Escape Hunt – “pleased to announce” contracts for French acquisition & trading update. But value?...
Just one of those days in the crop of larger cap regulatory news disclosures today. I cannot get excited about either William Hill (WMH) or WPP (WPP) but the market appears relatively enamoured, so this brings us to a stock that historically I have loved to hate: G4S (GFS)…
It is hard to resist looking at a share in a company which looks as though it will prosper despite all its manifest shortcomings and disadvantages. It is of course Group 4 Services (G4S) which I have made money in as a counter - or otherwise - intuitive trader; the shares lacking too much in the way of fundamental attractions to be called a proper investment.
From the FCA's spreadsheet of short positions required to be disclosed to it, the following details changes to net short positions in the last week (green if short reduced, red if increased)...
I first looked at Group4 Services (GFS) just thirteen months ago. Then the share price had collapsed to 212p after the Olympic Games fiasco and the charging scandal, in which HM Prison service was wrongly charged by G4S for tagging offenders not in custody, when it turned out that they were in prison or not available for such a service. It transpired that the picture of Group 4 operatives turning up for a made to measure electronic leg attachment, had too much fiction about it. Such seeming duplicity was a disastrous public relations and brand image catastrophe with bad vibrations. In July 2013, I found value in the company and the share price of 2012p, which duly obliged by peaking at 274p earlier this month. Last seen, the shares had come down to 261p.
With furrowed brow I scan the news sheets, finding to my satisfaction that Group 4 Services (GFS) has been welcomed back into the service of HM Government like a prodigal black sheep. Reports say that the company has paid back the revenue plus VAT (a nice touch) it received from the government for electronically tagging individuals being detained by the justice system, but which turned out not to exist for such purposes.
It is both reassuring and flattering to discover that a hedge fund follows your judgment a month after you pronounced it. I refer of course to the news that hedge fund Cevian Capital has taken a 5.11% equity stake Group4Services (GFS), a company I brought to the attention of ShareProphets readership at 212p on or about the 15 of July, describing it as a rational speculation on the basis of basic investment fundamentals.
Group4S (GFS) is not the kind of share I normally put on my drawer marked ‘potential buying interest’ – for which much thanks given its unfortunate public relations record: the Olympic Games imbroglio last summer and now the prisoner tagging fiasco, with Justice Secretary Grayling calling in the cops to investigate the possibility of fraud. My traditional reluctance about Group4S is to do with its poor value balance sheet and its high gearing.
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