Some investors choose to ignore shares that have rocketed in value. They can fall under the assumption that the gains have already been made on those shares and may instead focus on the shares that have struggled recently, hoping to get in at the bottom.
As we highlighted yesterday, that isn't necessarily the correct way to think. While some laggard shares can definitely represent opportunities, others can be trading lower due to their fundamental flaws.
The opposite can be said for high-flyers. While some should be avoided at higher prices, others may have risen due to their fundamental strengths which could represent great reasons to buy.
Below are five of the best performing shares from the ASX 200 index over the last 30 days, based on figures from S&P Global Market Intelligence, and reasons why they may have risen so sharply:
SAI Global Limited (ASX: SAI)
SAI shares had struggled for a long stretch of time, plummeting to their lowest prices since 2013 less than two months ago. However, the company then received a takeover offer from Baring Asia, valuing the shares at $4.75. The shares are currently fetching $4.67, up 35% over the month. On the odd chance that a transaction doesn't actually occur, however, this could be one for investors to steer clear of now despite the potential arbitrage opportunity.
Whitehaven Coal Ltd (ASX: WHC)
Whitehaven Coal shares have performed very strongly. They're up 27.5% over the month and roughly 640% since mid-February. This has largely been due to a rally in the coal price in 2016, driven by Chinese policies limiting Chinese coalminers to working 276 days per year. However, those production limits look to be relaxed, with Morgan Stanley calling the rally's peak.
Beach Energy Ltd (ASX: BPT)
Operating in the energy sector, Beach Energy has benefited from a rebound in oil prices, rising 26.1% over the past 30 days. This remains a risky play for investors, however, given its high all-in sustaining costs and its reliance on a steady (if not growing) oil price.
South32 Ltd (ASX: S32)
Like Whitehaven Coal and Beach Energy, South32 has also benefited from a rebound in commodity prices after its shares plummeted earlier this year. The shares are up 22.2% over the last month.
Sigma Pharmaceutical Limited (ASX: SIP)
Sigma Pharmaceutical is the company behind the Guardian and Amcal brands. Up 3% today alone, its shares have more than doubled in price since mid-February while they're up 22% in the last month. This month's strong gains appear to stem from the half-year results released early in September which revealed a 28.1% increase in underlying revenue, and 17% growth in underlying earnings before interest and taxes (EBIT). That growth was much stronger than the market had anticipated.
Is there an opportunity?
Whitehaven Coal, Beach Energy and South32 are great examples of stocks that can soar over a short space of time based on rebounding commodity prices. There are plenty of others that also fit this description, including the likes of BHP Billiton Limited (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG) and Northern Star Resources Ltd (ASX: NST) – all of which are sitting on very healthy returns since the beginning of the year.
The problem is, it is incredibly difficult to time dips and bursts in commodity prices. While those shares have recorded strong gains, those could very easily be reversed if commodity prices did drop suddenly – as the gold miners demonstrated on Wednesday. As such, I'd tend to lean away from the resources sector.
Sigma Pharmaceutical has demonstrated some strong growth recently and even has the ability to expand further into new geographical areas, including China. However, local competition could be a concern which could hinder growth in the coming years. It's worth a closer look, but certainly not a blind investment.
