Shifting Shares (29 April 2019) – CPR no longer needed? #CPR #ABDP

Shifting Shares (29 April 2019) – CPR no longer needed? #CPR #ABDP

News roundup

MX Oil (MXO) hit a high of nearly 0.5p after a Sheikh (allegedly) bought almost 30%. I still don’t believe that he did, but that didn’t stop the price going up! Illiquid stocks like this can generate large percentage returns if you’re willing to hold through the volume, and they are typical of the stocks that I used to trade before I moved to breakouts.

It’s never about what actually happened – it’s about what people think happened. If enough people believe it, and enough people buy it, this creates a spike in volumes and price and spikes attract punters like a Black Friday sale on TVs. The problem is, if you buy and the ramp doesn’t take off, you can end up taking a hit as the volumes on thinly traded stocks typically tend to be wide.

Carpetright (CPR) also updated the market with a hugely surprising update. I’ll be honest and admit I thought this stock was on its way to bankruptcy, but it appears there may be life in the old dog yet. This was the sentence that stuck out like a sore thumb:

“The UK like-for-like sales trend improved significantly in the fourth quarter, compared to the year to date, as customer confidence in the business started to return following the Group’s restructuring last year”

I don’t think I ever recall reading an RNS where UK like-for-like sales improved significantly! Given that the comparative was dreadful, a significant improvement could still be (and probably is) terrible, but this news was a complete surprise to me and many others.

The price responded in earnest, going way beyond what I thought it would, from 15p t0 36p (most likely a combination of traders and shorts closing). Completely bombed out and beaten up stocks can have huge moves if they do something unexpected.

Analysts can come up with all sorts of discounted cash flows but the price only ever move for two reasons: anticipation and expectation. In this case, the expectations were not the same and so the price moved abruptly.

AB Dynamics (ABDD) released its half-year report which showed that the company was growing PBT at 95% and basic EPS at 130%. Given that the P/E for ABDP was in the mid 30s, this was clearly cheap (not often you can say that) and so the price also rose.

Litigation Capital Management (LIT)

LIT is doing that thing that all good stocks do – go up and make new all time highs. I like the chart here, not too volatile, and dips are bought nicely.

Manolete Partners (MANO)

MANO has also been on a screamer since IPO. Normally, IPOs tend to dump these days, so an IPO going up is a rarity. It’s also threatening to break out into all time highs.

It’s a short one from me this week as I can’t see much I want to buy or short. SLP announced results today which seemed good to me. There was little reaction in price so hopefully just a gentle trend upwards.

Don’t feel the need to trade if there are few trades around. There will come a time when it’s time to cream it but until then I’ll keep my cash and protect what’s mine!


At the time of publication, the author has financial interests in shares discussed in this article.



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  • comment-avatar

    I would not call MXO illiquid really . Several bill shares in issue and trade volume is there on proper news . To me illiquid would be = small number of shares in issue with a large % tightly held for one of various possible reasons , making it difficult to trade a chunk, even on real news.

    • comment-avatar

      When that placing came out the spread was 20%. Of course, once the volume comes in this narrows, but when volume drops off again it soon widens up.

      Market makers know that there is zero interest in this share unless there’s a ramp going on, so they don’t want to be left holding the baby.

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