LON:BOO | BOO - When To Top Slice

19th Apr '16 by brileen

36 comments 13087 reads

Big thanks to Paul as I would have not have had the confidence to have purchased this stock (which had at that time just halved in value) without his pointing me in its direction. The stock has now doubled and I am faced with the difficult task of deciding whether or not to top slice as I normally would with a stock that shows a PE of 35 and a PEG of 1.59. Year end figures are out on 26th of this month and the share price has accelerated recently, perhaps in anticipation of good figures.

Pauls recent posts on this company remain bullish and this allied to an increasing share price means I am tempted to continue with my entire holding rather than take some profit at this stage.

I would be interested to hear what other holders think?

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About the Author

Brileen

Premium Member

36 comments

smallcapman

21st Apr '16

I've always continued to hold the winners. You can't compare a company like N Brown that is radically changing it's strategy. SCSW recommended it recently because of future profits from it's new online business. It looks like a potential winner, but is not demonstrating the kind of returns that BOO is. When a company produces very high ROCE, is swimming in cash, and isn't saddled with debt I don't reduce my position until the company's operations indicate it would be wise to.

If you look back at the charts of fast growers, you'll see ups and downs, depending on the scale of the chart, but if you zoom out, it's bottom left to top right. I'm not good enough to be sure of trading in and out. I take a position and hold on for the ride.

Scm

Rusty2

21st Apr '16

Yes a few good points. The counter arguement is the low was 22p not 25p, I bought some, so its over 100% now. The high street is having some problems probably partly due to shoppers buying more online. Did you see ASOS last update? That was positive and ASOS (LON:ASC) looks far more expensive than Boohoo.Com (LON:BOO). And ASOS is the close competitor not N Brown. Interestingly that Next (LON:NXT) are selling Boohoo.Com (LON:BOO) products in their online catalogue. Yes a lot will depend on the next figures, if you are concerned about a fall then a stop loss could be the answer.

imranawan

21st Apr '16

Hi Herbie

I agree a stop loss could be a possible strategy, but the flaw with a stop loss is that the price can still gap down through your stop loss. For example a stop loss on Sprue Aegis (LON:SPRP) or N Brown wouldn't have really helped, as the price gapped down on the open. The only times stops are "guaranteed" is when you open a spreadbet.

Best wishes,
Imran.

Glen Keedy

21st Apr '16

I have found stop losses for small caps to be very painful when they gap down on a poor RNS or whatever. There is a stampede to the exit doors and the stop executes at the lowest price of the day. So if there is any bounce later on its too late to bail out at a more acceptable price.

I use Motley Fool as an online broker, actually supplied by Interactive Investor Trading, and they now offer a stop loss with an upper and lower limit. So your sell price is the upper limit and it will sell only if the share price is below the upper limit and above the lower one, so it could help protect against gaping.

Anyone with a broker offering a better stop loss system?

Cheers
Glen

WhaleHQ

21st Apr '16

I think we are looking at a major player in an industry that is accelerating as a whole. More and more people are shopping online because it's cheap and convenient. Boo seem one of the best ways to play this industry and I'm happy with current large holding.

Rusty2

21st Apr '16

It can do if there is a profit warning. But if you have trailing stop loss you would have been out of Sprue well before the profit warning as it fell from 347p to 260p, I sold out at 266p.Also N Brown (LON:BWNG) again there was a quite a few falls before the profit warning, so I suspect with a 10% trailing stop loss you would have been out well before. But yes its a good point, I had one on Lakehouse (LON:LAKE), I only got 60p but still better than 40p I would have got without it. Robbie Burns uses trailing stop losses quite effectively, will not work every time I agree. I tend to only use them on smaller more risky shares like Lakehouse (LON:LAKE), Castleton Technology (LON:CTP).

imranawan

21st Apr '16

Thanks Herbie. As you alluded to Lakehouse (LON:LAKE) was a classic example of where a stop loss did help, but by definition on a PW or poor trading statement a PI is likely to take a hit when selling the stock. Like I said the only way that a stop loss can be guaranteed is through spread betting, but needs to be specified at the start of the trade and can't be tweaked afterwards. It also only works on more liquid stocks.

jjis

21st Apr '16

Hi Herbie, I'm not in it so stop loss not an issue for me, but seems like they work for you. You might be right about the online retailers and maybe they / this one will be the exceptions in the clothing retail sector, but then there's a lot in the ratings for that already. Good luck with your holding and your trailing stop loss.

Rusty2

21st Apr '16

Another thing to consider is the online retailers have a large proportion of sales abroad whilst our high street retailers are rather restricted to that location, so bad weather, good weather does not affect them so much. Also downturn in UK shopping will not affect them so much. Plenty more advantages of course being online such as costs, low rates/rent compared to a high street shop and more flexible working hours.

Tortoise investor

21st Apr '16

As a proxy for popularity/interest, I see Boohoo has 2.3M likes on Facebook. Topshop has 4.1M. That's pretty good when you consider how well-established Topshop is.

cig

21st Apr '16

Could it be that they're cheating slightly (giving away stuff in exchange for likes)?

Richard Goodwin

22nd Apr '16

Probably but it still means potential customers have more visibility.

imranawan

26th Apr '16

I sold out my position before the publication of FY results today, which I thought looked good.

My reasons for selling out y'day before results:

a) it was the largest position in my p/folio and I wanted to de-risk
b) the valuation was up with recent events and I couldn't see much more upside in the short-term

Good luck to all remaining holders.

Imran.

Rusty2

26th Apr '16

Could be a buying opportunity, had a quick look at the results seem to be ahead of the forecast figures so not sure why they are down 3.5% today. But I have noticed that with results, good results shares drop then bounce back in the day or next day.

Fegger

26th Apr '16

Very reasonable and well thought through action but I have never had confidence in timing moves in and out and remain a holder as I think there is much more to come long term.

imranawan

26th Apr '16

Thanks Fegger. I'm not really a trader but a medium to long-term investor. I still think Boohoo.Com (LON:BOO) is a great company with an impressive growth trajectory, but this was one of my largest positions (8%), and given the current volatility in markets and the Brexit vote, I thought it prudent to bank a profit.

A lot of my paper profits over the last year have quickly evaporated, so would like to buy back into Boohoo.Com (LON:BOO) if the share price did drop during the summer/autumn. Whilst the results were very good, I think the current valuation is up with events for the time being. I think there's more to come for Boohoo.Com (LON:BOO) but I'll look to reinvest the proceeds elsewhere into more value based plays.

Noodle Hat

30th Apr '16

quick question, Boohoo has over a billion shares in issue!, assume this severely restricts its upper share price limit. for example i believe ASOS has about 80 million?

Are share buy backs the only way to reduce number of shares in circulation, and is this still common at all? Assume if they did ever share buy back then it would affect s/p and EPS accordingly?

cheers

cig

30th Apr '16

The nominal share count does not matter. Your limit is the market cap, itself limited by how much they can grow the business. If they're the next Zara or H&M, and fund growth internally, there's scope for say 100x appreciation in share price.

The share count can be reduced by a 1 for N consolidation. This does not change anything material but is sometimes done to make the unit price of the share look "prettier".

Rusty2

30th Apr '16

It does not really matter, its the market cap that matters, ie number of shares x share price. Yes share buy backs are still quite common, Next (LON:NXT) has done quite a few recently but there are other ways such as reverse share splits, ie 10 old shares for 1 new share, Quindell did a 15 for 1 I believe.

TraderTim

30th Apr '16

As others have said, the share count can be reduced 1 for X - which a few of my holdings have undergone in the past with no noticeable impact on share price. Some research suggests that having high price per share, e.g. ASOS at 3,000p+ or others, and therefore a share that is perceived as expensive or overvalued can detriment a company's performance.

Very bullish about Boohoo.Com (LON:BOO) - great organic growth, really strong management and good signs globally. Very much waiting for a dip to jump in!

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BOO - When to top slice

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Brileen

36 comments

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