RE: Rerate in process31 Mar 2022 15:07
The first thing to say about this particular sweep is that it is focused on wrongly priced stocks that are apparently “too cheap” rather than overvalued. However, there is more than a little focus on situations where the bears have previously, or are still attempting to stick the boot in. Indeed, the normal bear playbook is to call a delay a lie, a loss a fraud, and of course, if this fails to get the share price down, simply make personal attacks on the management.
What is also worth noting is that when a stock does re-rate from a micro-cap to a small cap, or a small cap to a midcap, it is rare that the transition is not met with stone throwing of some kind or the other. All of this can help in the armoury of potentially finding a bargain stock, one that is hidden in plain sight.
Mode Global
But perhaps the best way of working out whether a stock has really been treated unfairly by the market is to compare the fundamentals the last time the share price was at current levels, with where the company is now. A good example of this “water under the bridge” test is Mode Global (MODE). Here the fintech group floated at 50p exactly a year ago, October 5 2020, and in terms of activity and milestones, it can be said that there has not been so much water under the bridge, but a tsunami.
For instance, although Bitcoin is only related to part of the Mode business, when the company came to market, the crypto currency was just over $10,000. It is now knocking on $50,000. But where Mode has really advanced is with regard to all the “fixtures and fittings” of the business, especially on the regulatory side. For instance, in June Mode secured its Electronic Money Institution licence and its AMLD5 registration from the FCA enabling it to offer a range of innovative financial services to both businesses and consumers in the UK. The Revolut comparison may not be entirely appropriate, but nor it can be argued is a measly sub £40m.