Am I the only person having problems with sourcing information on this weeks fall in Globo's share price. There was an unhelpful comment in the weekend FT attributing it to unspecified Bloggers but a trawl through the net didn't uncover anything meaty .. fundamentals still look good but should I take note of the directors' share sales and the gossip on cash flow?
Paul Scott with his excellent forensic analysis of the balance sheet has concluded it is not for him as he thinks it could be an accident waiting to happen. Lack of cash flow and accounting practices right at the limit I think. Evil Kneivel shorted during the week and quoted Paul's work as his reason for doing so! This caused all sorts of excitement on the bulletin boards. (I think you are far better off ignoring them all and making your own decisions without all the noise which is normally unhelpful. There is only one discussion board worth following; Stockopedia!) Paul has distanced himself from this and has categorically stated he is not short. He just would not buy the stock because of the accounting being used and the lack of cash flow. On Friday RBC issued a long note with the bull case for Globo and addressing the accounting issues that have been raised. The Company raised £24 m cash on the 17 October with the likes of Standard Life who own 8.8% of the company taking stock in the placing I believe? Three directors, not the Chief Executive sold some stock in the placing. In the JIC portfolio I currently hold 2.8% which for the time being I am going to hold onto. I am in the lucky position of having bought last December at 20p and have since halved the position at 71p and 64p in September. I think the volatility in the stock will continue for sometime as the Company needs to prove the bears wrong, both by hitting the sales targets, improving cash flow and realising profits that are not so reliant on accounting practices. You ask what you should do? Only you can decide on that and a lot depends on how much risk you are prepared to put up with and how convinced you are of the bull case being proved right and the bear case being wrong. Ultimately I focus on the bottom line performance of my portfolio and if Globo drops convincingly through my trailing stop loss I will be out and will move on as I did with Quindell in May. There are plenty other fish in the sea! www.JohnsInvestmentChronicle.com
