It's been an absolute rollercoaster ride for shareholders in mining and engineering service provider Monadelphous Group Limited (ASX: MND) over the past year and the past week has certainly been no exception!
After touching a high of $19 back in May 2014 the share price has been on a steady decent to a low of $7.87 in early February 2015.
Since touching that 52-week low, the stock dramatically reversed course – going on an absolute tear – racing to $13.01 on Monday which represented a gain of 65% in less than two months.
Monadelphous' share movements didn't go unnoticed by the ASX with the regulator last week issuing a 'Price and Volume Query' to which the company responded that it was "not aware of any information concerning it that has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities."
With no specific announcement from the company it seemed likely that an investor (or investors) had seen value and were building a stake in the company. The gains were so fast that it led me to ponder whether it was time to buy mining service stocks?
That was until 2:27pm yesterday when a little more light was shed on who was behind some of the recent buying.
A seemingly left-field explanation is now apparent thanks to a market release by the US-based fund management giant BlackRock Inc. The release shows that BlackRock was a major buyer of stock on 20 March as a result of various index tracking funds which the firm manages rebalancing their index weightings. This in fact accidently led to the firm briefly owning over 20% of the outstanding stock in Monadelphous, hence BlackRock was forced into a subsequent sell-down.
What now
As of Thursday morning, the stock has continued to fall and is now trading around the $10 level (compared with the $13 level on Monday) making it one of the most volatile stocks of the past few weeks.
Volatility can be the friend of long-term investors as events like this can create opportune times to enter positions.
It's a similar case when spin-offs come onto the market with some shareholders choosing to remove the new stock from their portfolios. With BHP Billiton Limited (ASX: BHP) set to demerge South32 shortly, this is one stock to watch for a potential buying opportunity.
