Potential Power Play: Sosandar SOS
Over the last few months, I have had a few successes with what Minervini calls power plays. These are stocks that go up by 100% or more in an eight week (or less) period, then consolidate/correct without correcting more than 20-25%, then finally move back up and through their high (at the top of the initial increase). The buy point is just above this high ideally on good volume.
I've had a few successes with this: Ocado and Bahamas Petroleum have been the most obvious examples.
I've been watching Sosandar (LON:SOS) for a while now since it hit a high of £0.36 on 23 July. It has since corrected about 25% (£0.27 on 3 August) but has now rebounded strongly with a huge rise on Friday. My hope is that it now tightens up for a few days before bursting through the £0.36 buy point when I plan to buy.
I know that there are a few who are in this already and I usually stay away from stocks that have an overly active ADVFN group (which SOS has). However given the good company in that group, I'm going to make this an exception!
Let's see if we get that breakout.
M.
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58 comments
I've just bought back the shares I sold earlier ay 43.8p. The chart tightened up nicely for the last few days and when it broke above 44p, I decided to go back from a 1/4 position to a ½ position. I'm a little concerned with the low volume today but it might come yet.
M.
Great thread, I just wanted to extend my thanks to maffs0 for starting it, and all the subsequent contributors to the thread.
I find it fascinating how different posters were spotting different patterns ahead of the breakout.
I personally saw it as a flag pattern. But really liked the tightening of the SP range and volume ahead of the breakout. The volume increase at breakout was impressive.
Also wanted to add my thanks to those who commented during the week as the trade developed.
I was pretty pleased with my entry on Friday 24th: 10k at 35.4p and another 10k later in the day at 38.10p, with a stop loss for both at 35p, target price 44p (20%).
Unfortunately it all went wrong on Monday morning when the alert I set triggered during the market open. As I couldn't watch the prices during the day, I elected to sell all at 37.35p only to return to my desk at the end of the day to find the share had blasted away. So I've printed out the charts in colour and stuck them on the wall in my study to remind me to ALWAYS follow my rules!
Total profit realised after commissions £90, potential profit would have been £1,445. At least I have more confidence now that the pattern works in the UK market.
Hi Ret. 2020,
Like you I messed up by not sticking to my own method. I got in earlier, and out later than you, but I still missed partially.
I really don't think the story is over by any means for SOS and we will all have further opportunities to make money. Personally, I can't decide if this should be a passive buy and hold (trying to ignore the volatility) or a stock to trade through the highs and lows.
Interested to see what happens next week.
This has been a great thread (even though I got a lot of thumbs down for a previous comment) :-)
I must admit I got my tactics all wrong on this.
I made a good profit before being stopped out, but I really should have made more of the opportunity.
I've still got a small position and I'll be looking to top up at a good point and see if I can do better, learning from this one. Must try to get my timings better with the next SOS trade.
So, one thing I am unsure of, when is the "powerplay" played out?
With ~10% fall from peak this morning are we likely to see some capitulation as you chart botherers look for the exits?
And are we expecting this to set itself up for another "powerplay" ie, fall no more than 25% and bounce back thorugh 45.5?
It would need to set up again to be another power play. Its extended from its base now. You could buy if it broke through its highs but it would be a much higher risk trade than my original proposal above.
I'm not sure what you mean by "played out". I have sold half (23% profit) and moved my stop to breakeven (35.5p). For that remaining portion to be a good bet, I must believe that it is more likely that Sosandar (LON:SOS) will hit 50p plus than it will stop me out. If I could sell the rest for a 50% profit, I would be very happy but it may go even further than that. Power Plays can be the start of a big move up.
M.
So, one thing I am unsure of, when is the "powerplay" played out?
The most difficult decision a trader/investor faces is when to sell when you have a profit. I only have a small position by my standards in SOS due to small Mcap and liquidity. I personally am going to continue to hold SOS through this first pullback/"natural reaction" to see if we get some "tennis ball action". I will only sell if SOS falls to my original stop loss.
Intercede (LON:IGP) could be another stock Paul has in BMUS that seems to be breaking out last few days. up 4% today also.
"This is a fantastic growth stock".
Well it might prove to be so, but so far sales are just over £1m - there's still a lot of i's that need dotting and t's crossing
Hi Shipoffrogs,
All depends on your outlook. I'm 30% up on this in a matter of days. To me that's pretty fantastic.
Stop loss in place of course!
And that’s the problem with historical data. Sales were nearly £1m in Q1 and have likely risen strongly since then.
Does it matter exactly what Mark Minervini would do here, and what he would do there?
I bet he would chuckle reading some of these comments. He probably doesn't even follow his own rules as precisely as some of his disciples.
I know Jim Slater didn't. He used his principles as a guide, but if it was a stand-out stock that met most of his criteria, he would buy anyway.
This is a fantastic growth stock. Don't miss the boat just because an i isn't dotted here, or a t crossed there.
I now spend too much time looking at the shareprice of this stock, so being sucked into a day trader mindset when
I am anything but.
Wonder if I shouldn't adopt Paul's strategy and turn off. But I bet despite best intentions, he doesn't or can't either!?
I think these type of stocks are not suitable for Minervini style trading..1) Spread is too high so easily market maker can swing both directions...2) company funda not that much great..price moving because of expectation...
I disagree that stocks such as Sosandar (LON:SOS) aren't suitable for Minervini style trading.
1. The spread isn't that wide for a small cap (~2.7% as of writing). I've had success with Minervini's strategy trading small caps with spreads as wide as 10% or even a little more.
2. Minervini doesn't require fundamentals on the table for a Power Play.
just been looking at the technical indicators a lot of bull still left in this. macd levels and volume still strong in a weakfish market today. I reckon same thing could happen tomorrow with share price.
im in for long term holding and will top up if it ever goes down
I bought this on a 35p pivot and then 36p (breakout). Minervini sometimes sets percentage rather than technical stops. Sometimes he staggers his stops so that he can give half of the position more room. The other option he suggests is to take a smaller position and accept a slightly larger stop which means the same risk as a full position with a regular stop. This is what I did in this case, only taking a 50% position but with a larger stop loss.
You're right that he probably wouldn't have bought this where I did. He likes stocks to "tighten up" before they break out rather than go straight through the pivot buy point. I am a bit more aggressive and am more likely to buy on a powerful breakout that is going "straight through" the pivot point without it tightening up.
I have sold 50% today for a 23% profit in 3 days. I've moved my stop to breakeven on the rest so I'm guaranteed a 11.5% profit on the trade.
M.
Well done.
Where is the entry point for the Minervini trade?? When the SP makes a new high after the dip?
For me the entry point is when a new high is reached - that was Friday when the SP went above 36p.
Where is the entry point for the Minervini trade?? When the SP makes a new high after the dip?
For me the entry point is when a new high is reached - that was Friday when the SP went above 36p.
I would point out it's very unlikely Minervini would have bought when the SP went through 36p, the previous price contraction was to 30.27p on 15.08. That would mean a stop of circa 16%, Mark never goes above 10%.
As I posted above Mark often buys on a "cheat" which would have been 17.08 above 31.62p or 22.08 above 32.95p.
For a full explanation of a cheat buy Mark's first book.
This discussion is hypothetical because none of us know how Minervini would have played it!
He doesn't mention anywhere in his books that he has to put his stop as wide as the previous "price contraction". As you said, his maximum for a stop loss is 10%, no matter where the support is.
Personally, I bought at an average of 37.7 on Friday and placed my stop ~7.4% away at 34.9 under that day's candle.
I'm confident he wouldn't have bought the "cheat" on 17/08 - the volume was too low.
This discussion is hypothetical because none of us know how Minervini would have played it!
I have to disagree, I have subcribed to Minervini's MPA service and get to listen to Mark's method of trading on a weekly basis for 1-1.5 hours every week. I have seen hundreds of buy points Mark has chosen to trade and setups he has rejected that have been put forth by other members.
Mark wouldn't actually buy SOS because he never invests outside the U.S, we are simply discussing how Mark's trading rules could be applied to a U.K stock.
"Mark wouldn't actually buy SOS because he never invests outside the U.S, we are simply discussing how Mark's trading rules could be applied to a U.K stock."
I'm aware that Mark only buys US stocks and I agree with the last sentence. It's not clear to me what you're disagreeing about.
Anyway, I think Stocko members would be grateful for any insights you have from trading alongside Minervini in his MPA service.
I doubt he would trade anything this small, is that not another of his rules? If he had bought then he probably would have sold by now.
unwise,
like you I subscribe to Mark's service and have found his weekly commentary very helpful.
One thing I have noticed is that he often misses perfectly good breakouts and buy points (Weinstein/O'Neil style) and often sells way too soon and misses big moves up. On other occasions, he buys stocks that if someone else had mentioned them I'm pretty sure he would have rejected. There is clearly an art and a lot of experience there that is difficult to "teach". So while I am learning a lot, my style will never be exactly like his.
For me, this has been a perfect power play. The buy point you mentioned on the low cheat would, in my opinion, have been very risky and I was happy to wait for the pivot at 35 and the breakout to new high ground at 36.
M.
maffs, thanks for your insights into Minervini's MPA service. Interesting you mention that he often sells too soon and misses big moves up because in an interview I recall him saying that his weakness is that he sometimes sells too soon.
"For me, this has been a perfect power play. The buy point you mentioned on the low cheat would, in my opinion, have been very risky and I was happy to wait for the pivot at 35 and the breakout to new high ground at 36."
I agree. I couldn't understand why unwise said that Minervini wouldn't have bought the new high breakout at 36 and instead would buy the "low cheat" points he mentioned. I had another look at all the Power Play examples in both books and he always has the "I'm buying here" arrow on the breakout to new highs.
Rick
Following through from the Power Play breakout today.
Thanks for your comments Paul.
For me at the moment this is indeed a simple momentum based power play trade. I'm up over 8% in one day. You may well be right and SOS may well go on to be a big winner but at this late stage of the bull market I'm reluctant to hold onto stocks for too long. This does look like it could be a big winner but I'll be selling at least 50% of my holding if this keeps going in the next few trading days.
All the best,
M.
Hugely brave punt by Paul, but history tells me, that a sh*t or bust bet is a signal challenge to the Stockopedia philosophy, but possibly right on track for a conviction buyer like Paul.
To me it reminds me of my determination in resource stocks to ride the momentum wave, and then get off, but then getting caught up in the slightly manic atmosphere of great riches tomorrow, and neglecting my own strategy - and being too late to take make paper profits, or even just bank some of them.
You have to admire his guts though!
I agree with Trident's sentiments. Looks like Paul has taken nearly 5% of the free float in the company with a very large proportion of his personal capital (about £800k at Friday's closing price). I certainly lack the cojones to place such a large bet on a single stock, especially one with what seems like a pretty challenging risk profile, probably due to a couple of previous punter stocks on my part that got out of hand and ended up losing heavily. Fingers crossed and hope it goes well for Paul and other holders here.
Gus.
I've been looking for the next Asos, since I sold my 500k Asos shares a little early (at 9p, for an 80% gain). Bit of a mistake, with hindsight, lol!
So Boohoo (LON:BOO) was the next credible one.
Then £G4M
The only other eCommerce business in the UK market which has interested me, is Sosandar (LON:SOS)
Yes, the valuation is nuts on conventional metrics. However, that is missing the point.
The way I look at SOS's valuation is like this - it's split into two. So there is a base level of valuation, for the future potential. At the moment, I would put that at £50-100m. Then there is an additional element of valuation, for future earnings. At the moment we don't know what that is, so I would say element would be small at the moment, but could explode upwards, if growth continues to be very strong.
This type of share is incredibly difficult to value, and peoples' views will wildly differ. Some people would argue that SOS is worth almost nothing at this stage. Others (like me) are very bullish, and think it's worth c.£100m on the future potential right now.
The trouble is, that shares valued on future potential, can really crash, overnight, if the growth stalls. So the higher the valuation gets, then the higher the risk gets.
So, it's different for everyone. I made a decisions to back up the truck, and buy as many SOS shares as I could afford. I'm currently holding 2.2 million shares. That's 100% of my ISA, 56% of my SIPP, and a good chunk of my spread bet portfolio (but most are on 75% margin, so it's low risk).
When to sell? Never - is my current thinking. Providing the growth continues to delight, then I'd be reluctant to sell any below 300p. If the growth disappoints, then that would look like ridiculous pie-in-the-sky.
I have no idea how it will pan out, but in my view, management are the real deal, and I think they stand a very good chance of succeeding, and turning this into a big business. But my timeframe is 5-years+ on this, so anything could happen in the short term.
Good luck to all, however you decide to play it, but personally I'm in for the duration, and am even thinking of removing this share from my price monitor - as I don't really want to know what the short term share price is! Although obviously it's rather exciting when things go well, like this week.
My worry is that the momentum traders who are buying now, are all likely to sell at the same point too, when Minervini chart points are crossed on the downside. So I think this share is likely to be highly volatile. The really big gains should come (longer term) from ignoring that volatility though!
Regards, Paul.
Hi Paul
Thank you for your thoughts.
I'd be interested if you could elaborate on your judgement that the base value is £50-100m for potential (so implicitly regardless of shorter term operating performance). Is it pure judgement/experience/intuition combined with your retail knowledge? Or is it an insight built from prior experience with other companies and observable positive signposts?
Best wishes, Paul
Have to say Paul, I'm confused by your method of estimating the valuation of an early-stage growth company.
"The way I look at SOS's valuation is like this - it's split into two. So there is a base level of valuation, for the future potential.... then there is an additional element of valuation, for future earnings."
Given that the future earnings will represent the future potential, isn't this double counting?
Hi Howard,
I don't want to speak on Paul's behalf (I'm sure he will answer himself at some point), but I didn't have the same view as you on him comment. I understood the valuation split to mean: Base level valuation for growth in Sales as the company picks up market share, then the second element for higher earnings (as a proportion of sales) for the premium value add and higher margins that this premium brand positioning can bring.
Just my take. I may be wrong.
Wow, this is an amazing and very candid post! I don't buy clothes too much, so don't follow this sector, but I just looked up the price of ASOS, sixty quid, more or less! Fingers crossed that Sosander can rise as far. FWIW I just asked the girlfriend, who very much likes clothes, about Sosander, and she said its not yet ASOS. But perhaps it will be.
I've followed the small cap report since I first subscribed about three or four years ago. I really enjoy reading and more recently I've really enjoyed the complementary styles of Paul and Graham. Its great to read seemingly very different styles to investing and know, I suppose, that you both respect each other. My aim is make a bit more than the 1% per annum I could get from cash in the bank and to enjoy the gamble. You help me a lot. Thanks.
I bought Sosandar (LON:SOS) some months back at 15-16p level. Its not my type of stock historically but I have been experimenting and pushing into higher growth and/or quality names....now Sosander isn't quality and with only top-line and no mid to bottom line growth worth a mention its hard to call it a growth stock too. But, I'd been looking at Boohoo (LON:BOO) and fashion retail in general high street and online and felt that Sosander was the interesting name with a good targetable and scalable niche with 30s and 40s women.
However, I only bought 1/15th of my normal full commitment scale...its an experiment after all and I felt that there was so much to prove out with such time sequencing issues that its near 100% likely that I will get a much clearer signal at some point in future if I follow and know company decently to build a fuller position. If I'm lucky my little stake grows and means I don't need so much cash to top up.
Today, I think there is so much to build out and the need for more cash so high that I will be given the opportunity to probably top up my holding at a discount to the current price on a capital raise. IMO the price today looks super toppy. With a pure momentum stock it may well double again for no particular reason.
I'd compare this to an early stage exciting tech stock. One where the technology has been shown to work but the commerciality and the path to commerciality are still to be executed.
Those are my views...I look on with interest to see what I can learn.
Ciao, Paul
PS the 'fundamental' thing I like most at the moment is the average basket size at near £100. That's great if they can maintain. I guess it comes down though and £ reflects an initial audience more biased towards middle class/professional women than will be the case if they succeed longer term. [But this is 100% guess work by me]
What is it you think they need to build out?
Pretty much everything is contracted out - from my understanding they're basically a design house that outsources production and distribution.
From where I sit all they need is good managers able to hire great designers, some marketing and some commercial expertise.
Now I'm not saying keeping on top of those is easy, but I can't see them needing to fund warehouses or other capital intensive items - they just get Clipper to allocate more space and resource as they need it.
I agree.
This one seems to be all about the brand and keeping the designs fresh. Everything else is/can be commoditised. I hold and have recently topped up.
Sosandar is a bet that it will prove to be a game changer...high growth from a scratch start, no pension deficit, no shop leases, small staff, a delegated back office so a small and controlled overhead; a High Street that's shrinking before our eyes; apparently competent and experienced management with masses of skin in the game who know that they are doing; and who are not pathfinding as that was done by companies like Boo Hoo. And attractive clothes for a neglected market. The risks of course are potentially grossly incompetent accountants and bankers, crap auditors who miss tricks, or founders who fall out. But all those hazards are common to every stock. In my view its as good a bet than most of the shares listed and a potential ten banger is we sit tight. What is good for the smaller shareholders who got into the stock early is that it's too small for the institutions to have bought stakes; they can't buy volume in the market without doubling the share price but they will be pleased to back the company when it needs cash for expansion.
What's not to like?
Game on. I bought both batches this morning, one at 35.2 and the other at 35.9. Very good volume yesterday and so far today.
ok the cup and handle pattern has formed on the charts, it needs to form a full candle above the 36p to confirm that a further breakout is likely to occur
50 day moving average is above the 150ma and sloping upwards on the daily charts which is a positive sign of momentum
I am assuming this full candle would have to be at a high volume for the breakout to be likely sustainable?
Well a big day today on decent volume. Closed at 34.9p so I'll be looking to get in tomorrow on any further strength.
M.
The spread is wide but I bought both my lots well within.
Also, the spread does seem to change throughout the day so worth monitoring.
One question for those of you who already own this. The spread is very large. Are you able to normally deal within the spread or is it one of those horrible illiquid shares that are difficult to trade?
Minervini's view is that a proper power play can be bought with with no reference to fundamentals. The share price is so powerful that it is telling us something is happening and so can be bought when it reaches an appropriate buy point.
I am still following this as I think last week's price action was quite constructive. I would like to see it tighten up and for the volume to dry up a bit. My buy price is now 1/4 position at 35p and 1/4 position at 36p. A 50% position would be plenty in this as my stop would have to be wider than normal.
M.
My understanding is that Mr Minervini chooses stocks from fundamental analysis - conspicuously excluding reference to the P/E Ratio - and then uses the chart to TIME his purchase.
Does Sosandar satisfy the Growth/ Quality requirements?
Good point Lawman.
I don't know Minervini's methods and rules, but there is a screen/filter loosely dedicated to his methodology on here isn't there? Is Sosandar (LON:SOS) on that?
I'm going to have to get reading his book/s as he gets a lot of mentions on here. I do know, from a U-tube video clip I saw that he doesn't really care if the PE is high (as he thinks high growth stocks are expensive for a reason). Not sure if SOS has the track record to fit that bill yet, but I can believe there is now a market gap for slightly up market fashion for on-line buyers to move up to.
Mark.
it looks like it could form a cup and handle pattern on the charts which can lead to a further breakout
I've decided I'm going to buy when this particular dip has bottomed.
I'm already a holder so interested in this thread as interested in possibly topping up.
But how do you know "when this particular dip has bottomed"?
Hi Laughton,
Yes, difficult to tell at the time isn't it. What I usually do is wait until a stock starts to rise again in a sustained way (again different depending on the circumstances), then buy in with a stop loss in place. If the dip is not over and it falls again, I get stopped out, then have to decide again on another point to get in. Not an exact science, but the only method that works for me.
I would point out Mark usually tries to buy a Power Play as a "cheat/low cheat". The move above 30.63p on 10.08.18 would have qualified if SOS had stayed above 27.6p a few days prior.
Yeah, Tern was a real winner. Unfortunately I got stopped out of it only for it to move up the next day (I think on some rumour or another).
I'm minded to give power plays a wee bit more room to move (maybe 12% instead of my usual 8% stop) and just take a smaller position size as the upside can be very quick and very big.
M.
Yes, I've been watching it for similar reasons.
Had similar success with Tern.
Good potential Power Play you've spotted. Needs to breakout on volume @ 36p. No earnings so I'd only play it for a short term move.