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Edmorgrimm

1,226 Posts.

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20/07/24

15:03

Post #: 74840855
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Originally posted by turbo: ↑

When I think of the apparent disconnect between NEU's fundamentals and share price I take a step back and think of it this way -

Institutional investors have risk management rules that commonly mandate maximum proportions any one holding can comprise of the portfolio. When an event occurs that leads to a large increase in share price (eg FDA approval, first 2591 readout), these institutions must (they have no choice) sell down until their holding comes back within mandated limits. It often seems counterintuitive that there is selling after a great announcement - but this is why. And they need liquidity to do it, so any interim good news or rallies are sold into.

So these institutions are now not net buyers and other buyers are by now set and/or waiting on the sidelines for the next major catalyst. This leads to a period of sideways drift where institutions are getting in our out for various reasons and other shenanigans are played by various actors with various agendas. This will persist until what the market considers the next major price catalyst occurs and a new group of institutional investors enter the stock.

Here is this behaviour in graphical form. Can you see the repeating pattern?

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Spot on turbo. I read everything I can on NEU, as it is still my largest holding. However it is always worth taking a step back. We can delve into the minutiae of the stock, analyse the daily/weekly share price action, pore over every aspect of this and that- but I try not to get too caught up in it all, because: a) I trust the management, b) believe in the science, c) know the ASX is a snake pit, and d) know that true value will win out in the end.

The graphic you've posted illustrates it perfectly. We are in a holding pattern until the next major catalyst. It will come. Patience required.

GLA.

NEU Price at posting: $20.68 Sentiment: Buy Disclosure: Held
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1 Great analysis

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