Shifting Shares (4 June 2019) – Risky business #GKP #IND #LVCG
I was in Ibiza and Cologne last week, so didn’t spot much news. I checked if there was anything on my holdings and managed my trades, and that was pretty much it. It’s good to have a bit of time off every now and again.
I did see that Altitude released their results, though these are pretty much legacy as the billed ‘transformational’ acquisition happened post-period, along with the placing. We did get some news on operational progress but I found it to be lacking – I understand the need for commercial sensitivity but shareholders also need some meat on the bones. I’m cautiously excited by Altitude, as they are building a marketplace and will own it – that means big money if they can execute. Fixed cost platforms, with operational scalability, high gross margins, and recurring revenue get me more excited than a pink G and T (with FeverTree, of course).
KOOV did receive some money, but I’ve completely forgotten what for now. My belief is that they’ll need more, and the fact that their revenue was down 40% (this is correlated to marketing spend, but I didn’t expect it to be that bad) shows that this is a highly intensive capital business. It’s worth consigning this to the junk bin for now.
Let’s see what else is happening.
Dow Jones Industrial Average
As we can see here, the Dow has failed to put in a new high since 2018. We could be in a period of consolidation, or we could be in for more turbulence. Volatility often signals changes in trends, and so far, I see nothing to suggest we go higher. I wouldn’t ever say I know, because I don’t, and nobody else does either, but what I do know is that it’s riskier to be heavily long now than it was previously.
I did say last week that markets follow the leaders, and when I ran my filters I noticed significantly fewer stocks breaking out into ATHs and 52 week highs.
FA. did hit that 200 EMA resistance I mentioned last week. It’s always worth checking for these resistance lines when entering because you want a stock to break out and have a clear run at it.
Gulf Keystone Petroleum
I like GKP – mainly because it’s nice and liquid and has offered plenty of breakout trades last year, or perhaps because it gives me memories of Keystone Light. However, the chart does not look good here. The fundamentals, strong though they may be, are not what traders get paid by. If I were to trade this it would definitely be on the short side and not going long.
Good Energy Group
I feel like the founders of this company weren’t thinking big enough. It should’ve been ‘Great Energy Group’ – good is satisfactory enough, but that’s not what people want. In any case, the chart looks rather interesting.
This stock could offer a trade around 165p. I’ve had a look at the last results and seen that they are profitable, but net debt stands at £40 million compared to the market cap of £25 million and cash generation of £13 million. It’s not terrible, but it’s not one I’d be willing to invest in on those numbers. By all means I’ll take my cut trading it if I can, and I’ve seen that plenty of directors were buying, but as we saw at Coral Products directors can buy all they want but it doesn’t mean they’re all right!
I’ve never looked at this stock before, but it may be time to start doing so. This stock has been almost a stealth bagger in the last six months. Why? I don’t know – and it doesn’t matter to me, either. All I need to know is that it’s been kicked into an uptrend, and therefore I can make money on that trend.
I’ll be looking to go long on the breakout here. It does look pretty illiquid, so one must be prudent with position sizing. It’s the sort of stock that could announce a profit warning (if it even makes any profits) and gap down 30%+.
Live Company Group
LVCG has now broken out – it was breaking out before, but a placing killed it. In fairness, the placing was at 65p, which was pretty good, but it deflated all momentum. Hopefully, we can look past that now. The results are due very soon, and so I’ll be interested to see them.
What’s funny here is that I once held nearly 2% of this company when it was Parallel Media Group – I did make a packet when it spiked 200% in a day but had I done nothing and just held, this would’ve been a very nice holding. Still, you have to decide what you are. Traders bank quick gains but they have to be prepared to sacrifice a longer term move; likewise, investors should not stare at their share prices every hour if they’re investing for the long term. You can’t have both, unless you have both a trading position and an investing position.
However, most people find this difficult, because they then turn their trading position into an investing one. If it’s going to go back up again, why sell and take the loss, right? Wrong. Trading is about cutting losses, and running winners, and capturing multiples of R (return). If you’re not prepared to do that – don’t try and trade.
On a final note here – it’s very easy to think about the stocks that would’ve made it. This is survivorship bias. A lot of AIM stocks are complete garbage, and they go bust, because they are run for the benefit of management and not shareholders. If I’d held every stock I’d ever bought I’d have lost all my money. The statistics for AIM shares are horrible, but that doesn’t mean there aren’t any gems. They’re just difficult to find.
At the time of publication, the author has financial interests in shares discussed in this article.