm talking about.
The problem I'm referring to is with my cafe.
See, last year, I bought a cafe for $300,000.
It was a pretty good deal. The cafe did $36,000 in profit last year.
Unfortunately, though, the council is repairing the footpath out the front, and they broke a water main.
Foot traffic is down massively, and people can't use the parking spots out the front.
It's going to take 6-8 weeks to fix.
Sales are down 30%, and they will probably stay that low until the end of March.
I reckon I'll only clear $1,500 a month in profit in February and March, compared to my usual $3,000 a month.
So, I'm selling the cafe for $150,000.
I mean, sure, profits will go back to normal in a couple of months…
But valuing my cafe just based on the short-term impact of footpath repairs is the right thing to do, isn't it?
It's not?
So why are the shares of coronavirus-affected companies being taken to the woodshed as if their earnings power has been permanently impaired?
No idea? Me either.
So if they're not going broke in the meantime, and business is likely to get back to normal after the crisis passes…
… but the shares are being sold off because of a short term problem…
Doesn't that seem like a buying opportunity if you have a long term investment horizon?
I think so, too.
Fool on!
