In­vest­ment for the brave


The Citizen (Gauteng) - - FRONT PAGE - Patrick Cairns Money­web

If in­vestors can sit tight, penny stocks might be worth it – they’re 2018’s big win­ners on the JSE.

If in­vestors can sit tight, penny stocks might worth it.

With the JSE end­ing 2018 in heav­ily neg­a­tive ter­ri­tory, an 185% re­turn in 2018 sounds like a dream. Yet that’s what South Ocean Hold­ings’ in­vestors would’ve seen.

The com­pany be­gan 2018 trad­ing at 28 cents per share and ended the year at 80 cents. But this was no slow and steady rise. The per­for­mance in­cluded a spike from 50 cents per share up to 80 cents on De­cem­ber 31 alone, a 60% jump in one day.

In­vestors in a counter as thinly traded as South Ocean have to ac­cept some rather wild volatil­ity. Ta­ble one shows how the stock ex­pe­ri­enced a num­ber of sub­stan­tial one-day move­ments in 2018.


An­other stock that kept in­vestors on the hop was TeleMasters Hold­ings, end­ing the year 130% up, after a wild ride.

The counter started 2018 at 50 cents per share. It had reached 64 cents per share by the start of Fe­bru­ary 22, but closed that day at 45 cents, a 29.7% drop.

On April 10, the share opened at 44 cents, and closed at R1.15.

This 161.4% one-day gain might seem eye-wa­ter­ing, but it wasn’t TeleMasters’ first such in­ci­dence. In 2017, the shares jumped from 31 cents to 75 cents at the start of June and dropped back to 29 cents days later, be­fore spik­ing again to 75 cents be­fore month end.

Like South Ocean, TeleMasters’ stock was also boosted by a trans­ac­tion near the end of 2018. On De­cem­ber 12 the shares moved from 70 cents to R1.15, where they ended the year. That 64.3% jump ac­counted for over half of its ful­lyear gain.


Ver­i­mark was an­other penny stock that de­liv­ered a pos­i­tive cal­en­dar year per­for­mance. It ended 2018 up 77.2% after climb­ing from 79 cents to R1.40.

It’s slightly more liq­uid than South Ocean and TeleMasters, but it still bounced around sig­nif­i­cantly last year. Ta­ble two shows the vari­a­tion in clos­ing prices for each month.

Liq­uid­ity risk

These were three of the JSE’s best-per­form­ing shares last year, but their in­vestors had to stom­ach a great deal of volatil­ity, part and par­cel when in­vest­ing in very small com­pa­nies with very low trade lev­els.

What these penny stocks are worth is a mov­ing tar­get. The pre­vail­ing share price isn’t nec­es­sar­ily an in­di­ca­tion of what you can sell them for. From day to day the price at which they change hands can dif­fer sub­stan­tially.

If you can sit tight, you can turn it to your favour and earn a premium if there are no other sell­ers.

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