Is A New Gilded Age Upon Us?

Ascertaining whether a stock will rise further or remain under pressure for longer is a tricky exercise. There are those stocks, however, running wildly on the back of stellar growth.

- Maarten Mittner

In a force majeure event, such as the present coronavirus epidemic spreading worldwide, blind selling or buying in the market becomes the norm. But under more normal circumstances, when to buy and when to sell equities are important considerations based on calculated assessments.

There is a saying that a share can climb much higher than hoped. Or linger at the bottom far longer than feared.

A selling spree represents a correction, with buying opportunities. Some shares are usually overvalued. But many are also undervalued. Local property and retail shares could have been considered overvalued before the present dip. But now they almost certainly are in undervalued territory.

Platinum and gold shares have risen to overvalued levels, delivering growth of 200% over the past year in some respects, benefitting from higher commodity prices and a weaker rand. The same for the major global tech stocks, growing on average 50% from a year ago before the slump, just when it was thought that a correction then could have been imminent.

Inherent value is the real value of a company, usually linked to its net asset value. But companies rarely trade at these levels. Therefore, the price at which to buy or exit a share is fraught with difficulty and danger. But it is immensely important for future returns.