from stockopedia19 Nov 2020 18:40
Saga (LON:SAGA) (I hold) - this was yesterday's biggest market riser, up 34%. What fuelled this? The only company news was that the second largest shareholder had slightly reduced their position, if anything slightly bearish. Yet it rose substantially, on another high volume day. I was searching for reasons for this (apart from it being very cheap, in my view), and the most likely reasons seem to be;
Positive vaccine news, in particular Pfizer saying its covid vaccine seems to be 94% effective in the over-65s. Saga of course provides insurance and holidays for the over-50s. Therefore the market seems to have twigged the rather obvious point that, with the elderly being vaccinated first, and having a penchant for cruising, then this should be good news for Saga's 2 brand new cruise ships possibly being able to generate lots of cash (they're heavily pre-booked already), perhaps from (at a guess), April or May 2021? That would transform Saga's profits and cashflow for the better.
I see broker forecasts seem to have been updated, and Stockopedia is now showing a forward PER of 9.3 - based on forecast EPS of 37p in FY 01/2022. I'm working on the basis that the potential for the year after is a good bit more than that - just getting back to historic profitability, it achieved c.180p EPS in the three years from 2016-18, could drive a far larger re-rating. We need to adjust for the share count doubling this year, on the refinancing which brought back former CEO & the founder's son, Roger De Haan, who put in £100m of his own money, most of it at 405p per share in new money. Therefore I think a sensible longer term target, is c.100p EPS. Put that on a PER of 12, which I think is reasonable (cheap, even) , and my share price target, long term, is 1200p per share. Hence I'm still a buyer, not a seller. This is now my 2nd largest position, as I bought a lot more yesterday morning, and am not planning on selling any for the foreseeable future.
Looking at the chat on bulletin boards, it seems that many punters are working on similar figures to me. If you think a share is worth 1200p, longer term, then you're not going to quibble about paying 250p or 270p, as the potential upside, if things go well, is so large. As always, there's a risk that things may not go well. Buying shares is after all, really trying to predict the future.
i've noticed that there seem to be a lot of people pursuing momentum strategies - ie. once a share starts rising, that seems to pull in more buyers, in a virtuous circle. The only problem with that, is that traders also tend to stampede for the exit at the same time, so today's big rise could be tomorrow's big fall.
I wonder if we might see a pullback today, as the futures are indicating a down day. Who cares! I try not to let short term considerations alter my view of the fundamentals.
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