Computacenter share price manipulation?

17th Mar '18 by ACounsell

10 comments 5319 reads

Very unhappy with share price action of Computacenter (LON:CCC) a 2018 NAPs selection) as smacks of market manipulation. Annual results issued on Tuesday 13th March with considerable pessimism about prospects for 2018 from director speak despite excellent 2017 results. Market price dropped to close to £10.10 activating my stop loss only to rebound on the day. What followed was two director buys on Wed & Thur averaging £10.50 as well as two separate positive broker reports which saw the price hit £11.80 by Friday’s close. This looks to me like the private investor being taken for a ride by company management & broker/analysts. Interested to hear what other holders who might have been stopped out think. For me demonstrates automated stop losses not a good idea!

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About the Author

ACounsell

Premium Member

10 comments

Gromley

17th Mar '18

Acounsell,

I hope you will take this in the spirit it is intended, that is one of helpfulness.

I think be calling "foul" and "manipulation" you are distracting yourself from your own errors. You are not alone in making mistakes with stop losses, I've been there, done that but the key thing is to learn from it rather than feel cheated.

I cannot see anything unusual in what you describe above.

I think you need to be asking yourself (as I have had to in the past) :

Why was your stop loss at 10.10?

Was it because that represented the maximum you were prepared to risk on this share? (If so, regardless of the subsequent recovery it did what you intended)
Was it because you felt that this was the price level that would signal a downtrend which you would not wish to ride? [ In which case it would seem so far that you were wrong]
Was it to enable you to leverage you position by only putting up sufficient margin to where you thought the lowest price would be? [In which case you have been taught that volatility is greater than you thought and will need to set future stop losses accordingly].

There are of course other possibilities, but the key things to consider imho are :

What you set out to achieve.
Why it didn't work.
Whether you can do things differently in the future,

It can take time (it did for me), but the sooner you can become sufficiently detached that you can treat events like this as learning experiences and adapt as a result, the sooner your investment returns will improve.

Maybe you are even right and it was manipulation (I honestly don't think so) - so what? You're not going to get any form of compensation, so the answer is still to learn to avoid this situation going forwards,

I'm sure that sounds a bit harsh, but sometimes you need to be wounded in the wallet in order to learn, if you refuse to take the lesson then that's just dumb.

Regards,

Gromley

ACounsell

18th Mar '18

No offence taken. You make a number of fair points and my post was more in frustration than anger or wish for retribution. The amount of money was small in the greater scheme of things and the stop loss almost worked as intended - it reflected the maximum I wished to lose on the share (there was no technical analysis or margin/leverage involved). However, I won’t be using automated stop losses in the future as they are prone to mishap particularly in the early trading period after a results/trading update announcement (so a lesson learnt!). On a couple of occasions the stop loss has activated at a price significantly below the target and effectively sold at the bottom price for the day. I guess any system struggles to beat the high speed automated transactions out there these days.

Rusty2

18th Mar '18

I tend to agree about auto-stop losses I tend to review share falls on a case by case basis. I did hold Computacenter (LON:CCC) also, yes shares did fall because of 2018 outlook. I did not sell at the bottom I waited as I thought they would bounce back although not as quickly as they have done. I sold out on Friday around 1150. I think the 1180p price is the auction price on Friday after market close so not sure if that will be price on Monday. I sold because of outlook and margins are very low. I don't see share price manipulation.

Beermonster

19th Mar '18

I have moved away from auto-stop losses for this very reason; although investors hope to use them for the preservation of capital in many instances as a result of volatility, particularly during announcement period and auctions auto-stop losses will be triggered. I now prefer to use price alerts, however, that does mean that you have to be able to review and react promptly.

JamesrWilson1989

19th Mar '18

Investing is an art, not a science and each investment case needs to be built on its own merits.

I read through the annual report, and the market over-reacted in my opinion so I doubled my investment. The director's dont set the price, so when they seen the market reaction, they invested too.

Computacenter (LON:CCC) management are always over-cautious. in Their 2016 annual report, they mention 2017 outlook as follows:

"Whilst in 2016 we had record adjusted1 diluted EPS, it was a year of mixed fortune with the UK business profitability reducing materially but the overall Group performance showing resilience due to the strength in Germany and the turnaround in France. The Group should have a year of progress in 2017, with a rebalancing of profits between the first and second halves of the year towards the historical pattern."

While Germany will be coming off a strong year, and therefore a difficult comparison, the business has strong momentum and potential to improve Services margins. For the French business we would be happy to repeat the same bottom line, with some deterioration in our Supply Chain compensated by improvement in Services revenue."

Not exactly firing on all cylinders, but the share price over that year rose from £7.54 to £11.90. Therefore, we can say that management don't set themselves ambitious targets, but talk down the opportunity whilst remaining quietly confident.

To conclude then, the outlook statement doesn't strike any different in tone from previous annual reports and their outlook. I trust management then didn't intend for any manipulation.

tony777x

19th Mar '18

I have to agree with gromley. I also was a holder of CCC. Also I was stopped out but fortunately at a far higher price and overall made a profit. I also took advantage of selling shares at the strike offer from CCC buyback.
My reason for selling and ending overall with a profit was nothing to do with the any lack of quality of CCC ( it is a good company) but more to do with overall market sentiment. You only have to look at the UK indices to see we are trading at 12 month lows with little appetite to breakout.
My stop loss was fairly tight as I was more interested in not losing money than making money in current market sentiment.
No offence but stop losses are there either to protect a profit or reduce a loss. Everyone's idea of where to put it if at all will largely depend on your mindset and what you are principally trying to do.
In my case as I tend to have a top down approach of investing and as the markets have been weak my stop losses tend to be more aggressive at these times to protect gains or stop bigger losses. At other times I might give more slack as I feel there is overall more positive market sentiment.
I do not believe in market manipulation as such but you can get large volatility in price if MMs are trying to fulfill an order and therefore take many stops out ( shake) to do so.
Stop losses are a powerful tool but should not be regarded as a guarantee for a price.

dscollard

19th Mar '18

There is an alternative view based on technical analysis: attached is a chart of Computacenter (LON:CCC) , you set your stop near the 200 moving average which is often a target for buying by bigger instis and buying programmes
Further, there was support around 10.00 going back to last year.
A much better stop-loss would have been south of both these areas as their failure is likely to indicate a change in sentiment and a lack of support for Computacenter (LON:CCC). So a stop around 960p takes account of the 200MA and support.
In the event that this stop-loss is too wide for your risk profile, one then changes the stake or decides that the risk:reward doesn't stack up for your desired entry and position size. So maybe one for the watch list -

I know many investors have little time for technical analysis, viewing it as hocus-pcus (and there is a lot of that). However, price does have memory and that relates to the physics of price action, areas of accumulation and distribution and the reality of supply-demand in order flow

While I appreciate that a stop-loss is set around one's risk tolerance, it is always good to invoke some inspection of long term price action to make sure one avoids some pitfalls: these days there are many algos who target areas of stop-loss confluence since that triggers a cascade of selling in that area and allows them to buy on the cheap on the resulting supply-demand imbalance

In summary it is worth overlaying your desired stop-loss with a view of the price chart to see if there are any obvious overlaps. Then try and avoid them if possible
In this case you were just unlucky that 1010 was the 200MA and therefore a likely inflection point. Conversely, when you see this happen it is often a very bullish read on the support for a share so can be an opportunity to buy (with a fairly tight stop-loss based on good evidence of support)

If you click on the below it will open a link in tinypic which can be enlarged

maffs0

19th Mar '18

I have come to like automatic stop losses because I find that otherwise I tend to want to give the trade "more room" and end up with a bigger loss. Of course, the bounce back is a downside of any stop-loss system, automatic or otherwise. But I view a stop loss as an insurance policy, part of the price I pay to take part in the business of trading. That helps me psychologically in cases like this.

I was stopped out at £10.65 which was part technical, part dependent on how much I wished to lose. Fortunately most of my position was taken out at £11.70 via the share buy back so I'm marginally up on the trade overall.

Something similar happened with NMC Health (LON:NMC) where there was a massive fall on results day only for the price to recover and consolidate. Quite a few swing traders and those who like low risk trades avoid results day or crop their positions back significantly leading up to results day just so as to avoid this volatility.

M.

PS. I use day stop-losses rather than GTC. This helps prevent getting caught out at the open. I usually put them all back on at about 8.15am.

ricky65

19th Mar '18

I use auto stops and Computacenter (LON:CCC) came up on my radar last year. What put me off was that it had a history of being very volatile, undercutting the 200 MA multiple times in its uptrend during the last ten years. I avoid shares with a history like that as I know I'll unlikely be able to stay on for the ride. Swallowfield (LON:SWL) is another that comes to mind which retraces heavily.

Sometimes you'll get stopped out and a share will reverse and go back up. It happens. I'd much rather that happening occasionally than not using a stop loss and taking a horrible big loss.

On the argument of manual vs auto stops. I prefer auto stops. Manual stops are fine if you can monitor the markets all day and you have the discipline to always obey your stops. I'll hazard a guess that's not feasible for most people. Here's a case study: not too long ago, I got auto stopped out for a ~10% loss on UP Global Sourcing Holdings (LON:UPGS) shortly after the bell. I have a full time job and by the time I checked my portfolio mid morning it was down over 50%. It was then that I appreciated the benefit of auto stops. Incidentally, an end of day stop would have cost me a lot of money.

Rusty2

19th Mar '18

But often if there is profit warning you won't get your stop loss price, it will be far lower, when the price stops falling, has happened to me. Also when Brexit happened I had some stop losses on and I could not trade the stocks, there was about 4 hours I had no idea what was happening with them and actually I did not want to sell them. I stopped using auto stop losses, got stopped out too many times only to see the price bounce back up. If you get stopped out what do you do, buy back in or leave alone? IG Design (LON:IGR) was the worst one, got stopped out at around 140p, it then more than doubled in the next few months. If you look at your portfolio charts, easy to do on Stockopedia, you will probably see that most of the dips would have been good top-up opportunities. I sell more on bad news or I may sell on valuation grounds or loss of momentum. But I take your point about working and not being able to trade, so it's different for each person, I prefer a review system now.

Problem I have with Computacenter (LON:CCC) is the operating margin of only 2.9%, I should have noticed that before I bought it. Swallowfield (LON:SWL) is on my watchlist, I'm waiting for such a fall.

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Computacenter share price manipulation?

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ACounsell

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