Running discussion on SP, page-5375

The subject of “who is buying” is one that interests me.

Some assumptions up front:
- retail investors are likely to have been the main buyers in all the froth and excitement between $6 and $9
- during the last big upwards trend there were higher than average volumes
- FOMO and momentum contributed to the run
- etf’s and ASX 300 also contributed

So now that the price has fallen from those highs by two thirds who is it most likely to be that is panicking, worried, concerned and therefore motivated to sell? In my opinion those sellers are highly likely to be those that bought in the run up. They don’t want to see their investment destroyed to zero and therefore have been selling in to a falling price environment. I think this is a reasonable theory…

OK, so then in this environment who are the likely buyers? Do we think it is a new crop of retail investors? Highly unlikely… rapid price decline, news behind schedule, lots of negative sentiment. Not attributes that are traditionally enticing to the retail crowd.

So who? Maybe, just maybe, it is well researched, savvy, deep pocket sophisticated and institutional investors. Happy to start building material positions in a company that has long term value accretive potential. The same investors who would be happy to use all the tools at their disposal (technology, algorithms, large amounts of capital, cross trade opportunities, understanding of reading patterns and high visibility of same) to achieve that position for the least cost possible.

I think that sounds reasonable. Risk averse retail buying? Unlikely. Risk managing institutions buying? More likely.

Therefore I’m going to keep breathing out and stick with the buyers who probably have more insight, research, and knowledge than me and keep buying and holding through the pain.

Note: My average cost across my WBT holding is just a shade over $1 so I understand that I’m still in the green. Nowhere near the same for those that are holding with a cost above current price. However I’ve been in that position early when we consolidated and my average was in the 50’s and price went down by nearly 50% so I can empathise. Buying and holding paid off for me then and I hope it pays off for me now.