web analytics

24 Jul | Range Resources and Newton’s Third Law

I’ve spoken at length in the recent past about the futility of releasing perfectly good statutory news in these most trying of financial times. I know, I know, timely release of such news is mandatory, but wouldn’t it be nice to stockpile all of those nuggets of wonderful data – the opportunistic deals, the reassuring JORCs, the tantalising executive re-shuffles – and drip feed them to the investing community piecemeal in more economically fragrant times.

Time and time again in recent months I’ve woken to news releases ranging the gamut of pleasant to overwhelmingly positive just to witness the price close the day lower than it began.

Calling on Newton’s third law (for every action there is an equal and opposite reaction), yesterday I read about Range Resources discovering not oil but water in their Puntland pit and was looking forward to the price rocketing to new monthly highs on this negative news. I mean if good news sends a price lower, ipso facto, bad news should……

But it wasn’t to be. In fact rather than finishing the day higher, Range plummeted 21% on the day. So how the hell did that happen?

All joking aside, there is a plus side to all the negative price response to positive news. One day in the future – not tomorrow and probably not even next month – when the macro-economic tide turns slack, there are going to be swaths of small companies with great track records, delivering exactly what they’ve promised their shareholders, sitting hopelessly undervalued. A light will flick on and the markets will say, “hang on, wait a minute, what’s going on here then” and we’ll be up and running. When that day comes I’ll be looking to top up and cash in as the market returns some of the value from all that ill-timed good news.

Thanks again for dropping by.