The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
With the growth outlook sub 20% and the PE around 25, and everyone who has ever wanted to buy it had multiple opportunities to buy. I think SGP is becoming a has been for the growth/momentum crowd. Swing and value traders will be taking over from here.
Looks like Friday was a selling climax for the fearful and a buying orgy for the bold. Much of the action took place around £8 and in the first 1 hour of trading. Lets see if it can retake 880, though even if it does this stock will take 3 to 6 months to build a stable base. Swing traders and value investors have the floor now. As for the new CEO getting to grips, this presupposes that i) it is a management problem and ii) he has the skill set required and that success in hardware is easily translated to fashion. Most professional investors will take a wait and see approach.
£7.80 may well prove to be a bottom, but it will be a bottom I will miss. From a purely fundamental perspective £8 is a good discount on fair value. However, uncertainty around performance has now set in, I'm still waiting for the last piece of bad news, the stock has spent such a long time below its 50 week moving average and it may likely becoming ex growth. Quite frankly there are better opportunities with stronger fundamentals, stronger growth, perhaps not as cheap but with momentum behind them.
Julian's replacement definitely had a catalyst. Unfortunately, you and I will not know until those who do know have finished selling. I suspect their is more bad news to come. The news is so bad that even Julian couldn't argue against falling on his sword. I sold off the last of my holdings on Friday. And will stay out until the news comes out or until the downtrend reverses.
Odds are in favour that 1050 is the low of this move and the new low to watch. Next stop from here is 1300. The bears could only manage a 33% pullback. This is a most healthy pullback (50%, 66% and even 80% are all tolerable). With a brilliant hammer doji to crown it.
Am I deluding myself? Cheer-leading myself to losses? Who knows. For me strength is price times volume. No doubt volume was weak vs. the buying and selling frenzy on 8th, 9th and 10th, but it was good versus 90% of all the other days over the past 3 months. And shows that buyers are coming back in. Whilst price delivered in spades I think todays volume (which of course I didn;t know yesterday) seems to be confirming it. Will price still drop back down to 950 odds are probably 60% that it will, will it test all the way down to 900 and maybe below, maybe I would put odds of this at maybe 30%. But I'm willing to wager that the volume of selling will be weak. In addition, I am looking at it in the context of the preceding action. Action from 9th of May has all the symptoms of a car trying to stop and skidding all over the place. We haven't seen volume like on 8 May since mid last year, And I promise you that that type of volume following a decline is a sign of scared sellers handing over to confident buyers. Anyway, rather than getting ahead of myself I will see how strong or weak the upcoming reaction will be (if there is one at all).
Super Group is now on the mend. Bottom fishers well done. Trend followers now is your time. Realistically it will take 3 to 6 months to get to its first target of £15 to £16 (depending on market strength) - It took about six to seven weeks to bottom and the climb up is usually two to three times slower than the climb down. We saw a sign of strength and added a quarter position yesterday (to the quarter position we had left after selling down during the collapse), and we will fill the rest of our position on the first reaction pullback. Our initial stop loss is below 950 and we will move it up after the first reaction. Happy hunting. Be a good scout and stay prepared, the market is forever finding new ways to take your money.
Over the short term, I think a bottom has been reached - 8 May buying/selling climax, 9 May 1st doji, 10th May 2nd doji, 19/20 May 3rd doji, 21 May 4th doji, these are skid marks - look like churning to me. But given changing sentiment on the market and on the stock, I'm reluctant to think it will bounce any time soon. I will wait for some signs of strength.
Today looks very bullish, lots of volume but by the end not much happened with prices, they even closed up slightly. Compare that to yesterday, big price drop but very little volume.
Looks like you're right, volume is down but the stock continues to fall under its own weight. I feel like we are close to a bottom for the move - the volume of selling has not been there over the past few days, but I can't get myself to hold onto a falling stock. Had to sell half of my pilot position. Will sell the rest just before the closing bell, f it looks like it will close below 10.00
An entry now at about £10.52 seems appropriate for bottom fishers. With a loss limit at £10.15 (or perhaps a little lower). For the rest it might be better to wait, since sellers appear to still outweigh buyers and it is not unlikely that even when sellers are done, the MMs will drop the price to £8 or £9 and shake out the last of us suckers and build inventory at favourable prices. In a bear market, buy on down days and sell on up days. In a bull markets buy on up days and sell on down days.
Job number one is not to be right or wrong. Job number one is to protect your capital. No one knows what will happen in the future, the best you can do is assign odds to future outcomes and make sure that a worse case scenario can't hurt/wipe you out. Job number two is to make sure that your capital is invested in your best five or ten bets. That means having enough deal flow to ensure that for every investment you have at least two other options. The questions to guide your decision are i) Would SGP in bankruptcy be a blow that I would find difficult to recover from (i.e. +25% drawdown) - this is the worst case scenario. ii) Given its recent fundamental (13% quarterly growth), volume and price action are the odds of it delivering a decent return higher or lower than the odds of other companies that I am assessing (which scenario has the highest odds). iii) What does my investment system tell me to do when a stock gaps down on volume and keeps falling. If it is silent on this, then why don't I have a robust system with pre thought out responses to market action. Rather than a system that leaves me to take a decision in flight.
Valveamp. I hear you. But I always go by the adage that the future is neither known nor knowable. Therefore anything can happen (i.e. it could go up or go down from here). What I can always do is reduce the possibility of a catastrophic failure, and I do this by cutting exposure to stocks that are not acting well (i.e. causing me pain - I gave up a big chunk of profit overnight). Funnily enough I cut my position in SGP in 2011 at around £12 (talk about coincidence) and I cut again at £10, this saved me having a big position on the ride all the way to £3 (who knows I might have sold in pain at the wrong time). It also enabled me to build a much bigger position at £6 (on the way up). I don't know where SGP will go over the next few weeks, but the odds are high that at some point in the next 12 to 18 months it will pop £16, I will be loading up when it is facing that direction. Because it can easily go to £10 (I'm not making a prediction) on the way to £16.
Myself included. I must confess, I don't understand the reason for the drop (though I would not be surprised that their is insider information that is known only to the wise), but my favourite fortune teller cookie (chart) tells me that the powers that be have a great opportunity to move the price up and down for the next few days, until they have shaken every weak holder to the sell button (if this indeed is their plan - or convinced the avid speculator to buy if they plan on selling more). The volume is so low since the opening salvo that big buyers and sellers don't have an opportunity to get in or out and there is fear and greed in the air. We will revisit 11.00 and 12.00 until the campaign is over. I sold half my position at 12, purely on risk management principles and the fact that I hate downward volatility when I am in a stock. Even though the stock is worth at least 15 or 16. I will make a decision on buying back when I feel comfortable that it is more likely to go up than to keep going down. (My sole objective in this market is to own stocks that are going up, one day I may discover the secret of how to do this consistently).
Started showing a whole host of bullish candles on the 30 minute chart from 11.00 am. A buy with a stop around 1280 represents a good risk return opportunity. Odds of a rally to 1500 or 1600 I would say are probably 2 to 1 in favour. I sold two thirds of my load at 1580 when we gave up the 50 day moving average. Just beginning to build it up to a full position
The future is not known, nor is it knowable. Price and volume over the past 3 trading days indicate i) a global market correction is underway right now - that's not to say it will not stop today, but it might not, and ii) the POSSIBILITY of it being a big correction. And when they raid the stock market, they normally get them all (no matter how strong the fundamentals - they certainly get most of those with a PE above 30). It was only a few months ago that I (and many others) felt that SGP was undervalued and could hit £16. It has done so and now it has hit resistance. Long term holders (i.e. those who genuinely don't mind a 30% price drawdown and will happily sit it through for a year or more) need not worry. Everybody else should be considering at what point they will take profits (or losses as the case may be) and wait for markets to provide better signs as to their intermediate terms intentions. I am hoping that this correction will end before this week is up. But hope is a poor emotion in the market. So I have defined points where I will cut 30%, 60% and 90% of my current holding of SGP. It has been a beautiful ride up, but I'm not convinced the long term upside upside (probably about £18) is worth a beautiful ride down.
So much for my prediction of a price recovery this week (I guess it was not worth the electrons it was written on). Anyway still hopeful for a breakout from the 12.50 congestion zone before year end.
Price should drop down to £11.30 (or even £11.00), nothing like a good hard pounding from the MMs to activate remaining stops and shake out the weak holders on a day when the FTSE is down. Once they have filled up on inventory, prices ought to recover over next week. Target £14.00
I bought back the half position that I had sold (at £11) at the end of Aug, for £12 following the gap up and during the subsequent pullback, week before last (5 Sep). Today's down action though on low volume is disturbing, particularly as it takes me close to my stop loss.
Sold half my stake in SGP this morning for £11. Will see how the day progresses. It may well be the bottom of the correction (I don't know the future), but this is the fourth day of weakness and it could easily slide to £10.00. I think time to start protecting profits.