The Curry Puff Party Ends

curry puffs No one likes to be a party pooper. However, the party just ended for those wanting to make quick bucks by trading the stocks of Old Chang Kee Limited (SGX: 5ML).

Back in early July 2013, I wrote an article on a “possible transaction involving the shares of the Company”.

Let’s fast forward exactly 28 days later. The following announcement was made on 1st August 2013 after market close:

“The Board wishes to inform shareholders that the controlling shareholder of the Company has informed the Company that he and his associate have presently decided not to proceed with the Possible Transaction.”

Speculators would have been horrified by the news, just like how they would have if they had watched the British horror film “28 Days Later”. The shares of Old Chang Kee plunged 7.7% the day after the announcement was made, closing at $0.66. This pales in comparison to a close of $0.715 on the previous day. To be fair, the stock also went ex-dividend on 2nd August 2013. However, after considering the dividends of $0.015 that will be paid out, the stock theoretically should have closed at $0.70 on 2nd August 2013, a drop of merely 2.1%. The drop of $0.04 (or $0.70 – $0.66) in stock price or around 5.6% has to be attributed to the announcement.

The 5.6% drop in share price shaved off a market capitalization of $4.8 million. At the time of writing, the stock is trading slightly lower than on the day the initial announcement was made. Speculators who thought they could make some “kopi money” would feel that they would have been better off not doing anything.

Foolish Bottomline

This is a classic example of “Buy on rumour, sell on news. Speculating on stocks based on news certainly does not do your portfolio a favour.

Let’s take a heed of advice from Warren Buffett. He said, “Shares are not mere pieces of paper. They represent part ownership of a business.” By having this mind-set, we will certainly become better investors.

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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 contributor Sudhan P doesn’t own shares in any companies mentioned.