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Mega
Cap Discounted Sharply for a Week Normally
we eschew watching stock prices too closely.
After all, our penchant is analysis, not trading.
When we happened to catch a $40 per share price on Royal Dutch, a stock
that normally trades closer to $60, we were stimulated to drop everything and
get to work on a Buy recommendation. As
it turns out, $40 was gone by the end of the day leaving a closing price of $44.
A week later, the closing price is $50.
Thus
it paid to watch prices carefully. Yet
we do not remember ever seeing a discount in Royal Dutch stock being closed so
quickly. We remember a similar
situation a few years ago in the same stock that unfolded over weeks and months.
The experience also reminds us of the time BP dropped sharply more than a
decade ago. While it was rewarding
to commit to that company when it was temporarily out-of-favor, recovery was
much slower than last week. Nor
could we be sure that RD stock would go up or that other Mega Caps would not go
down instead. We were confident
that the value of RD compared to ExxonMobil (XOM) could not have changed
as much as it did in a short period of time.
As it turned out, XOM held and RD went back up.
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