Under the curious, but at the same time accepted by investors, the name of chicharros hides a series of Securities listed on Spanish equities characterized by low quality companies, which present a very tight income statement, and generally with a debt above normal. In spite of everything, they are very likely to be hired by the most aggressive investors, who wish to speculate with their economic contributions.
Through its purchases, large capital gains can be generated, above the profitability offered by the values of the national selective index. But be very careful, because the losses are usually also very pronounced. Volatility governs the behavior of your shares. Not surprisingly, fluctuations in their prices are the common denominator in their actions in the equity markets.
As soon as they rise more than 10% in the same trading session, as the next day they double in a few hours. As a consequence of this peculiar evolution in the markets, these values are highly desired by investors who wish to carry out operations to make cash in a short space of time. They enter and leave the markets very frequently. Something, on the other hand, that you cannot develop in the most solid values of Madrid parquet.
But when talking about peas, we are also referring to a series of companies that show signs of identity that make them highly identifiable for any investor profile. They are generally companies whose lines of business are not corporately consolidated, or that even go through bad times in their management. It is not surprising, therefore, that their quotes are governed, more by expectations in their businesses than by the reality of their business accounts.
How are these values?
If, despite everything, your wish is to invest in one of these companies, you should know that they have very defined characteristics that will determine their evolution in the equity markets. You will be able to obtain significant capital gains through your operations, but at the same time the risks will be significantly higher, even with the possibility of losing a large part of the savings invested.
Faced with this complicated scenario that you have before you, precaution should be the first tool you should use to operate with peas. It will be highly advisable that you protect your investment, through four strategies that are very effective in these cases. And which basically consist of the following actions.
- Allocate only a part of your assets to this kind of operations, which in any case should not exceed 30% of the savings available to formalize the investment.
- Apply a stop loss order, to protect you against possible falls in its price. In this sense, the best option is to impose the stop loss. You will be able to limit the depreciation of the value.
- You should only take positions in these values when they maintain a very clear uptrend, that invite to take positions in the values, and to abstain in the remaining situations.
- You should focus your operations exclusively on the short term, and if you find that you have capital gains, the best option will be to permanently close the positions.
Only through these well-defined actions will you be able to minimize the risks that your operations entail, and protect yourself against the most adverse scenarios for your interests as a saver. Not in vain, A good part of the small and medium investors have left a good part of their savings in these very particular values. Although there will surely be more than one that will have achieved excellent benefits.
Strategies for trading peas
If you want to operate correctly with these very special values, you must necessarily import a series of actions that will be very useful to successfully start your relationship with equities. To get started, It is convenient that you identify these companies within the current offer generated by the Spanish stock market.
You will know at least what to expect, and you will avoid falling into blunders that you may regret later. In addition, they will teach you to operate in the markets with more complicated financial assets, and as a consequence, open your doors to the entrance of obtaining more benefits.
First key: they do not distribute dividends
One of the most notable characteristics of these values is that none of them distribute dividends to their shareholders. Not surprisingly, generally their companies do not give benefits, and therefore, this regular pay is not present in the remuneration policy of these companies. If you want to collect these payments, you will have no choice but to go to other more corporately consolidated stocks in the indices where it is listed. And that will generate an average annual return between 3% and 8%.
Second key: with little liquidity
They are listed companies, but with very little liquidity, since very few securities are exchanged on financial markets. They even make it very difficult for you to enter or exit their securities, especially when you carry out operations with significant economic contributions. And that encourages the strong hands of the market (large investors or institutions) to manage their prices at will. Hence, they are not suitable for the minority, who have other safer alternatives.
Third key: they present extreme volatility
If what you want is a stability in its prices, it is better that you also opt for other calmer values. Since the peas They trade under extreme fluctuations, which can even reach up to 30% in the same trading session, both downward and upward, indistinctly. It is common to find many of these companies that have generated an annual return of around 80%, and vice versa for the same reason. Do not try to rush their movements, since you will most likely have to regret it after a few days.
Fourth key: they are not the object of study by brokers
Most brokers and financial intermediaries do not take these values into account in the recommendations that they regularly provide to their clients. And as a consequence of it, you will be missing a fundamental piece for its corresponding analysis. Nor does it have a target price as a consequence of this variable. And that will undoubtedly harm you to assess what is the most appropriate price to buy or sell your shares.
Fifth key: shares to one euro
If you carefully study the supply of these stocks, you will come to the conclusion that most of them trade below one euro unit. It may make you think that they are really cheap, but nothing is further from the truth, in many cases they are usually too expensive to develop any kind of purchases.
In addition, with a deviation of a few tenths in its price, the revaluation or depreciation will reach very high levels of volatility. Only the most expert investors will be in a position to face their operations, and not without risk in any case.
Sixth key: possibilities that the company will bankrupt
One of the main disadvantages that you have when opting for any of these companies is that they may stop trading at some point as a result of their business problems. With the serious damages that the unexpected appearance of these situations can cause you. Experience should help you avoid these very negative effects that can happen to you if you buy shares in one of these companies.
It is enough to remember the many listed companies of these characteristics that have passed through this unpleasant scenario: La Seda de Barcelona, Sniace, Terra, Pescanova, and a long list that will make you wonder if it is really worth choosing this rental management model. Spanish variable so excessively aggressive.
Seventh key: they are small capitalization companies
To meet the true reality of these companies, the final conclusion will be that they are very small capitalization. The titles that move in the financial markets are very few. And therefore, they are more manipulable than in the other securities of the Spanish continuous market. They do not offer confidence to retailers, and are only used for very specific operations (of a speculative nature) that are carried out under not very high amounts, but you want to make a serious mistake that could affect your checking account.
Eighth key: they are listed on secondary markets
In order to have a clearer and more diaphanous idea of how these outliers are, the best way to check it will be to verify that none of them are listed in the selective Spanish index, the Ibex-35, but on the contrary, many of the chicharros that you can find in the current stock offer come from secondary listing markets, including the Alternative Stock Market (MAB).
It is not a model, therefore, to follow if it is one of the first times that you take positions in the stock market. Also, many of these companies may not even know them, and you may even have problems relating them to a sector of business activity.
Ninth key: the risk of getting hooked
Market entry and exit operations will be very important and may even determine the success of the operation. There will be no choice but to adjust the purchase prices to the maximum. Especially if you want to sell your securities quickly, and within a few days (even hours) from the formalization of the investment order. It is frequent, that if you do not develop it under these parameters, you can get hooked on the value. And as a consequence of this, you stay for many months, and even years, without being able to redeem the shares under the same purchase price.
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