Aug. 19, 2020
Day 146 of lockdown and Covid-19, new cases definitely on the decline and hence we're now in level 2.
Curro puts out tough results.. The real worry? Have a look at the massive outflows of students from their mature schools. This does not imply wondrous things in the future for the newer schools... pic.twitter.com/uZSaL2VXtw
— Keith McLachlan (@keithmclachlan) August 19, 2020
@smalltalkdaily has been a shareholder in $JSECOH since day 1. It has consistently been a core holding & I've followed EVERY rights issue
This current one at 807 cents & having seen H1 results & listened to presentation (frankly) I'm 50 : 50 if I'm putting another cent into #COH pic.twitter.com/t0roIL9a0G
— Smalltalkdaily Research (@smalltalkdaily) August 19, 2020
Last week all the talk was about a move down to level 2 lockdown and a lifting of the ban on alcohol and tobacco.
There was an NCC meeting on Wednesday, the state of disaster expired on Saturday and the roar against the alcohol ban was deafening.
Against this backdrop, we saw the leisure and alcohol stocks running last week.
Then on Saturday night, the president made the announcement, level 2. We can travel between provinces, buy alcohol and tobacco and visit friends and family.
Yet Monday saw the stocks that had run hard all start giving back their gains and most are back at where they started last week.
This is not surprising, a common saying in the market is "buy the rumour, sell the fact". This applies to results, mergers, takeovers and now also lockdown restrictions.
The logic is that everybody thinks they're clever having spotted the potential news before anybody else and positioning themselves ahead of the news. But they're to the only ones spotting it as the price action tells us. Then when the news happens the reality is that
it's actually a long road and those early buyers take their profits.
For traders, the lesson is careful buying as the news breaks. Sure often the news will send a stock price still higher, but watch the price action and if the news starts to see weakness in the price, take your money and run. The other lesson is that to be early often pays, but careful of how early. Buying weeks or months ago on an eventual lifting of the ban will make a profit, but being that early means your profit is still some way off.
JSE – The JSE is a registered trademark of the JSE Limited.
JSE Direct is an independent broadcast and is not endorsed or affiliated with, nor has it been authorised, or otherwise approved by JSE Limited. The views expressed in this programme are solely those of the presenter, and do not necessarily reflect the views of JSE Limited.