The issues in Karachi having been resolved rather amicably, with the MQM as usual patching up with the PPP though with some un-cried for blood spilt in between, and the longest-serving Ishrat-ul-Ibad back in the saddle as Sindh governor, the markets have almost been restored to good health. This is quite in accord with the season too, for in the third week of July, the market is entering a very good zone – with the investors on the home stretch to booking profit on their investments.
The era of manual ledgers having faded into history and almost every transaction on the books now computerised, the annual financial reports of the companies do not take that long in coming out. And this is followed by the board of directors meetings that decide on the payout of dividend and bonus – something everyone in the bourses waits for in eager anticipation.
Fertiliser is a segment that falls amongst the December-closing shares, hence most trading in such companies’ scrips takes place post-October, when people move out of the June-closing shares after having made their killing.
But since Fauji Fertiliser Corporation and its independently quoted subsidiary Fauji Fertiliser Bin Qasim also pay interim dividend halfway through, both scrips have seen sharp appreciation in the last one week. The reason behind this surge in price is higher production and greater profitability of both the companies was solid, and their financial reports for the first quarter reflected that.
Actually Bin Qasim, which has already fixed its board meeting for July 26, traded nearly two million shares Wednesday and its price retained the upward curve, easing past Rs47 – up from Rs44 a week ago.
The FFC did even better, the value-addition to its scrip over the last week standing at Rs12, taking its price to around Rs165, though it was ever so slightly in the negative zone Wednesday, mainly owing to profit-taking.
Of the June-closing shares discussed in this space in the last few weeks, most remained upbeat, save Attock Petroleum Limited, which lost its value by two to four rupees owing to lukewarm interest. But that is likely to change in the days to come close to its board meeting. Other than the odd day when speculators opted for profit taking, the rest – Millat Tractors Limited, Thal Limited etc. – have mostly stayed in the green zone and were likely to go up further closer to their BoD meetings.
This last week a friend came up with a question that may have bugged many, almost everyone, who dabbles in the trade: what to do when the value of shares you had acquired dwindles big time, resulting in sizable capital loss?
There are two ways of going about it. The first, the conservative way, is that you keep faith in the scrip and stick with it, hoping that in the years to come it would regain its price to be back where you had purchased it or even higher, meanwhile cutting your losses through dividend and bonus shares.
The second, more proactive way, is that instead of sulking over the pasting, one divests, investing the accrued cash in a share where the profits are likely to be higher – thus recouping the loss sooner.
The second option is more prudent, in more ways than one. Not only the tactical move is likely to recover the loss far quicker, but in case you still are unconvinced and want to stay put, you need to consider the innate flaw in the argument. And that is, if the yield from dividend and bonus was sizable enough, the fall in its price would not have been as steep as it was to really hurt you. That also means that it may perhaps take you considerably longer to retrieve your investment than you estimate – more so if the company carries on with the same mismanagement that has brought it to this pass.
Since the word count is up, and the issue is important, we would dwell some more on it next week.
The writer is Sports and Magazines Editor, Pakistan Toady