Scalp Trades Dated 22/3/2011

1. Scalp trades today :-

AMFIRST - sold 1.15, bought in 1.14 yesterday

2. Relatively, not so good news for Citigroup as many analyst has envisaged. :(

Giant bank Citigroup yesterday it was announcing a 1-for-10 exchange of its stock, a move that will dress up Citi’s Two Buck Chuck stock price into a double-digit Merlot.

Morgan Stanley found more than half the 236 companies it studied had underperformed the market following a reverse stock split. The underperformance tends to even out over time, Morgan Stanley found, so by six months, average returns are pretty positive. The analysts caution that the results are skewed by a small number of companies with extremely high returns after a stock split.

The upshot? Morgan Stanley says it’s smart to hold off buying Citi shares:

“Given the lag between the eventual positive returns and the reverse split, it is difficult to see the causation. It may be that a higher share price helps to facilitate strong performance once better financial data arrives, or that it takes time for investors to “forget” the old price (and the negative events that went along with that price). Even accepting that the reverse split played such a role, the companies that eventually outperform often suffer immediately following the reverse split, meaning investors would generally be better waiting to invest rather than immediately buying following a reverse split in these cases.”