What is happening with 138 Student Living preference share trading at a record high of $50 on Tuesday and hitting a new high of $51.74 after trading a mere four shares? There is just no rational explanation for this.
The stock pays interest at 3 percent above the 180 days Treasury bill rates, currently, the rate payable is just over 10 percent before tax. At the current price, the annual yield is a mere 2 percent. So why are investors buying the stock at such an elevated price and why are there more sellers?
A better perspective is gleaned from the stock price last year at just $5.43 resulting in an increase of 853 percent. Last year investors pushed Salada Foods to an unrealistic $10, with several investors lapping up large numbers of the shares. Now the stock is in the $4 range, the same thing is happening at Fesco where investors where the price was pushed to $8.49 and is now at $5.50 as it slowly adjusts to reality, but seems set to fall some more.
Investing in stocks is far easier than some think. Buy low and sell high is a recipe for making money. Momentum trading where investors buy into those stocks that are rising can make money for investors but many end up guessing when to sell before a correction starts.
Newer investors will save themselves much headache if they buy low PE stocks of companies whose profits are growing and sell ones with extended PE ratios well over the market average.
Gambling with stocks
August 4, 2022 by
