Michel Pireu Columnist

Don’t catch a falling knife is a well-known maxim in the stock market. It’s good advice, too. Many an investor who has rushed to buy into a company whose share price is tumbling has regretted the decision. In 1996, Murray & Roberts was trading at over R25 a share; three years later it was trading below R2. Advtech was over R6 a share at the start of 1998, but had fallen to below 20c by 2001. RCL Foods (then Rainbow Chicken) was trading at over R20 a share in 1994 but had stumbled to below R1 by 1999. Those investors who had got out along the way would undoubtedly have done the right thing. But by 2008 Murray & Roberts was trading above R90, RCL Foods was again trading near R20 a share and Advtech was trading at over R4 a share. If timed right, buying at the bottom of a price drop can be rewarding, financially and emotionally. The hard part, of course, is in knowing who’s going to make a comeback and who isn’t. It would be wonderful if we could avoid serious setbacks with timely exit...

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