A slightly longer break from blogging than I envisaged - but I'm back and clearing the cobwebs from the keyboard with a post on Communisis (LON:CMS) . I spent most of the last few weeks on holiday, so it's quite nice to come back and catch up with shares which have done interesting things in that time. In that category, without a doubt, is the small cap marketing/printing company that's been a constituent of the portfolio since late 2011. It hasn't just been the last couple of weeks that the gears have really started turning, though; Communisis has been on a pretty beefy bullish run since more or less the start of this year. There's quite a lot to be said here and a lot of catching up for me to do, so I'll split it up into two posts - this first one will primarily focus on why the price has moved, and if there's anything I can learn from it for future investments.
My reasoning behind looking at the price movement and the last year and half before the current valuation is twofold, and the factors are connected. Firstly, the scale of the price movement - Communisis has risen about 170% in the time I've been holding it, which is a gain similar to that which I made on the substantial number of Barratt shares I sold out of the portfolio a few months ago. Secondly, and while this might sound obvious, I still haven't sold, and didn't sell any in the run-up. That implies one of two things - either an enormous misspricing was clear when I purchased the shares, so large that it could endure a doubling in share price without hitting its intrinsic value, or that the company has fundamentally changed in the time I've owned it.
The difficulty with the second of those reasons is separating what you knew before and what you knew after the purchase. How much of the fundamental change the company has endured - and, as a rather quick spoiler to my rhetorical question above, it has changed quite a lot - how much of that change was predictable at the point of purchase? If there were clues back then, we can take them forward to future investment decisions. If it was simply blind luck…
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