Quote:
Originally Posted by timothywill
please i just have to ask before i jump, oga apache, riskreturn and other genius in the house, please i saw the rallying of this company first aluminium and i want to ask if its a good buy for me now at the current price as i want to buy some quantity tomorrow if its not too late. abeg i need ur quick intervention oooooooo, na bank money oooooooo  |
I do not have any grapevine or other unpublished information about the stock and neither could I lay my hands on any of its recent quarterly or even audited results. The only thing I know about it is that, like most other penny (or non-blue chip) stocks, it currently trades at an all-time peak price of above 8 Naira, compared to the lowest price of 2.28 Naira it attained earlier this year 2008 - translating to about 250% rate of appreciation in less than 3 months.
Buying shares when prices are rising is called "chasing" and this strategy works occasionally. However, it is prone to substantial risks because such prices are more prone to collapsing, unless supported by fundamental. In the present Nigerian context, such is not advisable (except in some very rare cases) for non-blue chip stocks. Prices of most penny stocks have risen 3 or 4 folds in the past few months without any change whatsoever in the information available to investors about future prospects of the companies. The probability of downside is therefore more than that of upside as, sooner or later, investors' sentiments would change and their eyes would now open to the futility of just buying papers (or titles to very little) at high prices. For smart and fortunate investors, they would get away with gains by selling such stocks before the imminent collapse - as we have been having in the past few months where many have made fortunes through this. But, mathematically, it is not possible for all investors to be so fortunate for some investors' gains must be exactly equal to the losses incurred by other investors (a zero-sum gate type of thing) in the process of staking money on majorly worthless things they call penny stocks characterised with weak fundamentals.
My own scripture I would refer you to states that: The fear of non-blue chip stocks (in Nigerian stock market today) is the beginning of (financial) wisdom ... The love of penny stock (in NSE today) is the root of all (investors') evil. ... Seek yee (today) blue chip stocks first and its strong fundamentals, and all else (financially) shall be given unto you.
So, I would rather advise that you use just enough bank money that you can use in subscribing for penny stock POs/IPOs like 99,000 units of DAAR communications offer for subscription and 9,000 units of offer for sale shares, 200,000 units of Standard Alliance Insurance's PO shares (both closing on 31 March) and some other PO's like those of Crusader Insurance (50,000 units) and Custodian & Allied Insurance of about 20,000 units (both of which are expected not later than April). With these indicative units, which you are not likely to be fully allotted, you should be able to cover the interest costs of the loans with the returns you make (some 5 months after subscribing for the offers) from the sale of what you are allotted and still have some gains left. But risking bank money on penny stocks traded in the secondary market can be very dangerous.