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By Nigel Somerville | Saturday 14 July 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 had been saying for a while that I was happy to pay up to 20p for shares in AIM-listed online fashion play Sosandar, and whilst I was highly encouraged by the full year results and especially the statement on current trading I had not changed my view. More to the point I said that at 25p I would be looking to take some money off the table. It seems that I am either Warren Buffett or a fool….but I’ve stuck to my guns.
And so, as suggested, I’ve lobbed out just under a quarter of my holding – rather as I did with AIM-listed Bowleven (BLVN), my tip from Christmas – and am happy to have done so. This does not mean the shares are a sell – nor does it make Bowleven a sell – I still think both shares have plenty of upside but in my humble way of looking at things there comes a point when it is sensible to take a bit of cash off the table. Too often I have held on only to see very good profits wiped out at a stroke by a bad trading statement or, more usually, a dodgy placing.
In the case of Bowleven, I was particularly pleased to have taken some wonga out, for that is what funded my first purchase of Sosandar! Unfortunately, house rules meant I had to wait to buy the shares so I ended up paying 15p when readers were able to pile in at just 13p. Indeed, I first commented (positively) when you could buy at 12p. So selling at a bit over 25p feels right. However, house rules also meant that I had to wait a while before selling, and I got well over 27p. Swings and roundabouts, then.
This, of course, means that my observation of an inverted head and shoulders suggesting the destination could be as high as 26p or possibly a bit more may or may not have helped me. I don’t know: the main driver was the results and trading statement, so perhaps this was just luck.
So where are we now? For once, Cynical Bear didn’t ask when’s the placing and has flip-flopped to neutral. Hotstockrockets has moved to hold and has a boring and conservative 35p price target. There are still some uncertainties – will the break-neck speed of growth cause a problem and will it be sustained long enough to reach profitability? I fancy the company’s chances but we won’t know until it happens.
More to the point, I am sure the boardroom will be eyeing up expansion abroad – and that will probably need financing. Maybe I should ask when’s the placing!
But so far the company has not put a foot wrong. FY18 numbers were published early and were way ahead of expectations – and 70-odd % growth for Q1 over 2017/18 Q4 reads extremely well. That is why I have held on to the vast majority of my shares.
Moreover, whilst seeing that profitability is heading our way – and I reckon we could see a number as high as £2 million if all goes really well - it is a bit of a pot-shot to predict. But £2 million profit on a PE of 25 would suggest a price target of about 50p. There are options out there, so perhaps we should knock a bit off for those – and of course we won’t know the actual profits until we see the numbers. So perhaps a target of around 40-45p to sell a bit more is the next mark to go for, absent further information.
In the meantime, let’s enjoy the ride!
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