Another day, another...inexplicably huge rise in share price for Russian coal and steel producer Mechel PAO (NYSE:MTL).
After surging more than 36% on Monday for no reason in particular (or at least none that we can discern), Mechel shares are off to the races again on Wednesday, climbing 18.2% through 10:40 a.m. EST. And once again, there appears to be no news driving the share price.
How can one explain this? Well, there's the obvious explanation: With a share price of only $3 and change, Mechel is a "penny company," if not exactly a "penny stock." As veteran investors know, penny stocks can be volatile. It takes only a few pennies' change in share price to result in large percentile moves, which can in turn attract more investor interest and more buying (or selling) by investors, in an effect that snowballs, creating large swings in price.
Complicating the situation, Mechel is a Russian company about which there's not always very good information available to investors. Case in point: Today, some outfit called "Zolmax News" apparently published a report stating that "Mechel ... receives [an] average rating of 'buy' from analysts," and says there are "six brokerages ... presently covering the stock," three of which rate Mechel shares buy or better.
That kind of bullish endorsement could well be the reason Mechel's stock is continuing to rise today.
But here's the problem: Depending on how you define "brokerage" and "rating," the preceding statements may even be true. There might very well be fly-by-night brokerages out there, in Russia or elsewhere, that are telling folks to "buy" Mechel.
As for reputable brokerages, though, well, according to financial-data-providing stalwart S&P Global Market Intelligence, there's actually only one of those covering Mechel at present -- and its rating on the stock is a very firm "sell." Once investors take a break from their buying and begin to check their facts, I suspect today's enthusiasm for Mechel stock will quickly wane.
Indeed, that may already be happening. As I wrap up this column, at 10:55 a.m., Mechel stock is up only 8.8%, and half its gains of the morning...have vanished!