Big Bang's....sorry for delay in replying earlier but I have been away...in that time both the stocks I was looking at have moved up around 10 to 15% so no longer on my radar ..
Saga was one of them which is a personal choice..I have always made noney on them...it climbed from 34p in June when I invested up to 51p in July, (I sold at around 48p) and fell back to 42p. and I was waiting for it to fall further from there but it has risen again ....there are always trading opportunities with this stock, but it doesn't come without risk...there are huge extra debts which have yet to hit the balance sheet in terms of capital commitments not yet due for payment which will cripple the company eventually...the direct result of a crass previous decision by CEO (ex Royal Navy) who likes boats and so bought not one but TWO big cruise liners ...even though they are really just a tour agent for old people rather than a cruise operator ...I have no doubt that in time that Carnival and and /or P&O cruises will compete head to head on their routes and use their hugely dominant positions in the market place to destroy Saga....they might take them over then sell of Sagas over 50s insurance business along with substantial customer database .I would in their position anyway...
The next is an emotional hunch really and it's Superdry...a premium brand clothing company , the share price went over £20 a couple of years ago before the founder was pushed out and a new CEO took them on a Primark discounted route and the SP fell below £4.00. The original founder who seems to have a Midas touch returned recently and the company seems to be recovering boosted by persistent rainy weather which helps their premium winter clothing product range..
So I think I have missed the boat on both of these..
Don't really have any more shares I am watching ..
I have read up on your other big holding Indivior and am still not tempted at this price as huge risk still, not only from legal proceedings but also knock on negative publicity effect on any new products to be launched..
Good luck though and if they do pull through all this, then their upward profit guidance should underpin substantial price increases on the future..
Anyway back to Amigo...moving up nicely but on very low volumes...do think though that if it can push beyond its current ceiling of 80p then it could rise up to and beyond £1.00 before Christmas , dependent of course on more positive half year results, which are to be released at the end of November..
Big Bang's...that first point you made about the potentially dangerous motives of a large corporate shareholder is a very strong one which I had overlooked... We should be mindful of the fact that if they really wanted to do it, they probably could at any time, but I inferred that this would result in suppressing future price increases as they drip fed their surplus holdings, rather than deliberately act to crash the share price and buy back in a fire sale.
I follow your philosophy though in that I buy when others are selling and sell once I have made 50%. For me the old mantra of buy and hold forever is a misguided one ...I look to move stealthily in and then out as quickly as I can before any setbacks occur...
My 'always wrong' name reflects that a share price is always wrong in relation to its fundamental value due to sentiment and other market imperfections so I try to buy when I think a share is undervalued and then sell when I think it's overvalued but have a stop loss at 50% gain....I bought into Amigo at 74.5 pence so have a 12.5% yield assuming no change in dividend policy .
Your opinion on Indivior is indeed backed up by the incredibly bullish statement in their half year accounts ..furthermore they have lots of cash on their balance sheet...the elephant in the room of course is the impending threat from the legal action which caused me to dismiss this share when the price was around 33 pence, albeit before their bullish interim accounts statement ...as it has turned out I missed an opportunity but at the time I felt that I was in effect betting on the result of a coin toss so I stayed away..
I have a couple of shares that are beginning to appear on my radar, but are not yet compelling enough to invest in
Big Bang. -. Yes my fears lessened once the markets opened and the share price didn't sink....then the rational side kicked in and I started instead to focus on the reasons why I invested in Amigo in the first place...very high dividend supported by strong fundamentals... Borrowing money at an average interest rate of 5.4% and charging if out again at 50% must make money even with defaults running at 30%. And yes any good news will lead to a disproportionately high uplift in the share price due to its low liquidity, just as the bad news had a disproportionate negative reaction in the share price.
So yes, fears allayed ..maybe I focus too much on the threats and blinker myself to the opportunities, although as always, a healthy dose of synicism helps when investing in any share...whether it be a turnaround share or a star performer..
One contributor, and I can't remember who, remarked that there were several other opportunities in shares out there to invest in if Amigo was judged too high risk, and I think that that would make an excellent new thread, as we will all have shares that we are following providing rampers don't spam the thread..
Thanks Monkshood for your very relevant and insightful comments...I will check them out...my instinct says this is still a good share , just temporarily out of favour , unless there is something underlying which is fundamentally unfavourable , but if there is then it isn't apparent from their regulatory statements..
Monkshood...thanks for your input...would relisting on either of these segments limit their exposure to other investors ? Having said that, this is where the current impasse is in that institutional investors aren't selling but at the same time retail buyers aren't buying even at these price levels...
Mike H...you make some very good points which I agree with and the price drop I was fearing on the opening of the markets didn't happen so it seems the only action required is patience and not try to second guess the market ..
Errhum.....your observations about the low free float and what it means reassure me because I am inclined to agree .
Still think the share price will drop when markets open
on Monday due to negative sentiment re the announcement but let's wait and see .
RAF...my references to Saga and Carillion werent intended to be company comparisons, but the dangers of becoming blinkered to the risks, external and internnal of our own private ahareholdings...
Regulatory requirements are there for a reason so any breach should in my view be treated with caution ....
The company anouncement was made at 6pm on Friday evening...after the markets were closed for the weekend . ???
I simply don't know how to interpret this because it hasn't happened to a share I have held before..
The rational side of me agrees with the comments you have made re profitability etc but I have an uneasy feeling about this...
Mike H...it's 75 million shares .
Total shares 475 million
21% of that is 100 million
For 100 million to equate to 25 % is 400 million shares
Resulting in 75 million (475-400) having to be bought back ..
This is just one scenario with all other things remaining equal and for illustrative purposes only..
Mike H...thanks for your input ..my concern is that if the minimum ratio is not subsequently met then it might be delisted which which would remove it from the radar completely
Yes I am a natural pessimist where shareholdings are concerned, not just Amigo, but that isn't necessarily a bad thing ..I got out of Carillon at around £2.00 and Saga at £1.28....i want to remain invested here but amber lights are now on with impending regulation and bad publicity of these kinds of loans plus this retail investor infringement... .
All opinions genuinely welcomed..
Thanks BB for your reply .
The pro's of this share outweigh the negatives too based on an affordably high dividend as a platform but at some point the 25% retail investor ratio must be met which means either institutional shareholders have to sell or at least cannot acquire more, or more retaill shareholders have to buy more and I don't see any positives in either outcome ..
Amigo could buy back shares off II's but would need to buy at least 75 million and at today's price that would cost around £55 million ...equiv to 12p of foregone dividends or do you think it will naturally progress to 25% without any direct intervention and if so why ? Why might it not conversely fall to 15%
I don't want to sell but I am concerned..
What are the implications of this from a private shareholders point of view..?
Does it mean that institutional shareholders will offload some of their shares resulting in a dramatic fall in the share price since the low liquidity means there is little demand from retail investors, or does it mean that the company will have to go private ..
Maybe it means there will be an enforced additional offering of shares to the public..
Or maybe it will result in existing shareholders to jump ship ?
This situation is a new one for me and am unsure as what to do as a result of this...
Can anyone enlighten me ?
It has just occurred to me that another looming large threat to future share prices is the significant holdings of the Richmond group who may decide to reducing offloading their significant holdins on the market in a drip feed process on any significant move up in price .. thus suppressing future sustained increases in share price for a prolonged period . This is the problem for private investors when such a large concentration of holdings us held in a few large institution hands..
Yes liquidity is very low and I think it was Stuart who made that point earlier. It won't help that the stock is now out of the FTSE 250...so I think you will have to wait for a good news update to sell into a rising uptrend..
Oogle..... I didn't come across where Richmond announced they were selling all their holdings...if they had I fear the share price would have fallen to 20p...I only read they were considering selling some of their holdings but keeping the majority of their holdings...
I have a large chunk of my money invested here because I am a conviction buyer ..but I am bemused by the ongoing low price of the share which makes me concerned that there are threats that I have not picked up on in my analysis ...contributions to this thread are therefore welcomed and sought...
The threats as I see it are as follows...
1. Regulation ....bound to have a negative effect given that the regulators come into this arena with negative intent and Amigo has 80% of the market so the regulators must have Amigo's business model in their sites...and 49.9% APR does sound high when the loan is guaranteed ...although how effective the guarantor part is when defaults are running at 30% must be open to question..
2. Competition ...If you check out the top 10 guarantor loan companies you can see that most charge the same APR as Amigo who always feature at the top of these comparison websites probably due to their market share... The ones who charge less are :
(a). UK Credit..who have a headline rate of 39.9% but when you read the fine print it points out that this is dependent on circumstances and the maximum APR is in fact 68 % ...in other words you have to prove you don't need it in order to qualify for the lower interest..
(b) TFS loans...copy UK Credit's 39.9% headline APR model
(c). Guarantor my Loan has a headline rate of 29.9% APR but this is only where both borrower and guarantor are homeowners and they too have a much higher typical rate of 49%
There are a couple more lenders who copy Amigo and these are Trust Two and Buddy Guarantor ...so Amigo are not uncompetitively priced and hold the go to provider slot for these types of loan...
3...State of the Economy...yes Brexit is a threat but actually would Brexit increase demand for loans...?
4...New entrants. ...to me this is a real threat...Banks and other prime lenders could re-enter this market but only cream off the top 10 -20% of borrowers with the best credit ratings within the this segment of borrowers offering much cheaper rates which would seriously impact Amigos prospects ...not on the horizon yet though..
4...Amigo's source of funding dries up, or their interest charges for providing the funding, increases significantly...both of these are possible but not likely at the moment..
Can anyone else think of any threats that I haven't covered...? Of course there are opportunities too, to take their business model to other markets and the Republic of Ireland is an example of this...
All factors considered the margin between the rate Amigo charge of 49.9% and the cost of their funding of around 6% gives a huge profit margin even allowing for the increasing amounts of impairments and operating costs.. All of these factors lead me to believe that the current share price of Amigo is massively undervalued and what encourages me in particular is that the balance sheet continues to show the company growing in prosperity despite the collapse in share price, or
BigBangs...didn't think about super Friday...that is the most probable cause and thanks for drawing attention to it .
Stuart ..your views coincide with mine long term...I have forensically examined their Balance Sheet which shows net equity actually rising and their statement that dividends will be maintained (and they can afford to ) even at the reduced levels of expectation which gives a 13% yield at current prices..
Yes this is a company whose outlook isn't as positive as it was a year ago...but not bad enough to warrant the fall in share price from £2.97 down to 70p...it's fundamental value is probably somewhere in the middle based on the last update...but yes still destined for growth beyond this once profitability fully restored... I am holding ...especially now I have a probable explanation for the sudden drop late this afternoon..
I agree with you totally Stuart, once a share price more than halves as Amigo's did there is an initial bounce then a retreat back testing the previous lows and if they aren't broken as in Amigo's case then a longering low is met by a creep upwards to come back to the share's fundamental value..until of course the next news anouncemnt or macro shift in the stock market as a whole..
I am watching this space and "holding". Like you I am reassured by the vulture's retreat from the scene..
Agreed zcccax77.. broker forecasts are as my name suggests always wrong...the zero shorts is the result of Toloman Capital settling their 0.71% short, probably when the price shot up rapidly to 84p last Friday...not bad considering they shorted the stock back in April when the price was around £2.50... what this should mean now however is that we now have a level playing field for trading so interesting to see where the price goes from here but my guess is northwards..
First of all, hello to those regular contributor friends..
Yes I am back again, tempted by the greater than 50% fall in share price in one day.. I got in at an average price of 75.8 pence so a reasonable 24 hour return .
It is worth making some candid reflections on the investment though starting with those which act against making the investment, and there are several ...
1...massive relative uplift in impairment rates which now stand above 30%....All of this comes off the bottom line ..hardly bodes well for assessing potential guarantors...do they carry out ANY checks..?
2..another large increase in admin cost ratio, underpinned by substantive increases in early arrears rates...discouraged by their explanation of "operational difficulties" in the collections department..
3...They charge very high interest rates for what are supposedly guarantor loans.....zcccax77 makes several very relevant comments about their business model . They are the highest of the competitive lenders where the guarantor is a homeowner. The others charge 39% for these or 29% if they are both homeowners .
4...The regulatory environment will ultimately bring an end to theirs and others premium lending rates which in all honesty are excessive...
5..At some point the prime lenders will relax their lending criteria and when that happens Amigo and other sub prime lenders will see their customer base diminish..
6..Finally (and personally) I wouldn't lend money from anyone who made me call them "Amigo"
Ok so why am I of the opinion they are a strong buy ? 1...Well, my opinion is a short term one to get in now and make a short term (less than 6 to 9 months ) profit which I think could exceed 50% above the low price of 68p. So I aim to exit around £1.10 hopefully before Christmas..providing no further bad news emerges..
2. This stock had minimal shorts (even before the bad news) so the hedge funds are not circling them which is a very positive sign .
3...Even factoring in no growth and maintaining the high ongoing levels of impairment and admin costs will still provide an EPS of around 16 pence...or PE ratio of about 5 on an 80 pence share price....the dividend of 9.32 pence can and should be maintained which gives a yield in excess of 10% ..
4..Ireland might prove a blue print for further expansion elsewhere supporting future growth..
On balance then I think that 80 pence is very cheap and a purely entiment based over reaction which will no doubt correct at some point....I am forseeing a rise to between £1.00 and £1.20 share price before Christmas assuming no further bad news emerges...
Good luck all and as ever dyor...