Financial Stocks/Company News
QUESTION: Mr. Henneman
I own shares of DWS Municipal Income Trust (KTF). The only information I can find on the Internet about the company is announcements about upcoming dividend distribution and stock price. In the last week the stock price dropped fairly sharply and then began a corresponding rapid recovery. In that same time frame, there was sharp increase in buying and selling. Obviously this had to be the result of some sort of "news", yet nothing out of the ordinary appears upon Googling KTF. Where else could stockholders have gotten real time information to have created such movement? Thanks. DBRJ
ANSWER: Thank you for your question!
Unfortunately I don't have much to add. Yes, all news and information should be readily available. However, this is a very small cap company at about 500 million. So just one larger investor, such as an institutional investor like a hedge fund, can affect stock price by buying and selling a proportionately large amount of the outstanding shares. It looks like about 20% of this stock is institutionally owned, so there are some institutions trading it. But a single larger investor trading could affect stock price as well.
I do see the dip and quick recovery you mention, my best guess is a larger investor selling their holdings. The high volume could simply be a response to a large sell. Sometimes you just don't really know.
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QUESTION: Thank you for your answer, and especially for your having gone to the trouble to examine the stock in detail. I understand your suggestion, and appreciate the limits on actually KNOWING the cause of the fluctuation.
I am alerted to AllExpert replies by a generic e with a link to the reply itself. This one came with an appended note saying it was the second alert to your answer. In fact I had not received any notification before this one. I do not know whether you contacted AllExperts or whether they somehow track and recognize any non-responses. It's probably not all that critical, but I though someone ought to know.
ANSWER: Thank you Dave, I'll check with AllExperts to see what happened to the first alert. I know that when I get the alerts that a question is pending, sometimes (but not all the time) they end up in my spam email box.
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QUESTION: Thanks so much Paul. I too have found "good" e's in the Spam bin, even after having had many e's from the same source appear in the proper box. When I first started e-mail, I would automatically just empty the spam box without looking at it, so I probably lost a few legitimate e's.
While I "have" you, let me ask another question. I watch "NBR" (formerly "Nightly Business Report") on PBS in the evenings. A half dozen or so stocks will be featured, along with a price chart for the day, which often extends to 6 PM, 2 hours after closing. Often, after moving along with little or no change over the day, the price will then show a dramatic appreciation or loss immediately after the Market closes. Where are these trades taking place and why the huge deviation from the NY's. Is there any opportunity for an ordinary investor to take advantage of this, or is it only for the "Big Boys" (Sorry - "Persons")?
Thank you for the follow up question!
Yes, over the past decade the trading volume right at the close (and open) has increased dramatically. What is happening is that many hedge funds and institutions that run quantitative models are closing out positions for the day, in huge quantities. This can drive the markets up or down, sometimes by a large amount right at closing. These types of firms have direct, incredibly fast connections to the exchanges, so they can enter the trades very close to the actual close. And yes, there can be continued activity with after hours trading.
Technically you could take advantage of this with after hours trading. Many online brokerage firms offer this. However, it is basically impossible to know what these large institutional traders are doing, so it can work against you as well as for you.
In my view, it is best to assume that there are huge institutions out there with such vast resources at their disposal, that they will always be able to beat you to it. While they can make huge sums doing it, as an individual trader you would find yourself at the losing end of those trades much of the time. My research company's focus is therefore simply to find undervalued stocks based on fundamental data, rather than to try to day trade for profits. We update our research every day, so are constantly looking at a stocks fundamental data to see if it is trading at less than what we project based on that data. So we are looking for stocks that are strong, but have fallen out of favor. Strong earnings growth relative to current stock price for example, among many other things.
With markets as volatile as they are, driven by the huge trading volume of massive institutions, going back to the old ways of looking at a stocks fundamentals is in our opinion the way to go. However, the difference now is that these undervalued stocks move more quickly than in decades past, so the time of buy and hold is over. Instead its the same research process, but the time period to hold a stock has gone from years to a few months. We run these kinds of models across 7,000 stocks every day.
I hope this helps, please do not hesitate to reply if I can offer anything additional.