There's a few types of 'low volume' stocks, and not all of them are caused by lack of buyer interest:
- Shell companies that have no business activity = low interest from buyers because there's no business activity yet. This is typically seen in explorer/mining companies.
- Companies that are up to something, but have very long timelines, or that are waiting on some sort of extrinsic event to allow further operation = low interest from buyers until the company gets closer to those events. This is common in biotech companies who have a great idea, but no ST/MT commercialisation opportunities.
- and lastly, companies like us: companies that are up and running and doing business just fine, but have low volume not because of no buyer interest, but because of new buyers waiting for their signal to enter.
Low volume on active companies is often a positive because it displays 'seller exhaustion' at the current price level. This means that the majority of holders are now holding for the next leg up. The less shares on offer at any given time, the better it is when great news drops. If 100 buyers want in, but there's only 10 sellers at the current price level, some are going to pay up and instigate the next move.
PFT will be all over radars in the investing community at the moment, but the reality is it's not easy to get in in a stealthy, cheap manner because of how few shares are available. This isn't a true penny stock with 800m shares on issue and 5m shares at each price level. As I type this, there are only 90,000ish shares available between 1.12 and 1.19. If a buyer wants 200,000 shares, they don't want to just pay for 12 price lines worth up to 1.22, they will accumulate these slowly until it's clear they can't get any more at this level. The longer the consolidation, the sharper the move when it happens because there are less sellers to chew through at any individual price level.
Institutions will be waiting for further confirmation as well. Insto's have a far greater aversion to risk than retail investors, so they tend to wait for multiple confirmations of business uptrend. E.g. an insto would get a starter buy after the news in the AGM, but they won't buy their biggest position until Daly potato in woolworths is confirmed, or until Nov/Dec sales figures are released. They will pay a premium over the added risk.
We know the fundamental side of things is solid, so when the announcements which we know are coming come, and the quarterly's come, we'll already be here and have to do nothing but smile.
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