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Investing in Low liquidity shares

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Contributor
I would like to find out from the forum what the views are in investing in low liquidity shares.
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13 REPLIES 13
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Valued Contributor
simple - don't. I won't touch a share doing less then R10million a day.
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Super Contributor
Simply cos when the S hits the F like right now, your buyers vanish. If you do it, know you holding through the bad news.
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Occasional Contributor
Never again, even if it does look rosie! Learnt my lesson with Afro-c one time and battled to even sell below market value at the time. As far as I know Simon does not trade penny shares, thus having a R value cut off makes it difficult for low value shares. I normally look at ave number of trades per day. Above 100 should be ok but OMO.
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Valued Contributor
Roboren, price does not indicate value (low or high)
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Super Contributor
well, if I followed the views expressed above, I would not have bought PNC at 40cps, SCN at 125cps, ADH at 50cps, ART at 250cps, etc. all 5 to 10-baggers for me. I guess each to his own. Investing in smallcaps according to a robust methodology and applying tested criteria could indeed be exceptionally profitable over time. omo
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Occasional Contributor
I see what you mean. Makes sense, thx.
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Not applicable
I learnt the hard way stick to the big guns ,chart patterns are easier and buyers are plenty- my opinion, rathere make 80% small profit trades than 5% big profit trades
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Valued Contributor
topgun, sure and nice returns. But then you could have got DLG at 240c, IMU at 140c, JDH at anything etc. Depends which ones you had and how thick the S was. It is risk reward and I don't like the risk. Over the last year you could have bought; SOL below R200, AGL below R200, SBK below R70, etc. and if we go back to 2003/4 SOL below R100, SBK below R40, PIK below R15, etc. Lower risks all and rewards not shabby. Point is back to the begining, risk is not bad. As long as one understands it and accepts it. I personally am not prepared to accept the risk of lw liquidity.
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Valued Contributor
last point. Imagine having R100k in IMU, now you want to sell? You're either moving the price markedly or you're getting out slowly. Either way tis nasty. Of course "robust methodology and applying tested criteria" could help reduce risks.
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Not applicable
Princess Leiah does not like to kiss a lot of frogs to find the prince.
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Valued Contributor
sup, lol, that be about right
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Super Contributor
I don't invest in rolling forward PE's above 13x which would disqualify most smallcaps at the moment and certainly DLG at 240 cps while my R20 m after-tax earnings criterium would have eliminated IMU by a mile. Current favourites ELR, YRK, GDN, PPE and SOV should, however, generate market beating returns over the next 12 months. omo
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Valued Contributor
topgun, ya you have rules in place that make sense. With respect to most penny stock punters - they only have hope.
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