Overview
A hypothesis that some days of the week are better suited for larger returns has developed over time. The idea is that it is possible to improve some trading methods by choosing the proper day of the week to buy stocks.
And Mondays are the ideal day to trade, according to this theory. The “Monday Effect” or “Weekend Effect” is another name for this phenomenon. As a result of what is known as the Monday Effect, investors are likely to see similar results to those seen on the preceding Friday.
This is based on the fact that markets normally fall lower following the greater accumulation of bad news during weekends so the likelihood for them to go down when reopening on the following Monday is much greater.
In this article, we will explore some of the best shares to buy using the “Monday Effect”, when investors can expect to take advantage of declining share prices for higher future gains.
As such, investors should seek to diversify their portfolio with a balanced asset selection that includes growth shares and more stable, long-standing shares. When buying low on Mondays, it’s best to find opportunities to invest in both.
Shares to buy low on Monday
Now that we have taken a closer look at the share types available to purchase, it is worth examining the best shares to buy low on Monday from companies that provide a number of different growth prospects, both as established shares and growth shares for future gains.
Capitec
Capitec is the fastest-growing bank in South Africa, with more than 720 branches, 7.3 million customers, and more than 11 000 employees.
The bank will continue to provide services that are simpler and more transparent than those provided by the majority of South Africa’s other large financial institutions. The combination of this, together with the affordability of its services, provides Capitec a strong competitive advantage during a downturn in the economy, and it will also draw new clients even during periods of economic strength.
This same advantage makes Capitec a good investment choice in the still-uncertain times following the effects of the latest Omicron variant.
Naspers/Prosus
Naspers is a global internet group and one of the largest technology investors in the world. Naspers companies operate and invest in countries and markets across the world with long-term growth potential.
Without a question, the biggest impact on the South African equity market in the last two decades was the 2001 Naspers acquisition of Tencent, a Chinese internet start-up.
Even though Naspers has sold $24bn worth of Tencent shares in the previous three years, it paid $32m for its investment in the company. If you own a stake in Naspers, you’ll have made a fortune thanks to Tencent’s outstanding performance.
Despite the fact that Tencent accounts for the lion’s share of Naspers/Prosus’ worth, it is important for investors to keep an eye on the company’s other businesses as well.
Swiggy (India), iFood (Brazil), and Delivery Hero (Europe) are just some of the food delivery businesses that Prosus has invested in. Prosus also has investments in several other internet and e-commerce businesses, such as PayU, Udemy, Skillsoft, and Brainly.
Sasol
Investing analysts agree that Sasol stock is currently undervalued and could outperform the market in the near future, suggesting that Sasol shares may be a surprising excellent purchase today, especially when coupled with the good dividends normally given out by the company.
Brent crude oil prices rose, refining margins improved, and chemical prices rose, all of which contributed to an increase in gross margin over the preceding half year while also reducing costs and increasing capital investment.
Looking at Brent crude prices, it’s clear that oil prices were substantially higher.
Added to this, a 66% to 76% increase from R18.6 billion in the prior half year to R30.9 billion to R32.7 billion in adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) was announced in the latest reporting period.
Zeder
Zeder is an exciting pick for growth investors. PSG Group, Zeder Investments’ parent company, provides the support and expertise that comes with being part of the PSG brand.
Many years have passed since Zeder was founded, and during that time it has evolved, matured, and adapted to meet the specific needs of the agricultural industry.
Zeder has a solid investment portfolio. Management is focused on expanding the company’s current base while preparing for new investment opportunities that may arise in the near future. The company’s business is defined by long-term, sustainable returns on investments.
As evidence of its presence and impact in the agribusiness industry, Zeder has made five core investments, but the company is optimistic about further expansion across the value chain.
Zeder is committed to unlocking value in businesses that can demonstrate significant growth potential through a scalable business model, a proven track record, and sound leadership.
New investment proposals are actively sought by the Zeder management team in order to grow businesses that have strong leadership, growth-orientated business models, and well-established brand names.
For Zeder to gain more exposure to export markets and foreign currency, it has acquired a larger share of South Africa’s largest fruit exporter, Capespan, as well as a stake in Pioneer. Other investee companies are using a similar export strategy.
Investors who have purchased Zeder Investments stock in the past have made a lot of money. A robust and well-balanced portfolio should bolster investors’ trust in the company’s stock.
Analysts predict that Zeder Investments shares could be a great buy as soon as South Africa emerges from the conditions created by the global pandemic.
Common stock
Investors receive common stock as a kind of verification of their investment in a corporation. A company’s common stockholders have the lowest stake in its assets.
The equity of a company’s shareholders includes both common and preferred shares, as well as any retained earnings.
Preferred shareholders receive their dividends first, followed by common stockholders. Until all creditors have been paid and preferred shareholders have been compensated, common shareholders are not paid in the case of a company’s asset sale.
That said, there are some distinct advantages to investing in common stock. If a company gets into legal trouble, your personal assets will not be at risk if you purchase common stock.
The amount you put into the investment determines the extent of your responsibility. If the stock goes bad and the company owes creditors a large sum of money or faces a huge judgment, your investment won’t be at risk.
Furthermore, as a shareholder of common stocks, you have no cap on how much you can make because your profits aren’t guaranteed.
You can increase your wealth over time if you are willing to give up some of the guarantees that come with the minimum and maximum amount that you can earn.
Finally, common stocks that can be bought and sold at market prices are considered highly liquid investments because they can be easily converted to cash at any moment.
You can start an account to buy this asset at any moment on virtually any trading platform. These transactions can also be completed with the help of a financial manager.
Preferred stock
In the case of most preferred stock types, investors receive a fixed dividend from these investments. Preferential treatment is extended to preferred shareholders as well: in the event of insolvency or liquidation, preferred shareholders receive dividends first.
It’s less likely for preferred stock prices to go up or down than for common stock prices, thus these shares in a company have a lower chance of gaining or losing value over time. Preferred stock is best suited to investors that favor short-term profits above long-term gains.
The stability and lower risk of preferred stocks outweigh that of common stocks. If a corporation is unable to pay its dividends at any point in time, they may even be refunded to shareholders in the form of a dividend credit.
Additionally, preferred stocks can be called in a way that common stocks can’t, which is an important distinction to make. After a specified date, preferred stock shares might be recalled by the corporation. This could be at par or at a little higher call price.
Differential voting rights shares
A DVR share is a regular equity share with differentiating voting rights. The voting rights of these shares can be higher or lower than the voting powers of ordinary equity shares.
DVRs can be issued for a variety of purposes, including preventing a hostile takeover, bringing in a passive strategic investor, or diluting voting rights. Investors in dividend-paying DVRs typically receive a greater dividend yield. Retail investors who don’t desire a stake in the company but are interested in the company’s long-term growth possibilities will find the DVRs appealing.
DVR shares are listed on the stock exchanges and exchanged in the same way as standard equity shares, but they typically trade at a discount, sometimes as high as 30%, because they have fewer voting rights.
Frequently Asked Questions
Why should I buy shares on a Monday?
Referred to as the “Monday Effect”, many investors look to take advantage of drops in share prices at the opening of each trading week. There are several reasons why this might happen.
If a company wants to give the market time to digest bad news before trading begins, it may deliberately release it late on Friday or over the weekend in order to minimize media coverage and investor attention as people take the weekend off.
When trading resumes on Monday morning, investors will, of course, react negatively to any new bad news. Investor dissatisfaction with the start of the work week may also be cited as a factor in Monday’s stock market declines.
Is it a good idea to buy shares when they are low?
There are several factors to take into consideration when deciding whether to buy low. For example, if a stock is undervalued, a lot of information is needed to establish a price target range.
One of the greatest ways to measure the extent of over- or undervaluation is by estimating a company’s future chances for growth and earnings.
Valuation strategies such as looking at a company’s P/E multiple and comparing it to that of competitors are also used. Using other criteria, such as price to sales and price to cash flow, a stock’s value can be evaluated relative to its competitors.
When should I sell shares?
For a stock to reach its genuine value, it may take some time for it to trade higher. Price projections for the next month or quarter are merely educated guesses by analysts who believe the stock will appreciate rapidly.
The price goal range for a stock may not be reached for several years. With confidence in a company’s growth, you should consider hanging on to the shares for at least three to five years in some cases.
What types of shares should I invest in?
To have a strong asset portfolio you should invest in as diverse a range of shares as possible, in order to spread out your risk, while also ensuring you have stable entities in your basket along with growth assets.
To this end, it is useful to identify companies that have a solid track record of delivering stable and consistent growth, as well as interesting new prospects that will likely overtake the market in the future.
Which are the best shares to buy on a Monday?
When purchasing shares on a Monday, it is useful to find companies whose lowered share price could respond with significant gains in the mid to long term. Buying such shares at a lowered price gives you an entry to market opportunities that you might not have had during other trading times.
You will want to identify companies that have exciting growth prospects, or established giants which are benefitting from market uptrends. Included in our list of good Monday share purchase options are:
- Capitec
- Naspers/Prosus
- Sasol
- Zeder
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