There are many unsolved mysteries that may endure for decades e.g. the Bermuda Triangle, the Marie Celeste, Jeremy Corbyn, why Lulu looks younger now than in the 60s and why BooHoo.com has a forward p/e ratio of 50 dropping to 45 in 2018?
Forecast EPS growth at BooHoo is impressive at around 39% this year, falling to 20% the year after, but why the heady forward p/e ratios of 50 and 45? Is it because everybody thinks it's the next ASOS?
In Peter Lynch's book "One Up On Wall Street" there's a wonderful section entitled "Beware the next something". It really is a must read.
Now I'll admit that I haven't looked at this stock in detail and it's possible that I'm missing something obvious, but unless a company is a tiddler then often the p/e ratio is a simple and excellent indicator of whether or not a stock is currently overpriced.
BooHoo's average EPS growth for the next two years is around 30. Even at a heady p/e of 30 for 2018, the eps figure of 1.85p would suggest a share price of around 56p (currently 80p). Good luck if you're invested here, but to reach a share price of 100p (i.e. 25% appreciation) then the February 2018 p/e ratio would need to reach 54.
Personally, I think Lulu is more likely to start looking her age sooner than BooHoo catches up with its heady rating.
Monday 29 August 2016
Sunday 28 August 2016
(The Internet of) Things often take far longer to mature than you'd expect
I don't suppose I make myself very popular when I make negative comments about a company's prospects. Notice the understatement!!
I don't do it very often, although this week has been an exception. I've no interest in going short for very many reasons. One of those reasons is that I've found going long on a stock and holding onto that stock until the story changes for the worse (if indeed it does) is far more profitable and a much safer option.
I'd like to think that in general when selecting companies for investment I'll work through the financials then apply some common sense assessing the business model, and the likelihood of success. It also helps you to avoid companies that are likely to get into distress or flatline. I have to say at this point that I don't always follow my own advice, and have been known to take a complete punt.
However, one company I did avoid investing in despite the so-called "sexy" area it's working in is Lightwaverf which is involved in the IoT market.
Since I first commented on the stock back in October 2015:-
http://uk.advfn.com/forum/search?q=michaelmouse&post_poster=on&post_post=on&index=posts&thread_id=32612016&offset=30
The stock has fallen from around the 26p/27p mark to its current 15p.
Some of my comments were a little flippant and designed to be amusing, but this one now appears to have been highly pertinent:-
http://uk.advfn.com/cmn/fbb/thread.php3?id=32612016&from=2593
"Will I ever buy shares in this company? Well never say never, but not at the moment. The reasons I've listed are good enough for me to avoid this one in the short to medium term, but my bigger concern is longer term.
I might be totally wrong but I think that this market will take considerably longer to develop than many think by which time the competition will be intense.
I would imagine that the best chances of success are selling their products to companies that will install them in new builds - both offices and new homes. However, (and I more than happy to be corrected here) it appears that they are trying to get retailers to sell them to homeowners e.g. through Maplin stores etc.
The majority of homeowners are undoubtedly aged 35+ and the majority of those are probably older. The demand for devices that remotely control your heating, lighting etc through an APP will be low for some years to come since the age group most likely to need them is the least tech savvy or interested.
In ten/fifteen/twenty years then it may be a different story as today's tech savvy cash poor youngsters eventually get onto the housing ladder, but as I stated that's a considerable time to wait.
Now I may not fully understand their business model or the full range of products they offer, but if I don't then sadly there are a large proportion of people in the same boat. Judging by this line in their finals, "Although we continue to remain alert to how we pursue our strategy in detail", neither do their management team. The sentence is total and utter gobbledygook, and illustrates that their strategy lacks any clarity."
A report in today's Telegraph suggests that my caution seems well placed:-
http://www.telegraph.co.uk/technology/2016/08/27/internet-of-things-struggles-as-use-of-smart-home-gadgets-flatli/
"The figures suggest that such connected home gadgets, which allow their owners to control their lighting without leaving the sofa or turn on the heating as they come home, are failing to resonate with consumers."
“Some of them aren’t resonating well because they offer too little,” he said. “The ability to micromanage the temperature in your house doesn’t appeal to the mainstream, and the savings aren’t significant enough to upgrade.”
In my experience, it's very easy to underestimate the amount of time it will take for a "new" market to develop. If you do buy shares in a company in these "new and sexy" areas then expect to wait many years for a decent return on your investment. Think dot-com boom. These type of stocks fly up on hype and hope, and then come crashing back down to earth when reality sinks in.
As ever though, this is a personal blog and I don't offer buy or sell advice. It's simply a record of my experiences.
I don't do it very often, although this week has been an exception. I've no interest in going short for very many reasons. One of those reasons is that I've found going long on a stock and holding onto that stock until the story changes for the worse (if indeed it does) is far more profitable and a much safer option.
I'd like to think that in general when selecting companies for investment I'll work through the financials then apply some common sense assessing the business model, and the likelihood of success. It also helps you to avoid companies that are likely to get into distress or flatline. I have to say at this point that I don't always follow my own advice, and have been known to take a complete punt.
However, one company I did avoid investing in despite the so-called "sexy" area it's working in is Lightwaverf which is involved in the IoT market.
Since I first commented on the stock back in October 2015:-
http://uk.advfn.com/forum/search?q=michaelmouse&post_poster=on&post_post=on&index=posts&thread_id=32612016&offset=30
The stock has fallen from around the 26p/27p mark to its current 15p.
Some of my comments were a little flippant and designed to be amusing, but this one now appears to have been highly pertinent:-
http://uk.advfn.com/cmn/fbb/thread.php3?id=32612016&from=2593
"Will I ever buy shares in this company? Well never say never, but not at the moment. The reasons I've listed are good enough for me to avoid this one in the short to medium term, but my bigger concern is longer term.
I might be totally wrong but I think that this market will take considerably longer to develop than many think by which time the competition will be intense.
I would imagine that the best chances of success are selling their products to companies that will install them in new builds - both offices and new homes. However, (and I more than happy to be corrected here) it appears that they are trying to get retailers to sell them to homeowners e.g. through Maplin stores etc.
The majority of homeowners are undoubtedly aged 35+ and the majority of those are probably older. The demand for devices that remotely control your heating, lighting etc through an APP will be low for some years to come since the age group most likely to need them is the least tech savvy or interested.
In ten/fifteen/twenty years then it may be a different story as today's tech savvy cash poor youngsters eventually get onto the housing ladder, but as I stated that's a considerable time to wait.
Now I may not fully understand their business model or the full range of products they offer, but if I don't then sadly there are a large proportion of people in the same boat. Judging by this line in their finals, "Although we continue to remain alert to how we pursue our strategy in detail", neither do their management team. The sentence is total and utter gobbledygook, and illustrates that their strategy lacks any clarity."
A report in today's Telegraph suggests that my caution seems well placed:-
http://www.telegraph.co.uk/technology/2016/08/27/internet-of-things-struggles-as-use-of-smart-home-gadgets-flatli/
"The figures suggest that such connected home gadgets, which allow their owners to control their lighting without leaving the sofa or turn on the heating as they come home, are failing to resonate with consumers."
“Some of them aren’t resonating well because they offer too little,” he said. “The ability to micromanage the temperature in your house doesn’t appeal to the mainstream, and the savings aren’t significant enough to upgrade.”
In my experience, it's very easy to underestimate the amount of time it will take for a "new" market to develop. If you do buy shares in a company in these "new and sexy" areas then expect to wait many years for a decent return on your investment. Think dot-com boom. These type of stocks fly up on hype and hope, and then come crashing back down to earth when reality sinks in.
As ever though, this is a personal blog and I don't offer buy or sell advice. It's simply a record of my experiences.
Saturday 27 August 2016
OptiBiotix say one thing, so why does a sharetipster claim another?
My last two blogs are linked, and this is the final one in the trilogy.
I did post this on ADVFN, but a vile lunatic seems intent on following me around and trying to trash the thread. Sadly, these days it's not unusual for the ADVFN site. I would simply ban this madman from the thread if I paid for their services, but since I haven't and have no intention of doing so, I can neither moderate or ban him and have therefore opted to post below.
Those of you who have read my previous two blogs will no doubt see the link with the following:-
In July, OptiBiotix issued a RNS stating a change in strategy. The CEO said the following:-
"I believe that OptiBiotix's diversity of both IP and Commercial relationships offers shareholders multiple opportunities where future value to shareholders may be best realised by spinning out domain specific opportunities where we as a Board believe the individual parts may be properly resourced and valued."
Now it's not difficult to compare that statement with yesterday's clear change in tone:-
"As these divisions grow in substance and start making a significant contribution to group earnings we will consider forming new legal entities with the potential for a separate public listing."
So the first RNS hints at spinning out the divisions and then raising extra cash to fund each entity.
Yesterday's statement clearly indicates that they have received no support for this idea, and can only consider it IF the individual parts can eventually make a profit in their own right.
Note:- "significant contribution to group earnings" before considering a spin-off. Since the group is barely producing any revenues, let alone earnings, then one can assume that the spin-off idea is a considerable time away.
You don't need to be Einstein to work it out. It's in black and white in the company's own words.
Why then (from the main thread) does Billy Liar say the following:-
"So all in all it is very good, but not absolutely brilliant. Not enough to drive an immediate one day re-rate. What is needed for that:
1. A demerger. We were hoping for hard news on that today. We now expect it in either this coming SEPTEMBER or early OCTOBER. That could drive a MAJOR RE-RATE."
So despite the company stating quite clearly in yesterday's report that each division would need to turn a profit first, Pinnochio thinks that news of a de-merger could happen as early as next week? Is he referrring to the same company that reported revenues of just £88,000 and a whopping loss yesterday?
He also says:-
"Cash will be boosted in H2 by a) more sales and b) the exercise of the last warrants from before the RTO that created Optibitix which must all be exercised by January 17 2017. But there is clearly " NO " funding concern, at all."
Who's he trying to kid? Bloody hell, the company had a cash outflow of £900,000 in H1 from operations. Administrative expenses are up considerably (£300,000). The small contribution that they get from revenues will be totally negated by increasing expenditure and I'd estimate full year cash consumption from operations will be around £2m. Further funding is almost inevitable at some point if they intend to exploit their "opportunity". About 12/18 months I'd guess.
Finally, just to clarify. I've nothing against OptiBiotix. I'm not short of the stock. The share price could go up or down in the next few months. I just happen to think it's a "jam tomorrow" stock that is currently overvalued.
My key point is that I can't stand the duplicitous fraudsters that often talk these companies up for their own gain. See:-
http://michae1mouse.blogspot.co.uk/2016/08/free-shares-guv-thatll-do-nicely.html
They'll quite happily talk shares up or down to line their own pockets by any means possible.
They need exposing.
I've done my bit, and I'll leave it there for a while.
I don't normally issue advice on this blog, I'll make an exception this time.
Don't sign up to share tipping sites. If you can't make share purchase decisions yourself using your own research then buy a tracker fund. It's safer, and you won't be throwing money to these duplicitious shysters.
I did post this on ADVFN, but a vile lunatic seems intent on following me around and trying to trash the thread. Sadly, these days it's not unusual for the ADVFN site. I would simply ban this madman from the thread if I paid for their services, but since I haven't and have no intention of doing so, I can neither moderate or ban him and have therefore opted to post below.
Those of you who have read my previous two blogs will no doubt see the link with the following:-
In July, OptiBiotix issued a RNS stating a change in strategy. The CEO said the following:-
"I believe that OptiBiotix's diversity of both IP and Commercial relationships offers shareholders multiple opportunities where future value to shareholders may be best realised by spinning out domain specific opportunities where we as a Board believe the individual parts may be properly resourced and valued."
Now it's not difficult to compare that statement with yesterday's clear change in tone:-
"As these divisions grow in substance and start making a significant contribution to group earnings we will consider forming new legal entities with the potential for a separate public listing."
So the first RNS hints at spinning out the divisions and then raising extra cash to fund each entity.
Yesterday's statement clearly indicates that they have received no support for this idea, and can only consider it IF the individual parts can eventually make a profit in their own right.
Note:- "significant contribution to group earnings" before considering a spin-off. Since the group is barely producing any revenues, let alone earnings, then one can assume that the spin-off idea is a considerable time away.
You don't need to be Einstein to work it out. It's in black and white in the company's own words.
Why then (from the main thread) does Billy Liar say the following:-
"So all in all it is very good, but not absolutely brilliant. Not enough to drive an immediate one day re-rate. What is needed for that:
1. A demerger. We were hoping for hard news on that today. We now expect it in either this coming SEPTEMBER or early OCTOBER. That could drive a MAJOR RE-RATE."
So despite the company stating quite clearly in yesterday's report that each division would need to turn a profit first, Pinnochio thinks that news of a de-merger could happen as early as next week? Is he referrring to the same company that reported revenues of just £88,000 and a whopping loss yesterday?
He also says:-
"Cash will be boosted in H2 by a) more sales and b) the exercise of the last warrants from before the RTO that created Optibitix which must all be exercised by January 17 2017. But there is clearly " NO " funding concern, at all."
Who's he trying to kid? Bloody hell, the company had a cash outflow of £900,000 in H1 from operations. Administrative expenses are up considerably (£300,000). The small contribution that they get from revenues will be totally negated by increasing expenditure and I'd estimate full year cash consumption from operations will be around £2m. Further funding is almost inevitable at some point if they intend to exploit their "opportunity". About 12/18 months I'd guess.
Finally, just to clarify. I've nothing against OptiBiotix. I'm not short of the stock. The share price could go up or down in the next few months. I just happen to think it's a "jam tomorrow" stock that is currently overvalued.
My key point is that I can't stand the duplicitous fraudsters that often talk these companies up for their own gain. See:-
http://michae1mouse.blogspot.co.uk/2016/08/free-shares-guv-thatll-do-nicely.html
They'll quite happily talk shares up or down to line their own pockets by any means possible.
They need exposing.
I've done my bit, and I'll leave it there for a while.
I don't normally issue advice on this blog, I'll make an exception this time.
Don't sign up to share tipping sites. If you can't make share purchase decisions yourself using your own research then buy a tracker fund. It's safer, and you won't be throwing money to these duplicitious shysters.
Thursday 25 August 2016
OptiBiotix - A trillion pound market opportunity!!!!!
I've written two blogs today. I'll let you make the connections and fill in the blanks between them both.
OptiBiotix listed on Aim in 2014 at a share price of 8p and has spectacularly risen to today's 70p and a heady £55m market cap. Wow!!! A multi-bagger in no time at all.
So what transformational deals have produced this stellar re-evaluation since the initial listing? Ummm...........now that's a tough one.
Certainly OptiBiotix has been given heavy exposure and promotion by individuals with vested interests, but let's look at the facts.
Interim results were released today.
Revenue £88,000.
Loss £615,000
NTAV £4m
Cash £3.6m
Operating cash outflow £900,000
Oh dear! Cash outflow is going to be about £2m this year, and this will clearly ramp up, as costs for R&D etc accelerate. A cash call will surely follow in 12/18 months time, since revenues will be wholly inadequate for the foreseeable future in my opinion.
The market cap. clearly can't be justified on fundamentals. On fundamentals, a share price of 8p is about right.
Ok, I've been terribly negative here. What does the company actually do? Well, in short it does the following:-
"OptiBiotix has established a pipeline of microbiome modulators that can impact on lipid and cholesterol management, energy harvest and appetite suppression."
Now I've no idea if this is an area that will eventually be successful or not, and for that reason alone I wouldn't be tempted to pay the huge premium on the shares at the moment. Secondly, if this is indeed a massive growth area then the competition will be very fierce.
I've already stated many reasons to be cautious here on my Advfn thread:-
http://uk.advfn.com/cmn/fbb/thread.php3?id=35291865
If you look at the CEO speaking today and on other occasions, each time he is asked about progress he refers to the IP and the share price. Not once does he ever refer to the timings for significant revenue generation or profits. I'd suggest these are years away yet.
Other warning signs for me are that the Chairman has just stepped down, a plan to break the company into 4 separate divisions has been shelved (less than two months after declaring that this was their intention), and ludicrous statements about trillion dollar markets when they've recorded just £88,000 in revenues.
Finally, would I be interested in consuming a product that claimed to suppress my appetite? The answer is a categorical no. Firstly, the market for dietary products is overcrowded and unnecessary. Eat healthily and encourage healthy eating habits. Anybody who has ever used these products will tell you that as soon as they stop using them then they return to their bad eating habits and put any weight they lost back on again in no time at all. In short, they just don't work. Personally, I'd be very wary of consuming something claiming to suppress my appetite.
Anyway, if you are a shareholder then good luck, perhaps I've got it wrong and a huge deal will appear out of the blue.
For the time being, shareholders may need to rely on share promoters to try and keep the share price propped up. A sceptic might suggest that some of these enthusiasts had been given "free shares". I couldn't possibly comment.
OptiBiotix listed on Aim in 2014 at a share price of 8p and has spectacularly risen to today's 70p and a heady £55m market cap. Wow!!! A multi-bagger in no time at all.
So what transformational deals have produced this stellar re-evaluation since the initial listing? Ummm...........now that's a tough one.
Certainly OptiBiotix has been given heavy exposure and promotion by individuals with vested interests, but let's look at the facts.
Interim results were released today.
Revenue £88,000.
Loss £615,000
NTAV £4m
Cash £3.6m
Operating cash outflow £900,000
Oh dear! Cash outflow is going to be about £2m this year, and this will clearly ramp up, as costs for R&D etc accelerate. A cash call will surely follow in 12/18 months time, since revenues will be wholly inadequate for the foreseeable future in my opinion.
The market cap. clearly can't be justified on fundamentals. On fundamentals, a share price of 8p is about right.
Ok, I've been terribly negative here. What does the company actually do? Well, in short it does the following:-
"OptiBiotix has established a pipeline of microbiome modulators that can impact on lipid and cholesterol management, energy harvest and appetite suppression."
Now I've no idea if this is an area that will eventually be successful or not, and for that reason alone I wouldn't be tempted to pay the huge premium on the shares at the moment. Secondly, if this is indeed a massive growth area then the competition will be very fierce.
I've already stated many reasons to be cautious here on my Advfn thread:-
http://uk.advfn.com/cmn/fbb/thread.php3?id=35291865
If you look at the CEO speaking today and on other occasions, each time he is asked about progress he refers to the IP and the share price. Not once does he ever refer to the timings for significant revenue generation or profits. I'd suggest these are years away yet.
Other warning signs for me are that the Chairman has just stepped down, a plan to break the company into 4 separate divisions has been shelved (less than two months after declaring that this was their intention), and ludicrous statements about trillion dollar markets when they've recorded just £88,000 in revenues.
Finally, would I be interested in consuming a product that claimed to suppress my appetite? The answer is a categorical no. Firstly, the market for dietary products is overcrowded and unnecessary. Eat healthily and encourage healthy eating habits. Anybody who has ever used these products will tell you that as soon as they stop using them then they return to their bad eating habits and put any weight they lost back on again in no time at all. In short, they just don't work. Personally, I'd be very wary of consuming something claiming to suppress my appetite.
Anyway, if you are a shareholder then good luck, perhaps I've got it wrong and a huge deal will appear out of the blue.
For the time being, shareholders may need to rely on share promoters to try and keep the share price propped up. A sceptic might suggest that some of these enthusiasts had been given "free shares". I couldn't possibly comment.
Free shares guv that'll do nicely!
I'm incredulous, no actually I'm not. In fact I'm not surprised at all.
It's been brought to my attention that a certain dubious character and the organisation that he works for has been reported to the FCA for perceived wrongdoing. A regular occurrence I'm led to believe. I couldn't possibly comment other than report the facts.
Apparently, the accused has issued some kind of rebuttal on his own website which is a laugh a minute. In fact when it was related to me, I couldn't actually believe that he thinks anyone in their right minds would take him seriously, but he clearly thinks people are so stupid that they'll believe his b*llsh*t.
To cut a long story short, the issue centres around this organisation being paid in company 'shares' for services rendered at their investor shows. For example, let's say company A wants a stand at an investor show but doesn't want to pay cash. The company can pay the equivalent and a bit more in shares apparently. Surely nothing wrong with that is there? Oh hang on, the company receiving the shares is a share tipping site. Now let me think about this. Ummm....It doesn't sound good does it. Seedy, unethical, ?illegal? probably doesn't cover it.
Free shares gov, that'll do nicely. Nudge, nudge, wink, wink.....report on your company coming up on our website.....ramp, ramp........know what I mean guv'nor.......gullible subscribers....nudge nudge......share price ramped up..........say no more ;)
Let's say I'm a share tipster that has just received payment in company A's shares for services rendered. What might I do in these circumstances?
a) Not write about the company.
b) Write a negative report about the company.
c) Ramp the company to high heaven, and try and exploit the opportunity for all it's worth.
Answers on a postcard please.
What is incredulous is that as a rebuttal, the following excuses are given:-
1) It's OK to do this if they like the company in question.
Ummmm............?
2) In the past they've told investors to sell a company's shares whilst continuing to hold on to them themselves.
Eh.........? How does that work? Would you buy shares in a company and then write a article explaining why everyone else should sell them unless of course you were trying to buy some more on the cheap which is totally unacceptable. So it's either mindless stupidity or totally unethical?
3) The individual doesn't receive any personal reward from the receipt of the company shares, but his dependants do.
Oh that's ok then. My dependents have nothing to do with me. Oh hang on they're my dependents!!
You couldn't make this nonsense up. Sadly it's true. FCA get your act together!!!!
P.S. I won't name the individual or website, but in a recent blog I mentioned that they looked like they were peddling soft porn, at least now they've had the decency to remove it. Pure coincidence of course since they can't possibly read my blog ;).
It's been brought to my attention that a certain dubious character and the organisation that he works for has been reported to the FCA for perceived wrongdoing. A regular occurrence I'm led to believe. I couldn't possibly comment other than report the facts.
Apparently, the accused has issued some kind of rebuttal on his own website which is a laugh a minute. In fact when it was related to me, I couldn't actually believe that he thinks anyone in their right minds would take him seriously, but he clearly thinks people are so stupid that they'll believe his b*llsh*t.
To cut a long story short, the issue centres around this organisation being paid in company 'shares' for services rendered at their investor shows. For example, let's say company A wants a stand at an investor show but doesn't want to pay cash. The company can pay the equivalent and a bit more in shares apparently. Surely nothing wrong with that is there? Oh hang on, the company receiving the shares is a share tipping site. Now let me think about this. Ummm....It doesn't sound good does it. Seedy, unethical, ?illegal? probably doesn't cover it.
Free shares gov, that'll do nicely. Nudge, nudge, wink, wink.....report on your company coming up on our website.....ramp, ramp........know what I mean guv'nor.......gullible subscribers....nudge nudge......share price ramped up..........say no more ;)
Let's say I'm a share tipster that has just received payment in company A's shares for services rendered. What might I do in these circumstances?
a) Not write about the company.
b) Write a negative report about the company.
c) Ramp the company to high heaven, and try and exploit the opportunity for all it's worth.
Answers on a postcard please.
What is incredulous is that as a rebuttal, the following excuses are given:-
1) It's OK to do this if they like the company in question.
Ummmm............?
2) In the past they've told investors to sell a company's shares whilst continuing to hold on to them themselves.
Eh.........? How does that work? Would you buy shares in a company and then write a article explaining why everyone else should sell them unless of course you were trying to buy some more on the cheap which is totally unacceptable. So it's either mindless stupidity or totally unethical?
3) The individual doesn't receive any personal reward from the receipt of the company shares, but his dependants do.
Oh that's ok then. My dependents have nothing to do with me. Oh hang on they're my dependents!!
You couldn't make this nonsense up. Sadly it's true. FCA get your act together!!!!
P.S. I won't name the individual or website, but in a recent blog I mentioned that they looked like they were peddling soft porn, at least now they've had the decency to remove it. Pure coincidence of course since they can't possibly read my blog ;).
Saturday 6 August 2016
If only it was always that easy......
I couldn't let the past two days trading in Avanti Communications go without further mention.
Please see Thursday's blog post:-
http://michae1mouse.blogspot.co.uk/2016/08/dont-try-this-at-home.html
Following another stellar 44 % rise in Avanti's share price on Friday, the shares have nearly doubled in two days.
If only short term trading was always that easy.
For reasons that I explained in my previous blog, following the FT article it was pretty much a one way bet.
The only possible fly in the ointment could have been Avanti denying any bid rumours. That was very unlikely to happen since they are currently conducting a strategic review, and it was no surprise to see them issue a statement on Friday (pm) to note the share price rise and neither confirm or deny the rumours. Why would they? The rising value of the equity is very much to their advantage.
If there were more one way bets like this then I'd consider short term trading far more often. As it is, I've always found my current style more profitable in the long run i.e. Seeking out value in micro-caps, building a reasonable position and patiently waiting for the company to grow and prosper. It's also less stressful and allows me to get out and about without being stuck in front of a screen all day. Anyway each to their own.
What next for Avanti? I don't know. I hope that the company can find a satisfactory solution to its debt issues since they have achieved a considerable amount, albeit more slowly than anticipated. Let's not forget that in the recent trading statement they said the following:-
Please see Thursday's blog post:-
http://michae1mouse.blogspot.co.uk/2016/08/dont-try-this-at-home.html
Following another stellar 44 % rise in Avanti's share price on Friday, the shares have nearly doubled in two days.
If only short term trading was always that easy.
For reasons that I explained in my previous blog, following the FT article it was pretty much a one way bet.
The only possible fly in the ointment could have been Avanti denying any bid rumours. That was very unlikely to happen since they are currently conducting a strategic review, and it was no surprise to see them issue a statement on Friday (pm) to note the share price rise and neither confirm or deny the rumours. Why would they? The rising value of the equity is very much to their advantage.
If there were more one way bets like this then I'd consider short term trading far more often. As it is, I've always found my current style more profitable in the long run i.e. Seeking out value in micro-caps, building a reasonable position and patiently waiting for the company to grow and prosper. It's also less stressful and allows me to get out and about without being stuck in front of a screen all day. Anyway each to their own.
What next for Avanti? I don't know. I hope that the company can find a satisfactory solution to its debt issues since they have achieved a considerable amount, albeit more slowly than anticipated. Let's not forget that in the recent trading statement they said the following:-
"Avanti (AIM: AVN) a leading provider of satellite data communications services in Europe, the Middle East and Africa confirms that revenue for the financial year ("FY") ended 30th June 2016 is expected to be approximately $83m. This represents growth in core revenues year-on-year (excluding the spectrum sale in the prior year) of over 35%. EBITDA is expected to be approximately $8m.
Avanti's commercial reputation for high service quality and product innovation is strong, enabling it to win high value contracts with prestigious telecoms companies. In particular, the Group is leading the market in winning cellular backhaul business, and many opportunities are opening up around the EMEA region. Contract wins in the fourth quarter were over $70m showing commercial traction is building."
It's not a bad company, it just took on too much debt and wasn't growing quickly enough.
Shame on those going short on the stock and trying to precipitate Avanti's decline for their own selfish purposes by destroying the value of the equity over a sustained period of time.
Anyway, anyone who lost money going long on the stock was given a wonderful opportunity to recoup some or all of their losses with the price action this week, and I hope Avanti do manage to reach a satisfactory arrangement where they can survive and prosper in the longer term.
Well done if you've taken profits and good luck if you've decided to hold on for more.
Thursday 4 August 2016
Don't try this at home!
Quick blog update re: Avanti Communications.
Now regular readers will know that I'm a long term micro-cap investor by nature. It has served me well to date.
You will also have read my recent blog about my investment in Avanti Communications:-
http://michae1mouse.blogspot.co.uk/2016/07/avanti-communications-triumph-of-hope.html
Well today I acted out of character and did something I wouldn't normally consider.
In short I made a trade in Avanti. Yes I know.... after everything I have written about speculating!!!!!
However, let me explain and try and convince you that it wasn't as speculative as it may first appear.
Firstly, can I just say a big thank you to the poster on ADVFN who posted a link to the FT.
Most stuff posted on BBs is waffle and junk posted by those with a vested interest, similarly on dubious tip sites. However, links to respectable websites are often useful.
This particular FT link was suggesting that Avanti Communications had received an indicative offer of £1.40 from Inmarsat, although clearly it never materialised for whatever reasons. It also suggested that Avanti were in discussions with two other potential bidders.
Now I had a dilemma. Avanti had been a speculation for me, but I was convinced at the time that it's asset base and the considerable risk and difficulties encountered by launching satellites into space would enable the company to come good in the end. They were also beginning to gain traction in selling capacity to Blue Chip companies. Unfortunately, as is often the case, debt was Avanti's Achilles heel combined with a slower than anticipated take up of capacity on their satellites. The rest is history as they say. It's a shame because given more time Avanti could have been a excellent British start-up success story.
However, the bid story appeared plausible to me given the reasons I have expressed above.
Since the share price was 27p, I took a calculated punt, and how I laughed as the price fell back instantly after I'd made the trade.
However, a brief moment of regret soon turned to joy as the price then began to soar. I took profits later in the day. Not a bad days work I'd venture. Making a quick buck through trading isn't usually my bag, but when you're familiar with a company and it's history, I have found that you get a feeling when a trade is possible. However seldom that may be in my case.
What now then? Well I'm wondering if I should have just stuck in there?
Technical factors may push Avanti much higher from here even if a bid doesn't materialise in the next few days. I may even be back for further trades.
Undoubtedly shorters will be having a sleepless night and palpitations. Imagine a bid coming in at £1.40+. Short covering will possibly be rampant tomorrow, particularly since I gather that a certain tipster has suddenly recommended that his lemmings (sorry followers) close their shorts in Avanti. What happened to his carrion cry of this one's going to zero? Mind you, if you follow third rate websites with dubious and equally third rate tipsters then you get what you deserve.
I won't mention the website, but you'll know the one I mean, there's lots of puerile swearing and given the captions you might think that you've landed on a soft porn site. God knows what you receive if you register with them? Anyway, I suppose it knows it's audience.
Tomorrow should be interesting, and remember this is a one off for me and don't try this at home!
Now regular readers will know that I'm a long term micro-cap investor by nature. It has served me well to date.
You will also have read my recent blog about my investment in Avanti Communications:-
http://michae1mouse.blogspot.co.uk/2016/07/avanti-communications-triumph-of-hope.html
Well today I acted out of character and did something I wouldn't normally consider.
In short I made a trade in Avanti. Yes I know.... after everything I have written about speculating!!!!!
However, let me explain and try and convince you that it wasn't as speculative as it may first appear.
Firstly, can I just say a big thank you to the poster on ADVFN who posted a link to the FT.
Most stuff posted on BBs is waffle and junk posted by those with a vested interest, similarly on dubious tip sites. However, links to respectable websites are often useful.
This particular FT link was suggesting that Avanti Communications had received an indicative offer of £1.40 from Inmarsat, although clearly it never materialised for whatever reasons. It also suggested that Avanti were in discussions with two other potential bidders.
Now I had a dilemma. Avanti had been a speculation for me, but I was convinced at the time that it's asset base and the considerable risk and difficulties encountered by launching satellites into space would enable the company to come good in the end. They were also beginning to gain traction in selling capacity to Blue Chip companies. Unfortunately, as is often the case, debt was Avanti's Achilles heel combined with a slower than anticipated take up of capacity on their satellites. The rest is history as they say. It's a shame because given more time Avanti could have been a excellent British start-up success story.
However, the bid story appeared plausible to me given the reasons I have expressed above.
Since the share price was 27p, I took a calculated punt, and how I laughed as the price fell back instantly after I'd made the trade.
However, a brief moment of regret soon turned to joy as the price then began to soar. I took profits later in the day. Not a bad days work I'd venture. Making a quick buck through trading isn't usually my bag, but when you're familiar with a company and it's history, I have found that you get a feeling when a trade is possible. However seldom that may be in my case.
What now then? Well I'm wondering if I should have just stuck in there?
Technical factors may push Avanti much higher from here even if a bid doesn't materialise in the next few days. I may even be back for further trades.
Undoubtedly shorters will be having a sleepless night and palpitations. Imagine a bid coming in at £1.40+. Short covering will possibly be rampant tomorrow, particularly since I gather that a certain tipster has suddenly recommended that his lemmings (sorry followers) close their shorts in Avanti. What happened to his carrion cry of this one's going to zero? Mind you, if you follow third rate websites with dubious and equally third rate tipsters then you get what you deserve.
I won't mention the website, but you'll know the one I mean, there's lots of puerile swearing and given the captions you might think that you've landed on a soft porn site. God knows what you receive if you register with them? Anyway, I suppose it knows it's audience.
Tomorrow should be interesting, and remember this is a one off for me and don't try this at home!
Subscribe to:
Posts (Atom)