Stanbic Bank shares: To sell or not to sell?
LAST week, Stanbic Bank shares started trading on the Uganda Securities Exchange. In the most spectacular two hours of trading on the local bourse, the shares opened at sh150 – more than double the Initial Public Offer price of sh70.
By Paul Busharizi
LAST week, Stanbic Bank shares started trading on the Uganda Securities Exchange. In the most spectacular two hours of trading on the local bourse, the shares opened at sh150 – more than double the Initial Public Offer price of sh70.
It then went on a roller coaster ride trading between sh140 and sh240 before closing the day at sh205. More than 23 million shares changed hands, more shares than were traded in the whole of 2006.Going into this week, there are more than 30,000 shareholders shaking their heads, bewildered at their unexpected good luck. To sell or not to sell; that is the question?
Is there a right or wrong answer? Whether one sells or not, is a personal decision and depends on what each individual’s goals were when they went into the deal.
Essentially, whatever you do, will be governed by whether you have a short or long-term outlook.
In the short-term, cashing in now would mean picking up sh135 a share or about 200% return in two months. Many investment managers would close their books for the year on attaining such returns and this is only January.
But the question would then be what do you do with all those gains when you get them?
Because after all, cash while nice to look, is losing value every day with inflation. And the temptation to buy depreciating assets like cars, clothes or go on a trip would be overwhelming. The smarter people are cashing in now and doing one of two things.
Either they are selling only as much as they put in and let the rest ride – called playing with house money or they are selling out completely and jumping straight back into the market and bidding lower than their sale price.
So for instance, you have 1,000 shares and you exit at sh205, you then immediately place an order with your broker for say sh150 a share and if your bid is successful, your sh205,000 will get an additional 300 shares.
When there is a big swing in prices, the knee jerk reaction is to take your profits and run. However, the long- term investor is a different kind of animal.
Unperturbed by the daily fluctuations of prices on the exchange, he watches the fundamentals of the company – durable competitive advantage, sales, profitability, return on investment, growth in company value and cash positions. The long-term investor only sells if the fundamentals as described above cease to live up to his expectations. But he is always looking for an opportunity to buy more of a good company if the prices fall.
So the long-term investor is not so excited by sharp price increases but extremely happy with share price dips in good companies. This will allow him to buy more and more of a good thing.
And long-term investors can win very big but it will just take a bit longer.
To illustrate if you held a portfolio that included 12,500 shares of dfcu Bank, 10,000 of New Vision, 3,800 of Kenyan power generation company Kengen and now 100,000 shares Stanbic Bank, you would have made a return of 168%.
Meaning if you had invested sh1m in those ratios, you would have sh2.68m in only two years.
So what if you had invested sh100m?
You do the math!
LAST week, Stanbic Bank shares started trading on the Uganda Securities Exchange. In the most spectacular two hours of trading on the local bourse, the shares opened at sh150 – more than double the Initial Public Offer price of sh70.
It then went on a roller coaster ride trading between sh140 and sh240 before closing the day at sh205. More than 23 million shares changed hands, more shares than were traded in the whole of 2006.Going into this week, there are more than 30,000 shareholders shaking their heads, bewildered at their unexpected good luck. To sell or not to sell; that is the question?
Is there a right or wrong answer? Whether one sells or not, is a personal decision and depends on what each individual’s goals were when they went into the deal.
Essentially, whatever you do, will be governed by whether you have a short or long-term outlook.
In the short-term, cashing in now would mean picking up sh135 a share or about 200% return in two months. Many investment managers would close their books for the year on attaining such returns and this is only January.
But the question would then be what do you do with all those gains when you get them?
Because after all, cash while nice to look, is losing value every day with inflation. And the temptation to buy depreciating assets like cars, clothes or go on a trip would be overwhelming. The smarter people are cashing in now and doing one of two things.
Either they are selling only as much as they put in and let the rest ride – called playing with house money or they are selling out completely and jumping straight back into the market and bidding lower than their sale price.
So for instance, you have 1,000 shares and you exit at sh205, you then immediately place an order with your broker for say sh150 a share and if your bid is successful, your sh205,000 will get an additional 300 shares.
When there is a big swing in prices, the knee jerk reaction is to take your profits and run. However, the long- term investor is a different kind of animal.
Unperturbed by the daily fluctuations of prices on the exchange, he watches the fundamentals of the company – durable competitive advantage, sales, profitability, return on investment, growth in company value and cash positions. The long-term investor only sells if the fundamentals as described above cease to live up to his expectations. But he is always looking for an opportunity to buy more of a good company if the prices fall.
So the long-term investor is not so excited by sharp price increases but extremely happy with share price dips in good companies. This will allow him to buy more and more of a good thing.
And long-term investors can win very big but it will just take a bit longer.
To illustrate if you held a portfolio that included 12,500 shares of dfcu Bank, 10,000 of New Vision, 3,800 of Kenyan power generation company Kengen and now 100,000 shares Stanbic Bank, you would have made a return of 168%.
Meaning if you had invested sh1m in those ratios, you would have sh2.68m in only two years.
So what if you had invested sh100m?
You do the math!