Using SENS announcements for trading?

[Sicilian-Najdorf]

Hi Everyone
So I have been buying shares - For long term growth.
I have 6 large cap companies in my portfolio, well diversified.
Also have a small/mid cap bundle (Easy Equities) as well with about 30 companies in them.
Also some ETF's in a TFSA (Easy Equities)

Something I have noticed while browsing throughout the day.....
1. SENS Announcement comes out with results for company XYZ for the last 6 months....something like that
2. Results are good compared to previous period, profits up, revenue up etc...
3. Share price goes up immediately following the SENS announcement.

An example of this was yesterday, SENS comes out for PPC at 13:40 - All round good news.
At the same time, the share price goes up about 6%.
I've noticed a trend like this with most "good news" SENS announcements.

I'm a newbie to all of this
So, my question is.....Is this a viable trading strategy.
1. "Good News" SENS comes out for company XYZ
2. Buy some shares in company XYZ
3. Watch it grow buy a bit (Hopefully)
4. Sell
5. Collect a small profit
6. Repeat throughout the day as announcements are made public.

My whole thinking is that a SENS announcement with positive results means a rise in share price, even if it's small.
And perhaps set a strict rule to say that the moment is hits 3% growth for example, sell.
Do people practice this kind of strategy?

Is something like this viable? Advisable?
I'm not looking to become the next Warren Buffet.


Thanks

 

[jezzad]

Have had similar thoughts like the above. Not sure if there is a central platform for all of them but maybe you could get alerts to be triggered

 

[die_koos]

I have thought about this as well.....

Besides the obvious problem of interpreting the SENS correctly (I don't think there is any indication on the SENS announcement that it is positive or negative, so you would need to read through it and decide), you would also have to factor in the cost of the transactions (Buy and Sell) as well as the CGT implication.

So perhaps 3% is a bit low.... depending on the size of the transaction, and then you have to factor in that most professional traders analyze the company fundamentals before the SENS comes out and would already have bought the shares they thought would be profitable, so by the time you get the SENS and make the call the 3% growth might already have been factored into the price.

 

[Sicilian-Najdorf]

Have had similar thoughts like the above. Not sure if there is a central platform for all of them but maybe you could get alerts to be triggered

There is - https://www.moneyweb.co.za/tools-and-data/moneyweb-sens/

 

[beefymoocow]

Hi Everyone
So I have been buying shares - For long term growth.
I have 6 large cap companies in my portfolio, well diversified.
Also have a small/mid cap bundle (Easy Equities) as well with about 30 companies in them.
Also some ETF's in a TFSA (Easy Equities)

Something I have noticed while browsing throughout the day.....
1. SENS Announcement comes out with results for company XYZ for the last 6 months....something like that
2. Results are good compared to previous period, profits up, revenue up etc...
3. Share price goes up immediately following the SENS announcement.

An example of this was yesterday, SENS comes out for PPC at 13:40 - All round good news.
At the same time, the share price goes up about 6%.
I've noticed a trend like this with most "good news" SENS announcements.

I'm a newbie to all of this
So, my question is.....Is this a viable trading strategy.
1. "Good News" SENS comes out for company XYZ
2. Buy some shares in company XYZ
3. Watch it grow buy a bit (Hopefully)
4. Sell
5. Collect a small profit
6. Repeat throughout the day as announcements are made public.

My whole thinking is that a SENS announcement with positive results means a rise in share price, even if it's small.
And perhaps set a strict rule to say that the moment is hits 3% growth for example, sell.
Do people practice this kind of strategy?

Is something like this viable? Advisable?
I'm not looking to become the next Warren Buffet.


Thanks

Sens announcements doesn’t mean anything. It’s the deviation of what the market is expecting changes the share price.

So if revenue goes up by 50% but the company has a very high PE ratio and the market expected a 100% increase the share price will ultimately go down.

The reverse is true.

 

[Pegasus]

Brokers and Equity analysts will have an idea or know of those results before you see the SENS, so you're getting old info. They get to chat with company management.

They forecast results 3 to 5 years into the future, so are watching like hawks.

If you sell often you are liable CGT, unless you're just a small time trader.

https://www.sars.gov.za/wp-content/uploads/Ops/Guides/LAPD-IT-G11-Tax-Guide-for-Share-Owners.pdf

 

[Snyper564]

Brokers and Equity analysts will have an idea or know of those results before you see the SENS, so you're getting old info. They get to chat with company management.

They forecast results 3 to 5 years into the future, so are watching like hawks.

If you sell often you are liable CGT, unless you're just a small time trader.

https://www.sars.gov.za/wp-content/uploads/Ops/Guides/LAPD-IT-G11-Tax-Guide-for-Share-Owners.pdf

Sell often will most likely be income tax especially if you do it on a frequent basis.

Section 9C will be relevant here and I don't see the op holding 3 plus years

 

[Pegasus]

Sell often will most likely be income tax especially if you do it on a frequent basis.

Section 9C will be relevant here and I don't see the op holding 3 plus years

Don't know how much he is trading. He might have a R2000 portfolio in easy equities for all I know.

 

[Snyper564]

Don't know how much he is trading. He might have a R2000 portfolio in easy equities for all I know.

Size doesn't really matter here whether it's 10 rand or 10m it would be the same

 

[InvisibleJim]

Hi Everyone
So I have been buying shares - For long term growth.
I have 6 large cap companies in my portfolio, well diversified.
Also have a small/mid cap bundle (Easy Equities) as well with about 30 companies in them.
Also some ETF's in a TFSA (Easy Equities)

Something I have noticed while browsing throughout the day.....
1. SENS Announcement comes out with results for company XYZ for the last 6 months....something like that
2. Results are good compared to previous period, profits up, revenue up etc...
3. Share price goes up immediately following the SENS announcement.

An example of this was yesterday, SENS comes out for PPC at 13:40 - All round good news.
At the same time, the share price goes up about 6%.
I've noticed a trend like this with most "good news" SENS announcements.

I'm a newbie to all of this
So, my question is.....Is this a viable trading strategy.
1. "Good News" SENS comes out for company XYZ
2. Buy some shares in company XYZ
3. Watch it grow buy a bit (Hopefully)
4. Sell
5. Collect a small profit
6. Repeat throughout the day as announcements are made public.

My whole thinking is that a SENS announcement with positive results means a rise in share price, even if it's small.
And perhaps set a strict rule to say that the moment is hits 3% growth for example, sell.
Do people practice this kind of strategy?

Is something like this viable? Advisable?
I'm not looking to become the next Warren Buffet.


Thanks

Speaking as random f***wit from the internet with no financial qualifications whatsoever, I do, naturally have a strong opinion (which may or may not be correct but I hope is helpful) on your proposed strategy. So I will share this opinion and you can weigh it up with the other stuff you know or don't know and use it or don't use it as you see fit

What you are proposing, I think is not a good strategy and is almost the exact opposite of what has made Warren Buffet so successful. You are being led here by market sentiment and specifically, good or bad news in a SENS is not always reflected in the share price.

Please read about Value Investing. Warren Buffet is one of the World's most famous Value Investors and was a student and employee of Benjamin Graham, who detailed the approach in his book 'The Intelligent Investor' (to quote Warren Buffet ' the greatest book on investment ever written'. Or something along those lines. I don't remember exactly but you get the point.)

Anyway, value investing considers that the market sentiment will over value or under value the price of a given share at a point in time. The aim is to buy a good stock (NB not just any cheap stock which might not be a profitable company or one that has a lot of debt) when it is undervalued by the market and sell it when it's overvalued by the market.

Buy low, sell high. It's obvious but how many people plow into a share when it is going up and panic sell when it goes down to fast?

Even if Value Investment does not resonate with you in the same way that it does with me, I do strongly believe that anyone contemplating investing in the stock market should be aware of it and have it available as a benchmark against whatever strategy they prefer.

 

[cguy]

The OP’s approach is well known and well traded throughout the world. As others have said, one also has to look at change relative to expectations and not absolute change, which makes this a little trickier than just look for a “good” or “bad” signal.

The other huge factor is that if the news does result in a clear, predictive signal, then someone else would have acted on this before you by virtue of superior technology and process, at which point you would at best be paying the spread (and at worst be taken advantage of).

 

[cguy]

Speaking as random f***wit from the internet with no financial qualifications whatsoever, I do, naturally have a strong opinion (which may or may not be correct but I hope is helpful) on your proposed strategy. So I will share this opinion and you can weigh it up with the other stuff you know or don't know and use it or don't use it as you see fit

What you are proposing, I think is not a good strategy and is almost the exact opposite of what has made Warren Buffet so successful. You are being led here by market sentiment and specifically, good or bad news in a SENS is not always reflected in the share price.

Please read about Value Investing. Warren Buffet is one of the World's most famous Value Investors and was a student and employee of Benjamin Graham, who detailed the approach in his book 'The Intelligent Investor' (to quote Warren Buffet ' the greatest book on investment ever written'. Or something along those lines. I don't remember exactly but you get the point.)

Anyway, value investing considers that the market sentiment will over value or under value the price of a given share at a point in time. The aim is to buy a good stock (NB not just any cheap stock which might not be a profitable company or one that has a lot of debt) when it is undervalued by the market and sell it when it's overvalued by the market.

Buy low, sell high. It's obvious but how many people plow into a share when it is going up and panic sell when it goes down to fast?

Even if Value Investment does not resonate with you in the same way that it does with me, I do strongly believe that anyone contemplating investing in the stock market should be aware of it and have it available as a benchmark against whatever strategy they prefer.

This is pretty much the only way for non-professional traders without significant resources to trade successfully (ie. above market returns). Everything else is highly competitive, and will almost certainly (statistically) fail.

 

[jezzad]

Does anyone have the patience to explain this to me

Information Regarding the Composition of the Reference Portfolio Underlying the Notes - SENS

Sens announcement for Information Regarding the Composition of the Reference Portfolio Underlying the Notes - SENS

www.moneyweb.co.za

This is released at 07:08am JSE opens at 9am in the above example you can see the percentage gained.

How has this percentage been calculated if the market isn’t open? Is it based on the date below it?
This example has multiple share codes linked to it?

 

[Lukcydog]

By the time you read the news, the banks are already trading it. Been there done that...

 

[Sicilian-Najdorf]

Thanks everyone for all your insights
Let me make the point that I am not looking at huge amounts here by attempting to do this.....Max R1000 at a time. I have no intention on becoming a squillionaire overnight.

I am more than happy with my long term investment plan - I'm talking 10 years and more.

This is just something I considered to maybe gain a few extra rand over the course of the month, I don't need it by any means.....This was just a thought.

I realize that this is a risky operation....case in point:
Transaction Capital publishes good results, guys on Stock Watch are recommending it as their stock pick etc....BUT...



I'd love to understand the rationale behind something like this.

Again, this whole thing was just a thought and my main aim is looong term. I'm only 35 now so I have some years to go.

Regarding CGT, I'd be well below the R40 000 threshold in any case with this "idea" of watching SENS etc..


Something I'd like to really get a grasp on is a method of finding value on the JSE.
How does one (newbies like me) go about determining whether a company's share price is currently undervalued?

When it comes to buying shares, I try to not just go with the herd.....except for Aveng, I bought some there.
For my existing large cap portfolio, I tried to choose companies that I know for myself have kind of been around the block, household names kind of thing.


Thanks

 

[Hackson]

I've tried this for about a year and unfortunately, it doesn't always work.
Some companies release good results for the period but aren't projecting a good future. As such, double digit revenue growth in the billions can still result in a share price crash.
Another factor to consider after results is that if a company declares a dividend the share price will almost always fall (and maybe recover after the day for earthing dividends lapses). For this, checkout Afro Centric group right now.
Companies like PPC in your example are coming off the back of penny stock status. As such, they are ripe for big growth at every announcement. Along with Aveng, Steinhoff (maybe no very penny but very volatile.), etc.