Singapore’s “Flyer” Of The Week: LionGold Corp

StockMarketBoardWhat a bizarre five days it has been for shares. The Straits Times Index (SGX: ^STI) kicked off the business week at 3,184 points and closed on Friday at 3,161 points to register a small 0.7% decline.

However, the seemingly calm waters of the Singapore market belie the turbulent and frenetic trading activity that went on below the surface. Over the last five trading days, the benchmark index sank to an intraday low of 3,094 points on Thursday having climbed as high as 3,214 at one point on Monday. That’s a swing of 120 points.

To highlight the disorderliness of the market, this week’s Singapore “flyer” is none other than last week’s “falling knife” share, namely LionGold Corporation (SGX: A78). Its shares surged 6.3% to S$1.1 after falling by roughly the same amount the previous week.

Curiously, nothing has changed over the last seven days that could have resulted in some S$62m to be added back to the market value of one of Asia’s largest gold miner.

The wild gyration in the shares of LionGold, however, highlights the importance of appreciating the difference between the intrinsic value of a business and its market valuation.

The former, namely the intrinsic value, is the underlying value of a business that comes from an understanding of the future income of the business. On the other hand, the market value is what the market is prepared to pay for the business. The intrinsic value is unlikely to change in the space of a week but the latter can change from second to second as the mood of the market changes.

As investors we need to resist the temptation of overreacting to the kind of market noise that we experienced last week. If we are unduly anxious then perhaps we have bought the wrong shares for the wrong reasons.

Warren Buffett once said: “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” And that is the way that all of us should think about the shares in our portfolios.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.