A former student messaged me on the eve of our National Day that Yangzijiang (YZJ) share price had dropped 20%. For the past 2 weeks or so, I have been very busy and have no time to look at how my stocks performed. What am I busy about? (Click here). Indeed, by the time I was able to avail myself some time, it was already national day on 9 August. The stock price had plunged 20% to $1.04 per share from the previous day close of $1.30 per share. It had already been suspended. Following the national holiday, there was a super long weekend. It was with luck that I had sold 40% of my holding in April. I would have called it an ‘insurance’ sale, taking a leaf from Jerome Powell’s insurance cut of interest rate of 25 basis point on 31 July 2019 to guard against global uncertainties. The stock price has been oscillating stubbornly high between $1.40 and $1.65 recently. Since 2011, the last high around this level was 2 years ago. Given the on-going trade war, it would be a miracle if the share price can continue to remain this high for the rest of the year. Certainly, it would be prudent to take some money off the table and do what I wanted to do, while waiting for an opportune time to buy back the stock when the time comes. With that sale in April 2019, it was a great feeling that all the remaining stocks were held at zero cost down.
Actually, in the last 6 months or so, the stock price seemed to be out of sync with the other stocks. It was especially glaring in view that all the other stocks had already fallen quite a fair bit amidst the trade war between the world’s two largest economies (see previous post – As we approach mid 2019). However, YZJ share price seemed to be extremely resilient even though China has been a direct target of the US in this trade war. In fact, the share price has been defying gravity when it was less $1 per share less than a year ago.
When the suspension lifted on Thursday, 15 Aug, its share price had run up from the close of $0.86 to $0.99 on Friday helped by the company’s open market purchases. With the relatively small percentage float held by shareholders of less than one million shares, it is no wonder that the share price can move ferociously in both ways. With that, it has been a great opportunity to replenish my stock holding again at almost 50% discount. However, there is a still one unclear hurdle. It is interesting that the chairman takes a leave of absence in a police investigation. Although the recent news release somewhat cleared the air, it is important that we should not let our guards down. A slight ripple can affect the share price again. We know from past incidences that when a bad news strikes, it topples the share price very fast. This is especially true for corporations whose operations are far away from our shores. That said, it is always good to know that a corporate has a succession plan in place.
Disclaimer – The above points 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 securities. 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.
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