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You may have noticed that after my initial ‘Foot in the Door’ Buy on ARM Holdings (Epic Code: ARM) about 2 months ago, I massively boosted my Position in ARM on Friday 23rd Sept 2015, taking it up to 5% of my Total Portfolio Exposure so it is now a significant Stake. I bought a Chunk of Shares at 1049p and some more Spreadbets at 1051p - please see the ‘Trades’ page of my Website for full details.
In terms of the Fundamental Position, please see my earlier Blog from when I bought the first lot here:
Back on Wednesday 21st October, ARM issued Third Quarter Results which were very good and showed that the fears over Royalty Revenue which had dogged the Shares earlier in the year were really a fuss about nothing - exactly as I had expected. It stood out to me how many new Designs ARM are working on and the Statement lays out just how the Internet of Things will boost their opportunities for Chip Designs hugely. You can read the Statement here:
In terms of Valuation, if you strip out the Cash, then at my Buy Price of 1049p for the Shares the Forward P/E Ratio for Next Year 2016 is about 29 but this falls to around 24 for 2017 - but bear in mind that we are nearly at the end of 2015.
This may seem steep but it needs to be appreciated that ARM has historically commanded a P/E as high as 40 to 50 many times and the Quality of its Growth, lack of Debt and Economic Moats makes this a pretty unique investment opportunity to my mind. There is also the chance of a Takeover but although I would be happy at a High Price it would in a way be a shame for such a great company to be taken off the market.
I will pick up a small Divvy around 0.7% for Next Year but there must be a chance of a Special Dividend and in the past ARM has done several Share Buyback Programmes.
The Chart below is just Long Term from 2009 ish and sets the scene of a lovely overall Uptrend Channel. As per usual, I am trying to demonstrate why I made my Buy Decision on Thursday Night to buy on Friday and the Charts are showing exactly the situation that confronted me then. I like to make Buy or Sell Decisions out of Market Hours when my emotions are calm and I can think carefully and rationally. Snap judgements during Market Hours rarely work for me.
The ShareScope Screenshot below just zooms in a bit to show things a bit closer and I would particularly point out how the Shares have turned up off the Bottom Black Uptrend Channel Line.
Right, now we need to use our Brains. On the Chart below the key thing that prompted my Buy was the Breakout of the Horizontal Resistance Line at just below 1000p which I have marked with a Red Line and a Red Arrow. The Price had failed at this level a couple of times in recent weeks and the Breakout which was induced by the Q3 Results on Wednesday was the Buy Trigger.
The Candlestick generated from the Jump on Wednesday is marked with the Black Arrow and note how the Price got up to the Light Blue sort of Flat Line which is the 200 day Moving Average. Intraday the Price could not stay up at the Highs so it fell back and created the Inverted Hammer which is marked with the Black Arrow - this was not the best sign so I did not decide to buy on Wednesday night.
Then on Thursday we got a lovely White Up Candle which I have marked with the Green Arrow and this ‘Engulfed’ the Inverted Hammer Candle from Wednesday so it was a tasty ‘Bullish Engulfing’ Candle. In an ideal world you would get a nice pick up in Volume but it was nothing special really (sorry, the Volume is on another Chart which I have not included - trust me, I‘m a Doctor). However, I was prepared to overlook this as the Fundamental Picture of Strong Q3 Results backed up the Technical Breakout and Bullish Engulfing Candle.
That’s it, shortest ever WheelieBlog !! Wishing everyone a Great Week, wd.
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