Bad to buy lots of shares in less well known company?

[fredd]

I have a few shares in a company, and I was thinking of buying more, but today there was only 6 trades and a volume of 9000. Im not exactly sure what that means, but if I spend 10G buying more, can I get stuck with them? And will it be hard to sell them? (obviously being a less traded company)
thanks

 

[suhm]

depends if your comfortable holding them very long term, I own some shares in companies which only trade every couple of weeks, if your wrong its hard to bail out, but in liquid stocks it is very unlikely you will be the first person to exit the stock on bad news but at least you should be able to and the buy sell spread is likely to be a lot smaller.

 

[springhill]

I have a few shares in a company, and I was thinking of buying more, but today there was only 6 trades and a volume of 9000. Im not exactly sure what that means, but if I spend 10G buying more, can I get stuck with them? And will it be hard to sell them? (obviously being a less traded company)
thanks

What are your motives/reasoning for buying more?

 

[fredd]

I probably want to hold them for 2- 6 months, longer if they keep doing well.

I want to buy more because they have gone up 30% in the month or 2 I have had them- more than any of my other shares, and I believe there is scope for them to go higher.

I just dont want to be stuck with 25G worth of shares that dont sell when I want to sell. (Im new so I dont know if this can happen or not)

 

[springhill]

I probably want to hold them for 2- 6 months, longer if they keep doing well.

I want to buy more because they have gone up 30% in the month or 2 I have had them- more than any of my other shares, and I believe there is scope for them to go higher.

A few Qs here;

1. What is your level of knowledge of this co?
2. 30% in a month is good, have you considered going the opposite way and taking profit/taking out your capital and free carrying?
3. Is that 10k burning a hole in your pocket?
4. Is there something more liquid it would be more prudent to look at?

I just dont want to be stuck with 25G worth of shares that dont sell when I want to sell. (Im new so I dont know if this can happen or not)

Bingo!
You can get stuck holding shares no-one particularly wants at any given time.
I think you know what (or what not) to do.
I'm just asking so you can run through it out loud, always helps when i'm churning something over in my head.
Good luck

 

[fredd]

A few Qs here;

1. What is your level of knowledge of this co?
2. 30% in a month is good, have you considered going the opposite way and taking profit/taking out your capital and free carrying?
3. Is that 10k burning a hole in your pocket?
4. Is there something more liquid it would be more prudent to look at?

1. I have actually done my research. It is a decent size, positive profits for the last 5 years, currently at half the value it was before the crash...


2. So you mean take the profit out and just keep investing the original sum? (or vice versa) Is that what free carrying is?

3. Just sold under performing shares and have it spare to invest until the time comes to get a house.

4. Possibly, there is a couple of other shares I am looking at buying.

Cheers

 

[awg]

watch the buy/sell spread for a while.

If the spread is consistently a high percentage of the SP, then you may strike trouble, if you want to get out, especially on a falling SP.

I have seen slippage of 10% to 20% on ASX300 stocks occasionally

 

[kam75]

I have a few shares in a company, and I was thinking of buying more, but today there was only 6 trades and a volume of 9000. Im not exactly sure what that means, but if I spend 10G buying more, can I get stuck with them? And will it be hard to sell them? (obviously being a less traded company)
thanks

If the trade goes against you, and there is a lack of demand, you could be getting out at worse prices. On the other hand, if the trade goes in your favour and there's a lack of supply, could be good. I recall a trade I did back in 2003 in a company called SRV (Servcorp). Very illiquid then, (and still now). Anyway, bought about $10K's worth @$1.65/share. Only about 10000 shares traded that day. I still remember the market depth the next day. There was absolutely no sellers anywhere. And not a lot of support either. So I placed my order to sell them at $2.00. Day or two later I was out with a good profit. But could just as easily go the other way. The lesson, trade in stocks with sufficient liquidity for your position size.

 

[Julia]

What is the company?

 

[fredd]

vrl

 

[kam75]

vrl

I've seen worse liquidity than that. But yeah, this one would not meet my liquidity requirements to trade $10K. I'd be looking for a stock that has done at least $1.5M in the last week. One thing I hate more than slippage when I buy a stock is getting less for it when I sell the dog.

 

[So_Cynical]

vrl

LOL since when has VRL been a "less well known" low volume company.i suppose its
hard to spot the Village Roadshow logo at the start of them big Hollywood movies. corn:

Anyway fredd what did u pay? i got in at very close to bottom.

 

[fredd]

true, I guess they are well known, just not massively traded, I got in at around $1.15, what about you?

I did buy flt earlier this year when they went down to $5, they are now at $15, but this was in the asx game while I was still setting up my real account- doh!

 

[So_Cynical]

true, I guess they are well known, just not massively traded, I got in at around $1.15, what about you?

82 cents...one of my better bottom picks :brille: and while the SP was still falling.

Anyway the VRL thread can be found here https://www.aussiestockforums.com/forums/showthread.php?t=2269

 

[ROE]

Not sure why you want to put more money into this company....
Couple of thing that got me running rather than put more cash in

1. Interest cover at just over 2 times...scary..
2. Pile of debt that could take years to pay off if not going bankrupt before that
3. Return on Equity and Return on Capital is shocking for most year.
4. Earning is all over the shop you dont know what happen to it next

Try a good company like TRS and check their earning..you know where it go
next, and that's North whether there is a crisis or not

There are company when it go down and you want to avoid and company you want to
load up big ... FLT is one of them and you got it right just make sure you pick more of those
and filter out the rubbish