Rise of the #Invader?

Tuesday, 2nd December 2014 08:58 - by Moosh

What do you get if you cross an investor with a trader?

Well, you get what I have termed an ‘invader’. Traditionally the system has comprised of investors and traders where investors are generally believed to buy a stake and hold it for the long term, while traders buy a stake and sell the stake completely on the short term. I have no problems with either type of market exploiter, but what about the hybrid of an investor and a trader? I like to play the short term swings (by which i mean a few weeks, NOT days) but if I like the fundamentals of a company then rather than take the entire profit and sell out completely I would prefer to keep the value of the profit as a holding of shares (many call this a ‘free carry’) so that as the fundamentals of the company unfold over the longer term and assuming these are for the positive, then the value of this free carry should rise too. So in this case I would be trading a short term swing for a long term investment – I’d be an investor-trader, or an invader, of the company.

Consider this though, if many more invaders existed then with each short term swing, if more shares are being held as a free carry, then theoretically the price of a company should make higher lows on each swing, and ideally higher price highs too. That’s common sense assuming no further mass issue of shares onto the market – if a company does have to raise capital by issuing new shares, then it may be a short term problem if the people subscribing to the new shares flooded the market with them immediately. Investors everywhere want the price to go up in a consistent and sustained fashion and this can only be achieved if either, 1. People buy more shares, or 2. People sell fewer shares into a price rise. Again, that’s just common sense.

You don’t have to be an invader 100% of the time...I’m not, but in companies where the fundamentals suggest that they are currently undervalued (or even undervalued based on future potential – in these cases, be honest with yourself and others...no sugar coating the facts), then I believe becoming an invader is the way forward.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.