How to Cash in on the Foolishness of the Stock Market in Kenya
Investing the stock market can be a very lucrative venture if you know when to dive in and out. This is because prices at the Nairobi Securities Exchange can be quite deceiving. Most of the prices instead of being determined by the facts on the ground are often than not a result of investor sentiment. Sentiments that are quite baseless but affect the price of the share you pick in the short run. Intelligent investors can therefore cash in on this foolishness of the market and make a killing for themselves.
Things to look out for
Share Splits
Let’s look firsts at what a share split is and when it happens. More often than not a share split is done when a share has become too expensive to facilitate trading on the bourse.
Share slips present very nice hunting ground for any trader. It presents you with more shares at no cost at all. It’s like being given free money only you have to give first in order to receive.
Dividend Payouts
A simple study of the previous dividend payouts will tell you which share would have a good return on your investment. Most long-term investors look at the dividend rather than anything else. So instead of wasting money on cheap stocks you could as well buy few stocks from a dividend paying company like Williamson Tea, EABL and BAT.
Rights issues
A rights issue is a cheaper way of increasing the number of stocks you have. I good example here would be CIC insurance they gave out a rights issue of one for every five held then they were trading at 4 shillings a share after three months it hit 12 shillings with the rights in play . If you ask me you only needed to invest 100k when they were trading at 4 shillings a share. The rest depends on who was your Math’s teacher.
IPOs
IPOS are good times to get into the market. Most times the share hits the roof immediately they start trading. If you witness a spike of more than 20% then don’t wait too long take your loot rarely do they continue with the run for long.
Bull Bear Run Cycles
It has become rather obvious for me that the bull and bear runs in the Nairobi securities exchange have a pattern. The trick then becomes learning this pattern to be able to know when to get in and out. The best timing for entry off course would be on the periphery of a bear run. But this is if you don’t want to wait for the Bull Run for long. If you have no problem waiting then look for the lowest price ever. This has to do with your gut feelings sometimes .A counter like Safaricom surprised us to go down to 2 shillings a share, who would have thought? Now it has hit 20 shillings that’s an astronomical rise in investor’s capital in a span of a year or two if your timing was correct.
