What was Friday's last minute share price plunge aboutThe market does what it does....until it doesn't.
This piece is going to ramble a bit so you might want to skip this one.
Prices have to go up and down for the trading desks to make money. That is why the brokerage firms produce a "reason" why such and such happened that day. Without any market related news, prices would move according to how a company actually performed, and that type of news is too infrequent to feed the hungry mouths of Wall St.
So what happened in the last few minutes of trading yesterday. Prices were down pretty much across the board yesterday and then boom....a smack down at the close. Was it:
1) normal month end house keeping
2) a meeting of LOC (Limit on Close) meeting MOC (Market On Close)
3) in inflection point created on the fear of rising interest rates as per market reports
ENB has been experiencing daily LOC/MOC trades for inordinately large volumes for 8 straight months. What does it mean when 2/3 of the trade volume happen in the last few seconds every day for 8 months. It beats me. Trades have to be reported within 10 seconds, so it can't be a daily accumulation of buys and sells reported in the last few seconds. The end of day crosses have to amount to close to 800 million shares of ENB in the last 8 months.
One would think that we would see the massive accumulation/distribution reported in ENB institutional holdings but other than the fact that institutional holdings of ENB have dropped by about 7% (140mm shares) over the period, the 13F reports are not very illuminating.
SU shares have been exibiting high LOC/MOC trades recentyl as in about 10mm shares per day and Friday was no exception. We saw a bit of the same action on IPL before the Brookfield announcement. What we saw Friday afternoon near the close was mass trading across many stox.
I had been targeting buying WMT for months, hoping to buy in the low $130's for months. I thought I had missed the opportunity. Watching the share price of WMT drop recetly from $153, I set a target of buying if the price hit the $120's. With ten minutes to go, the share price was $131 and then boom, down she went.
When I bought WMT, I figured in for a penny, in for a pound so I picked up TSLA below $680 and AMZN below $3,100 in place of finding a third core Canadian position.
I have been asking myself today whether I was being impetuous yesterday. Maybe.
When the markets crashed in March, I missed the bottom. I was on the verge of buying a core position in ENB at $34 but couldn't pull the trigger even though it had met my target price. I loaded up at $37 later and made a couple of moves to get my cost under $35. It would have been much more simple to just buy when the share price hit my target. The problem that I had at the market bottom was that I lost my nerve with things crashing. That was dumb. There is no point in setting buy targets and then not following through.
Was yesterday's sell off a bottom?. I don't have a clue. What I do know is that the consensus target market for AMZN is now $4,000. I also know that the target price of WMT is$154 as it is mobilizing to become become the box store version of AMZN. I also know that the top TSLA analyst (ranked 80 out of the more than 7,000 ranked analysts) has set a price target for TSLS of $1,000 per share.
As much as I like the stox that I purchased, I like ENB better. If I wasn't already overweight ENB, I would have bought ENB instead. Why? As the kids like to say, like to say, ENB is MONEY! You literally can't buy a stock that is more MONEY than ENB, even if the Line 5 decision goes badly, which it won't. How do I know Line 5 won't go bad? I don't, but it would take a series of illogical moves for that to happen and I have learned not to bet against ENB, just like it is folly to bet against Elon.
In three years, ENB's dividend will likely be over $4 per share. That means that buying at today's price will produce over a 9% yield before we know it. After we pull through the pandemic and Line 5 has been sorted, what yield to do you think ENB will trade at? I'm betting that the yield starts heading back down, maybe not to its historical average of 3%, but much lower than where it is now.
Could we see another market selloff, like we saw in March? Yup. Will that actually happen? I don't think so. In March, the market looked like an abyss with no discernable bottom as the pandemic was a complete unknown. That is no longer the case.
From the Atlantic this week: "The facts are undeniable: The seven-day average of new cases in the United States has fallen by 74 percent since their January peak, hospitalizations have gone down by 58 percent, and deaths have dropped by 42 percent. Meanwhile, more than
60 million doses of vaccine have gone into American arms. At some point—maybe even some point relatively soon—the remaining emergency measures that were introduced in March 2020 will come to an end."
I took the final plunge into the market when prices plunged on Friday. Is there more downside to the market? Maybe. All I know is that if you invest in great companies like ENB, you will probably make out just fine in the long run. I would rather buy at my target prices and experience a little sphincter tightening in the short run rather than regretting missed opportunities that drift away as prices rise.
I regret not buying CNQ under $20 recently. I regret not buying XOM at $32. The regret list is long and painful for most investors.
I'm not sure how long the price of ENB will be in this range. I'm also not sure if the share price will ever be this low again once the pandemic clears. What we do know is that the ENB pipes will be running full again this year and we all know what that means. Taking advantage of market fears, whether real or not just makes sense.