Since the time when I mentioned about Y-Ventures last week, it had multiplied by 350%. It was about 7 trading days since it hit the bottom at 3.8 cents on 31 March and 1 April 2019. I had mentioned in the article that it probably worth a punt on the stock.
Given that it is a penny stock, the queue in the buy column at that time was very low at 10,000 to 20,000 shares. So, it meant that you could key to buy at a few bits lower than the trading price and, still, somebody was willing to sell the stock to you. However, when one were to look at the the transaction volume, it was another story. It was comparatively huge, perhaps 1 to 2 million shares showing the market was full of spot sellers willing to short the stock for any ready buyer. For the past one year, the share price has been beaten down and was close to 5% of the peak value by end March/early April. This could be one of the best chance to buy the stock at fire-sale price. It can only happen when the market thinks that the company is on the brink of bankruptcy or is widely expecting a rights issue. The company was listed on the stock exchange fairly recently, of less than 2 years and the stock price has been affected by the fallen crypto-currency joint venture and the accounting fiasco that it experienced last year.
With the quantity of shares issued at 200 million, it is possible to buy 0.1% of the company with only $8,000 at the share price of 4 cents. (The pre-IPO share quantity was 35 million from which about $7m was raised.) It means that at 4 cents, it is below the pre-IPO price valued at 5 cents. In effect, it is worth the risk to take the plunge. At most, if the company did go bust (touch wood), I would lost a few thousand dollars. The potential upside should be higher than the downside.
It would be good to execute the trade in small tranches, each time by buying 25 000 to 50,000 shares per trade. As we know, the best trades happen when nobody is looking at the stock. This is where custodian account becomes relevant. We need not pay a minimum brokerage of $25 to execute each trade. By doing so, it helps to cluster the buy price to around 4 cents. (I use the word ‘cluster’ because, very often, we do not know exactly know when is the lowest price. Sometimes when we feel that the purchase price is good, it still can drop further. So, to play it conservatively, we buy in smaller tranches once we believe that the share price has dropped to a level that one simply cannot refuse.)
Fast forward a few days to today. The upside has been extremely sharp. The share price has advanced almost 400% from its bottom at 3.8 cents in a matter of 7 trading days! Perhaps, based on market psychology, it may still have legs going forward as it has started from a very low base. But the rate of increase should taper off as the share price increase. The purchase has been a pure luck as if one had struck a price in a 4-D. The timing was good. Certainly, it cannot be repeated or applied to other stocks easily. This can only happen, perhaps, once in a few years.
So, going forward, where will the stock price be? Well, your guess is just as good as mine. Right now, there is no fundamentals to provide us an idea of the share price, apart from making some wild guess, with some assumptions. That said, I have decided to sell one-third of my holdings. That provides me with some profit and the 2/3 of the quantity purchased at zero cost. With the change of management, hopefully, more good days lie ahead. At today trading price at 14 to 15 cents, it is still below the IPO price of 22 cents in July 2017. If the new management proved to be good, the share price should advance in the long run.
Disclaimer – The above pointers are based on the writer’s opinion. They do not serve as an advice or recommendation for readers to buy into or sell out of the mentioned security. Everyone should do his homework before he buys or sells any securities. All investments carry risks.
Brennen has been investing in the stock market for 30 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is the instructor for two online courses on InvestingNote – Value Investing: The Essential Guide and Value Investing: The Ultimate Guide. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.