Tom Scollon
Chief EditorIn the USA market, stocks commonly have prices in excess of $100 – the Berkshire Hathaway price (BRK) is almost US$90,000!
The two highest prices in the Australian All Ords are CNA, which is not a widely traded stock, and Rio Tinto, which is more commonly owned. RIO is not highly sought after by Aussie retail investors as for a small investment they do not get a lot of shares. Yes, we are strange. We prefer to receive a sizeable number of shares for each trade, which is one reason the so-called ‘penny dreadfuls’ are so popular for a ‘punt’.
RIO is traded by hedge funds. Often it is sought after by the Fundies who need to hold the stock as it is a key component of many indices. Many funds stipulate specific indices must be tracked.
In any case, RIO is our second largest miner after BHP and, despite the uncertainty as to whether the resource cycle is over or not, our miners are on track to set new records.
I have CFD positions in RIO so I watch it closely. From time to time I ponder (momentarily) whether RIO will be the first major Australian stock to reach $100. I am inclined to think it will, although I suspect it is unlikely during the lifetime of my CFDs!
For those of you who use ProfitSource you might like to look at the Elliott wave projection for RIO. You will see a projection of $93 in the coming months. Not quite $100 but it’s getting there. From $73 to $93 may seem a long way to travel, but it is only 27% which is not such a large leap in a mining boom.
The biggest challenge along the way for many investors will be their reluctance to pay so much per share for a stock here in Australia. But in time we will get used to paying over $100 per share, and where in the past we have seen stock splits, this will become less likely as a new norm becomes established here.
Enjoy the ride
Tom Scollon
Chief Editor