Shifting Shares (27 March 2019) – Managing downside #DEB #IDP #BBSN
I can’t understand Ashley’s fetish for retail stocks, but he seems to want to buy as much as he can get his hands on. Or is it that he’s in too deep with Debenhams and now wants to sort out the mess himself? Sadly, filling more stores with knock-off Donnay sweatshirts is unlikely to turn the almost, if not completely worthless, stock around.
Elsewhere, Footasylum was bought out by JD Sports, only a month after JD said it did not intend to make an offer. Plenty of inter-related party transactions, and relationships with JD Sports. Absolutely nothing dodgy can have gone on here. I warned on investing in this in September and the price continued to slide, until a large trade that turned out to be JD went through a few weeks ago.
Game Digital released results too, and its cash position against market cap is very attractive – the problem is I don’t see there being enough of a catalyst to unlock it. It doesn’t really help that Sports Direct has its fingers in the pie there, either.
This week I’m looking at several stocks that are looking to break out.
DX Group is a logistics company – Graham has done an interview with them here. I don’t know if their turnaround is having much effect, and I haven’t bothered to look too much into detail, because I’ve bought in at 13p due to the chart.
(All charts and Level 2 screens are taken from SharePad.co.uk)
That’s a multi-year high from an extended period of consolidation. It’s potentially signalling the start of a new trend – the longer the period of consolidation, the more volatile the reaction can be.
Another thing I like about DX. is that it is well bid. Look at these four x 100,000 bids all above 13p, not including the two market makers at 75k each. That means I can dump close to £60,000 of stock (if my position was that big) above 13p. Spoofy algos do exist on L2, but these orders would execute immediately if I dumped stock into the bid.
How the stock reacts when/if it does test the breakout will be key. I like stocks that bounce back quick as that’s a sign of strength – I get turned off by stocks that slump with no underlying bid support.
Pelatro released results this morning which looked fairly impressive, though I’m not sure what the expectations were. The share price is flat, meaning they were likely as expected. I bought a small position last week, based on the chart. I don’t like to take unnecessary risk often, and buying a full position into results is just asking for trouble.
However, what was not expected, was this little nugget:
During the year the Group acquired motor vehicles for the benefit of two Directors at a cost of $270,000.
Cheeky! Hopefully shareholders will give the directors an uncomfortable ride in the call later this afternoon, because spending over £200,000 on two cars does not seem like the best use of shareholder cash. That’s well over 10% of the company’s profit after tax.
I like all time highs, and at £30 million market cap there is potential for this stock to do pretty well (provided the directors don’t go and buy a Ferrari next results).
I covered Innovaderma a few weeks ago, and finally pulled the trigger as it was breaking out.
That’s a lovely bowl, and as Skinny Tan is no longer exclusive to Superdrug and making its way into Boots, that should hopefully give a nice kick to both revenues and the share price (actually I don’t care about revenues – just the share price!).
I would look to shut this down with a close below 105p, because I don’t want to give much leeway on this stock. It’s very volatile, and can move quick either way – if that way is down then I don’t want to be holding!
I’ve banked some profit on Brave Bison despite it breaking out, because results are this week and I want to reduce my results risk. I have a sneaky feeling the results will be good, given the last trading update, but who knows how everyone will react? It’s best to be careful, and to limit our risk. Trading is not about the big wins but by managing the downside.
At the time of publication, the author has financial interests in shares mentioned in this article.