What to do with medibank stocks


Published in the Australian National Review, May 2015 by Dale Gillham

Investors have been watching closely as their Medibank Private shares have fallen by around 15 per cent from the recent high of $2.59 in February 2015, to around $2.20, at the time of writing.

So where does this leave you if you are holding the stock?

As mentioned in articles previously written by me, the first 12 months post any float, the ride for investors is often a very rocky one.

Statistics show this is the case as they indicate that more than 50 per cent of floats trade below their issue price within the first 12 months.

The reason for this is that once the marketing hype fades, which is drummed up around the time of the float, and the market gets a much firmer view on the company's likely future performance, the price comes back to more realistic levels. In my opinion, currently, this level is closer to what the institutions were willing to pay, at $2.15.

Most investors would probably be comfortable if the price stopped there, however, the problem is that some investors may panic sell if the shares continue to fall.

Provided there is no negative news from the company, MPL is likely to hold above $2.00.

So, you have a choice. You could sell now and bank a profit, which may mean you have to pay tax on it, depending on your income, or you could continue to hold and just hope for the best.

Personally, I would rather the profit and consider buying back in if the shares rise above heavy resistance at around $2.40.


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