Shifting Shares (12 June 2019) – Dilapidated sites aren’t exciting #LGRS

Shifting Shares (12 June 2019) – Dilapidated sites aren’t exciting #LGRS

I’m finding fewer stocks breaking out as the weeks go by. That tells me to flip my strategy around and start looking for breakdowns rather than breakouts.

Loungers (LGRS)

Loungers is already on my list because I think the sector is dire, and plenty were sellers in the IPO. I wouldn’t be surprised to see the share price on its knees a year from now, because IPOs do have a nasty habit of issuing profit warnings when private equity or founers reduce or sell their holdings completely. It’s almost as if they know it’s coming.

(All charts taken from SharePad.)

I was offered this in the IPO and told the broker that there was no way they’d get it away at that price. They took a significant haircut and in my opinion it’s still overvalued, but that so far hasn’t stopped the price rising.

I want to short this at 211p. If the stock puts in fresh lows then ‘investors’ can soon jump ship and bail – which will further exacerbate the supply. I can’t see where the demand is going to come from here because it’s just not an exciting sector, and it’s not an exciting stock. When management say something like not needing to spend huge amounts on capex because it’s supposed to look run-down, that should be a red flag to anyone.

Sensyne Health (SENS)

SENS was another I was offered at IPO and turned down. This is another I’m looking at shorting if it breaks the level below at around 122p.

The problem here is that it’s not available to borrow and short on either IG or Spreadex. This is somewhat irritating because if I could short everything I wanted to short I’d be short more than I was long! There’s an abundance of cheap rubbish or unprofitable rubbish just waiting to be profited from. If only I could find the borrow.

Marks and Spencers (MKS)

MKS is looking vulnerable here. It’s been in a downtrend since 2014. There’s a likely correlation that the stores are boring, unimaginative, and pointless.

I also don’t understand fully the deal with Ocado. In fact, I’m not even certain management themselves understand it. It seems to me like a wild gamble on producing some value – something which has not been in abundance for recent shareholders.

218p looks to me like a key level. If that breaks, I’d expect further downside. With a market cap of £3.5 billion this could end up falling far and so I’ve made a physical note to do more research on Marks & Spencers. Borrow isn’t a problem here.

Zoltav Resources (ZOL)

ZOL has had a fantastic run, nearly quintupling in just over two months. It appears that this was the RNS that kicked it all off. Quite why this is such a big deal I have no idea, so either it’s coincidental or the market thinks he means big business. Who knows, and who cares? There’s an opportunity to long with a tight stop with a break of 71p.

It’s good to see volumes pushing the stock higher – it shows clear demand. I also like that the stock has shown strength on dips as it is continuously bought. A lot of people don’t like stocks that “go up too much” as they feel they can’t buy them, but these are the types of stocks that deliver outperformance when you ride them up and they keep going.

UP Global Sourcing (UPGS)

This stock has been covered several times here. It has made the 50 EMA its support line now, hitting and bouncing from it twice.  It also confirmed 90p as resistance, so if we see a break of that it offers an opportunity to get long.

Fulham Shore (FUL)

This is one both Graham and I like, though I believe we share the opinion that we’re happier to be customers than rather than investors. The valuation leaves a lot to be desired, and in my opinion it could halve and still be overvalued.

Nevertheless, valuation doesn’t mean much when it comes to making money, and I shan’t be averse to buying overvalued stocks lest they continue to become more so.

12.5p has been sold into a few times, but the stock is now trending above all of its moving averages, which is bullish. Ideally I’d like to see it take out that 13p resistance and have a clear run at 15p. The problem of buying at 12.5p is that resistance at 13p. It’s much better to buy when stocks have clear runways to take off, rather than running into previously established resistance. That’s why all time highs are great – everyone is in profit, therefore they aren’t in any rush to sell.

T Clarke (CTO)

This is a stock that has been covered here by Simon (and done well – he’s very shrewd), and whilst I dislike the obscene board remuneration, the management do appear to be turning things around.

It’s a fairly steep drawdown, but then the stock is relatively illiquid. I’m interested in 140p and have an alert set if it gets there.

Starcom (STAR)

Not my usual type of stock, but I do hold a long position in STAR from the 2p placing. Allenby are suggesting that they will be net profitable in 2019, and so I’m now starting to get interested. I’ll be attending the AGM on Monday to ask a few questions, because with recurring revenue and strong technology it can be a powerful combination (assuming the business is self-sustaining and net profitable).

Spectra Systems (SPSY)

I covered Spectra a while back now and I still like it as a trading stock for when it breaks out. They won a new contract and I thought that may have given it a good kick, but alas, no.

With the share buyback approved, this should give investors confidence that there is a solid bid in the market but so far we have yet to see any benefits realised in the stock price.

 

If you’re interested in learning how to trade, my trading handbook is available free of charge to subscribers of my website at www.shiftingshares.com

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