There is a saying that goes this way “Greed makes investors buy shares when they are high and fear makes investors sell shares when they are low”. It’s an irrational behaviour in the investor place and something I don’t think can change. This irrational behaviour was evident in the trade of one of my favourite stocks Transcorp Plc.
Last Week Transcorp shares rose to its highest in years to N5.87 on the back of recent announcements by the conglomerate and as expected a lot of people rushed to ride the bubble and make quick profits. It’s a value thing and value investors show no remorse after all, they see shares as some gamble. However, there are some innocent ones who join the band wagon for fear of loosing out on capital gains. That Capital gains you seek can quickly turn into losses depending off course on market sentiments as was shown last week and this week. Transcorp shares has been down 33% since its 5 year high last week.
So if you had bought shares last week at N5.87 your investment would be down 33%. That is, for every N1000 you invested you would have lost N330 within just a space of one week!! So, how much did you invest, N1million? You’d have lost N330k in value in a week!! But then who knows, it’s probably early birds. The stock may prove resilient and bounce back but the fact remains that stock volatility is typically associated with stock who see price appreciations based on sentiments rather than fundamentals.
And the chicken has come to roast!! The irony of it all is that it keeps re-occurring.