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UK Investor Show tip update: Sosandar – stance downgrade

By Nigel Somerville, the Deputy Sheriff of AIM | Saturday 9 June 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.

I’m changing my stance on AIM-listed Sosandar (SOS). This is not because the company has done anything wrong, or that events have gone against it. Nor is it any fundamental reassessment of the company. No, it is just that the shares are well up since I tipped it and whilst it could be a buy still, I’d like to see updates on current trading before saying buy now.

I originally viewed Sosandar favourably at 12p to buy when writing up my company chats at the UK Investor Show, and made it my buy a few days later at 13p (mid). Since then we’ve had a very positive trading update and the shares closed yesterday at a very pleasing 20.2p (mid).

Is that still cheap? It may well be, but in the absence of a further update it is hard to know. At 12/13p the market capitalisation was pretty paltry, sitting at around 13 million or so. Now at £21 million there is still plenty to go for if the company really takes off. On the other hand, we’ve had plenty of opportunity to pick up the stock and be sitting on a nice profit.

So I’m downgrading my stance to HOLD pending further updates from the company.

I noted an inverted head and shoulders is my last piece, suggesting the eventual destination could be as high as 26p or possibly a bit more. Of course, that is squiggles in the sand and we don’t do that around here. My problem is that sometimes it does work, and with a stock whose share price is perhaps driven by a bit of speculation I think it may offer a short-term guide here.

My original target was 30p to do a spot of top-slicing, but I had anticipated that would come after the next round of results. Given the speedy rise of late, I am now inclined to say that if we find ourselves at over 25p with no further news, it would be prudent to take a bit off the table.

Perhaps I am too much of a coward, and it will be a wrong call. I certainly hope so, for I do not intend selling much. It would be really good to learn that sales have continued to race ahead and perhaps break-even has moved forward.

But in the absence of a further update, it is all guesswork - we just don't know. So for the time being, I’m marking 25p as a top-slicing point – when I’ll be taking a little bit of profit. I stress this is my view and NOT that of Tom Winnifrith a fellow shareholder who disagrees with my caution.

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