DIY Investor Magazine
/
2015 Issue
41
The market would anticipate him taking a stake and
volumes and interest would spiral. A single £200 million
share purchase in Tesco (ie approx. 1% stake) would
have a single event impact that would take 200,000 +
small investors investing £1000 each at the same time
to have a similar impact. A big player with influence,
reach and funds recommending Tesco sends a signal to
other institutions which may trickle down to the rest of
us.
Buffett and Woodford have pedigree, so they can move
share prices as individuals, but what about others who
are less well known - do tipsters and financial journalists
have the same impact?
Again this depends on the size of the company, liquidity
and volume of its stock, the type of money invested,
the share structure, the influence or reach of the tipster
and your approach to investing.
AIM stocks typically have very small market
capitalisations, poor liquidity, often do not have major
institutional money invested into them, have lower
volumes of shares traded relative to shares in issue,
high risk investors interested in them, can have more
restricted share structures and are not really well
covered in research terms by market analysts. As an
The first trading day after the tip was
published the share price rose by 11.6% on
sixteen times normal trading volumes
‘(Buffett’s) investment tanked, losing
Berkshire Hathaway £287.6 million. It is
almost impossible that such a smack
in the chops didn’t elicit a modicum of
schadenfreude from the little guys’
example, on Saturday 18th of July 2015 in the Daily Mail,
Joanna Hart tipped Optibiotix Health, a small UK based
AIM stock as a ‘risky buy’.
The share price closed on Friday the 17th of July at
33.38p.
Optibiotix has a market capitalisation of £27 million,
73.6 million shares in issue with average daily shares
traded of about 120,000; by way of comparison, on a
single day’s trading only 75 trades were made in the
company compared with 6857 in Tesco.
By market close on Monday 20th July, two days after
the tip was published and the first trading day,
The share price rose by 11.6% to 37.25p on sixteen times
normal trading volumes with close to 2 million shares
trading hands. Over a 10 days period three stock tips
we made to buy the stock - Hot Stock Rockets said
‘buy’, Share Prophets said ‘buy’ and then the Daily Mail
ranked it a ‘risky buy’.
Nearly 6 million shares traded against a more normal 1.2
million and the share price moved from 32.75p to about
36.88p which was a 12.6% increase in the share price.
So what does this tell us? Buffett can move Tesco
and in this case it would seem logical to conclude
that Joanna Hart’s tip had a very positive impact on
Optibiotix Health.
If I went onto a website or bulletin board and said buy
a stock then I would not move the share price, small
cap or large cap but if a national publication or tipster
recommends a small cap stock then I would argue that
they can have a significant impact on the share prices
depending on a few fundamentals of the stock they are
tipping.
