Bottom Shekel / Lesson in investments, courtesy of Africa Israel
Tuesday: Three whippersnappers are sitting at the Aroma cafe in Tel Aviv, regaling each other with articles from TheMarker's Web site - received on their cellphones - regarding the slide in Africa Israel stock, and the Sell recommendation the stock received from two equity analysts.
That's not an unusual picture. For the last three weeks, Africa Israel stock has been the hottest bet in town. Breaking news on Channel 2 television, rumors of a major foreign investor, blaring headlines in the papers. Africa Israel had become the talk at water coolers throughout Tel Aviv, the main story on Web sites and in SMS messages.
No wonder. Who needs a smoky gambling den in a basement when Africa Israel is rising 20% a day? On mushrooming turnover at that? Altogether it gained 130% in three weeks, and 230% from its lowest point.
Investors who chose to keep faith with Africa Israel's controlling shareholder, Lev Leviev, all the way from a company valuation of NIS 30 billion a year and a half ago to NIS 2 billion at the height of the crisis, were chortling.
"I didn't tell my wife about our loss on Africa Israel stock," somebody said. "Now it's up another 30% and I'm getting out, without her ever knowing how low we went."
Others only got into the stock during Passover's intermediary days, infected by the madness. With gains of 10% a day and more - some couldn't resist.
On Sunday, Africa Israel stock began the day with a 15% gain and ended 10% underwater. If you bought at the start of the trading day and didn't sell, you lost a fifth of your investment inside six hours.
On Monday the loss deepened as the stock fell another 26%.
It's awful to lose that much money in so short a time, but that's how the world is - some people have to learn their lesson about investments the hard way. The lesson is that you don't buy stock based on chatter at a cafe. You have to study the company and its financials.
The lesson is that investment in a company whose bonds are trading at yield levels of 40% and more, the most terrifying yield levels of any of the bonds on the Tel Bond-60 index, is very risky. Yield levels like that indicate that bondholders think the company may well not return their money, at least not in full.
The lesson is that what rockets skyward may come back down with the same velocity.
Yesterday morning, as stocks opened for trading, investors in Africa Israel were licking their wounds and desperately searching for another horse to ride.
Meanwhile, the managers and owners at the company itself went back to business as usual, which involves selling the company's properties for as much as they can get in order to return its gargantuan debts to banks and bondholders.