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Sell My New Capita Shares, Lucian? I Think Not.

By Malcolm Stacey | Thursday 8 February 2018

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello, Share Plungers. Much as it makes me uncomfortable to contradict the mighty wisdom of my fellow scribe here, Lucian, I have to disagree with his advice against bargain-hunting Capita (CPI).

The great bear also advises against fellow outsourcing companies Mitie (MTO) and Interserve (IRV). Though, reading between the lines of his article, he doesn’t seem to regard Capita as the biggest risk of the three. I don’t rely on the fundamentals or the balance sheet of Capita for my recent purchase of its shares. What I hope to do is cream off a tasty profit on a dead cat bounce.

I’m not relying on the future of Capita. Though I do see it crunching its act together and getting back on its feet in the long run. I bought the shares on the day after its biggest crash, which saw a half of its value go up in smoke. That smacks of illogical panic buying or those pesky robots which nearly always overdo the selling.

On day two, the shares fell a bit more plunging me into an early loss. But then the bouncy cat got going and at the mo, I am about 10% ahead. And this paper profit is at a time when nearly every other share on the planet has been involved in big falls. A fairly good sign that I have the trend right?

I agree with the headwinds outlined by Lucian. It’s also a big disincentive to buy the shares now the dividend is scrapped. But, as Whitehall, one of Capita’s biggest customers points out, Capita is not in the same category as the collapsed outsourcer, Carillion. I also need to say that Lucian does not mention the benefit to Capita of possibly scooping up some of the high-profile orders that Carillion can no longer fulfil.

So I’ll continue to hang onto Capita for a little longer. Though its position in my bag is still only temporary.

Please join me in the Punter’s Return.

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