Shifting Shares (21 July 2019) – Heightened probabilities #FUL
Audioboom are still blasting their way through cash, but the recent HY report shows all the metrics going in the right direction. It’s still uninvestible, but from a technical point of view it has now cleared the area of the 52 week high, pulled back, and is now looking like it can go higher. A tight stop is required here, but if the trend is up, we want to be on it.
Avation is another stock that is currently base building and goes on the watchlist for that break.
They are in the business of managing a fleet of aircraft and then leasing these planes to airliners across the world. It seems like a reasonable business, which is perhaps why the stock has done so well recently. Often, a simple business executed well can deliver phenomenal returns.
Brave Bison (BBSN)
Brave Bison was looking great until a boardroom spat ended up with the CEO leaving abruptly, a few days after doing some promotion. The business itself is strong and self-sustaining, backed by nearly half of the market cap in cash.
We saw another institution appear on the shareholder register last week, taking 5.97% of the share capital. Things could be changing now, but with so much supply to churn through I’d look to buy a break of the high. That’s over 50%+ higher from here, but I would rather buy higher and have a higher probability of the trade succeeding, rather than buying lower and have a higher chance of losing lose money! One of those options is a better trade as the market doesn’t give a damn what price you or I paid!
Instem Life Science Systems (INS)
I got a starter position here at INS last week on the breakout, and am keen to average up so long as the stock keeps behaving well.
It’s well up from its lows and confirms the trend, and is highly illiquid. It’s definitely not one to go overboard on, but at £65 million market cap there could be nice upside if the trend stays intact.
Trackwise Designs (TWD)
TWD is a new issue, and it coming up to an all time high where the entire shareholder register is in profit.
The problem is the stock can go for days without actually doing anything, and so it’s not one for the easily bored. Its size and illiquidity lend itself to powerful moves if good news is released, and so far it hasn’t moved much from the low.
The Fulham Shore (FUL)
I have previously mentioned FUL in this column and my belief that it is overvalued, but there is a trade at 13p. That nearly was tested recently.
13p was hit and then confirmed as resistance. This is good news because the more times resistance is tested, the more significant a break of that level becomes. This is because the price is telling us by virtue of bouncing there that it is a key level, and when a key level breaks the price is telling us that something has changed.
What is nice about this chart is that it is a nice smooth and curved bowl. No spikes downwards as sellers crash the price, just a gentle slope as the accumulators and suppliers do their daily battle in the stock market.
There was a seller recently, and neither the holder or the company had bothered to tell us how much he held previously.
The results looked good, with strong cash generation and some of it sensibly used to reduce debt. However, what was missing was a clear like-for-like table of the stable of units. Revenue growth of 17% is great but not if it is from opening new restaurants whilst existing units remain flat or even negative.
The power of a roll-out is from increasingly profitable units being bolstered by new and growing units. It’s not the responsibility of the new units to prop up a poor estate. Usually when something is omitted, it’s because there is a reason. Remember, management use the financial statements to tell us what they want us to know, and not what we perhaps should know. I see this as a red flag but I believe the trade is still there at 13p.
Ted Baker (TED)
I have been watching TED for a few weeks now – look at this chart:
It is clear that someone was accumulating as those volumes are consistently higher than previously before the gap down, and the price had remained relatively firm. Today, we see news that the founder and former Chief Executive Ray Kelvin is drumming up support for a private equity buy-out.
Whilst I couldn’t have predicted exactly what would happen, the chart clearly showed an interest in the stock.
Mpac Group (MPAC)
MPAC has been one of those stocks that has been billed as ludicrously cheap given the size of the cash position almost covering the market cap. I finally got a chance to enter this stock on the recent trading update and I’m viewing how the stock reacts on the pullback. The less it gives back, the more inclined I am to average up on the break of the recent high.
Stocks that show strength should be rewarded. Stocks that dump need to be disciplined. If they can’t learn to go up then they need to be sold. Do not compromise here, because it’s only losing traders that run losing trades.
The week ahead
We have both FEVR and BUR updates coming this week (both potential in-play shorts), and Rockrose Energy coming back on Wednesday. I am quietly excited for this as this is going to offer plenty of volatility given the length of its suspension and size of its acquisition.
At the time of publication, the author may have financial interests in some or all securities mentioned