Volatile markets and prices #investments
In volatile markets, you have to assess risk and make forward predictions. The AIM is one of the most volatile and you have to look not only at the current value of a company but at the potential value. I’ve been watching Solo Oil and the price dropped quite dramatically from a high of 0.8 right down to 0.45 yesterday. Those are the bid prices and the spread at the close yesterday was a massive 20%. That was obviously the market makers manipulating the price to trigger stop losses and increase their margin.
Volatile markets are driven by greed and panic. The high price for Solo Oil stock was driven by greed and then when the RNS didn’t deliver the promised jackpot the profit taking began. There was, however, investors like me who had done their research and stayed in for the jackpot. We are expecting more news from Aminex, Solo Oil’s partner in Tanzania and so the profit takers could miss out unless they bought back in on the low yesterday. Small investors find it hard to buy low and sell high because of the ridiculously high dealing fees.
Banking and the financial system
We do get free banking but when you look at the system overall the banks make ridiculous amounts of money from dealing fees and from credit cards in order to provide free banking. If you look at credit cards, it is the poorest that pay the highest interest, often 39%, while the rich get cards at 7%. It is the same with mortgages and savers get a raw deal too. Everything in the banking system appears to be fixed and there is little competition. To get a decent rate of interest on savings you have to go to a peer-to-peer platform like Zopa.
Carillion is out of favour with brokers and so it is now top of my watch-list. It makes a decent profit and pays an excellent dividend so I might add that to my portfolio in April. I’ve been looking at insurers too, like Aviva, who will benefit when interest rates rise.
Some investors use charts to track share prices and try to predict the future. Overall, charts are useless because you can’t predict political events and panic but for some shares looking at a chart might help. Some share prices are steady in volatile markets and go unchanged for quite long periods and will suddenly jump up a few percent or down a few percent. In some cases, it can be a huge jump. This is because the stored value isn’t recognised. If you can recognise that value and buy in on a drop in the price you can make a good return. One such share that seems to do that is Alliance Pharma in the AIM market, it is down 3% this morning for no apparent reason. That could be an opportunity.
Other pharmaceuticals I am watching closely as part of my portfolio are Immupharma and Verona Pharma. I think both have a lot of stored up value and potential. Verona Pharma was double it’s current price last year before the consolidation.
That’s it for this week. You can subscribe by entering your email address at the top of the sidebar or follow me on Twitter for updates. You can also find links on my Facebook page. Remember to always do your own research and hedge your risk by diversifying and investing quantitatively as well as qualitatively!