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I dumped my Small Holding (why am I talking about Farmyards?) in Alliance Pharma APH on Tuesday 28th April 2015 at 43p as per my Tweets and the updated ‘Trades’ page of this Website.
As usual, I will do a quick run through of why I made this Decision - hopefully it will help Readers with their thought processes and it may assist me to evaluate if I really have done the Right Thing.
Please note, all Charts and Screenshots are as they were at End of Day on Monday 27th April 2015 when I made the Decision to Sell - as usual I made the decision ‘Out of Office Hours’, hopefully with a clear and rational brain.
Fundamental Decision Drivers
I have given it a fancy heading, but the reality is that I have found this one of the most mentally frustrating Stocks I have ever held. I have had a Small Position from around 2011 and I topped up in 2013 - but despite seeming very good value, it has just been irritating me like mad. When I feel like this about a Stock, I feel like it is sucking my BrainPower and I just cannot go on with the charade.
Theoretically, the Business makes superb sense to me and I have met the Management several times at Shows and always been impressed. In essence, they borrow money to buy ‘Orphan’ Drugs and Medical Products that huge Health Companies no longer want - they are too small in terms of Sales to bother with for the Big Boys. They borrow Dosh to fund the Acquisitions and the beauty is that Health stuff has very predictable and stable Cash Flows - so they can easily support the borrowing.
Anyway, that’s the theory but I think the Market just sees a fair bit of Debt and does the usual Kahnemann Fast Thinking bit and the Brain Waves say “Oooh, can’t buy that as it has loads of debt”.
Whatever the reason, the Stock has basically done not a lot over many years and despite its apparent cheapness in P/E Terms and Divvy Yield, the Share Price just has no oomph in it.
If you look at the ShareScope Screenshot below, you will see that EPS (Earnings per Share) for 2016 is 3.60p. At my Sell Price of 43p, that was a P/E multiple of 11.9 (43p divided by 3.60p) - not bad value at all for a Quality Business. The Divvy forecast for 2016 is 1.2050p per Share - so that is a Divvy Yield of 2.8% on my Sell Price of 43p - again, not bad Value.
On the Bullish Side, I have had to consider the future impact of more Acquisitions. APH announced their plans to buy more Orphan Products last year, but as yet we have not seen much. It is possible that any new Acquisition Announcements will help push the Share Price up, but the counterbalance to this is that the Debt will rise and the Market doesn’t seem to like this with regard to APH. It is a matter of judgement, and I suspect that the Share Price will plod along as usual and I just have lost patience - quite unlike me really.
So, Value is not an issue here in my view, but I just got frustrated with it and I have too many Stocks and some Old Timers have gotta get the Order of the WheelieBoot.
The Technical Picture
If you look at the Long Term chart below (remember, with any Technical Analysis / Charting stuff, it is best to look at the Big Picture first), you should see where I have drawn in 2 Parallel Lines (Blondie?) which sort of mark a Trend that has been in place for about 5 years - in other words, this is a well established Trend so it will have a lot of influence on the Price Movements of the Stock.
My Green Arrow points to where the Price has had a good run up in recent weeks and is now at the Top of the Trend Channel - obviously a good point to consider Selling.
If you look at the Image below, you should see my Big Blue Arrow which is pointing towards the RSI (Relative Strength Index) which is at about 80 and clearly at a High Level - remember, this is a Short Term Timing Tool and it is very good at helping to spot Peaks and Troughs.
The Screenshot below is a much Shorter Timeframe and my Black Arrow is pointing out the Daily Candle (if you can call it that !!) which was generated on Tuesday 28th April 2015 - the Evening of which I decided to Sell. The ‘Candle’ is basically a Flat Day where the Price Opened, Traded and Closed at the same Price Level.
If you look at the Candles, you will see loads of nice White Up Candles and the chain ends with a Big White Up Candle which was produced on Monday 27th April 2015. Then on the Tuesday, we got a Flat Candle where the Price did nothing - this was the Signal to me that the Upmove had now most likely come to an End. So this was the Time to Sell (note, I put ‘most likely’ in italics and bold because all TA stuff is probabilistic - we cannot be 100% certain what will happen, but it is the best indication we will get of the most likely outcome).
I hope that this Blog has given Readers a good bit of detail on why and how I sold APH - the fact is that the frustration of holding it was doing my bonce and I actually made the Fundamental Decision to dump it many Weeks ago - it was then just a matter of patiently waiting for a great opportunity to sell out at a good Level. The recent run up in the Price gave me the Opportunity to get out at an Advantageous point in time when other Investors were keen to buy them off of me !!
Just to be clear. I actually think APH is a good business and it is reasonably priced - so I can understand if Readers hold it and continue to do so. This is no recommendation or anything, just letting you know what I am up to. For me, it was a frustrating Stock and I decided to let it go.
Bidh mi 'gad fhaicinn, wd
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