Stock Spirits - Someone Talk me out of it

Monday, Aug 20 2018 by
6

Hi,
I've posted a few similar challenges over the years for various stocks. The general thinking is that when i'm looking at a company I should be looking for the one reason not to buy it rather than the positive reasons that confirm my bias.

I've been looking at Stock Spirits (LON:STCK) for a while, ever since I started making the occasional trip to Poland for work.

Stocko says its a contrarian and it looks like it might have hit some support at 200p. It goes ex-dividend in a week or so and pays roughly 4.4% which isn't bad at all.
To my eye it looks like decent value and I see this as a reasonably defensive play with some upside from the current sp. I can't see why it won't proceed upwards from here, but then again I don't really understand why its gone down so much recently either.

Anyone got any thoughts? Anyone want to talk me out of it?
cheers
Carey

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Stock Spirits Group PLC is a United Kingdom-based spirits company. The Company, together with its subsidiaries, is involved in the production and distribution of branded spirits in Central and Eastern Europe. It operates through five segments: Poland, Czech Republic, Italy, Other Operational and Corporate. The Other Operational segment consists of the results of operations of the Slovakian, International and Baltic Distillery entities. It has more than 40 brands and exports its products to more than 40 countries worldwide. It offers spirits, including vodka, vodka-based flavoured liqueurs, rum, brandy, bitters and limoncello. Its brands include Zoladkowa de Luxe, Lubelska, Zoladkowa Gorzka, Fernet Stock, Bozkov, Amundsen, Keglevich, Limonce, Keglevich, Golden, Stock 84, Fernet Stock Citrus, Hammerhead and Stock Original. more »

LSE Price
228p
Change
0.9%
Mkt Cap (£m)
452
P/E (fwd)
13.6
Yield (fwd)
3.6



  Is LON:STCK fundamentally strong or weak? Find out More »


13 Posts on this Thread show/hide all

BlueFrew 20th Aug '18 1 of 13

I owned Stock Spirits (LON:STCK) for about 2 years up until earlier this year. I bought it for 2 reasons. Firstly it had a high stock rank. Secondly, it looked like a decent turnaround opportunity at the time. I sold as the stock rank fell and it looked like the turnaround was largely complete. Along with a lot of other defensives at the time it was on a pretty warm rating.

Having fallen about 20% since then it looks better value. But I'd say the price looks reasonable rather than absolutely compelling.

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Carey Blunt 23rd Aug '18 2 of 13

Not many other attempts to talk me out of it! I guess I will plan to take a position before the ex-dividend date.
cheers
Carey

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simoan 5th Sep '18 3 of 13

Hi Carey,

Well I hope you managed to get some! I can't even get a quote for a very small number of shares across 3 different broker accounts even though 80k shares have been traded so far today. Is this usual for this share? I can't remember ever having this problem before but if the liquidity is that bad when times are good, I'd hate to need to sell when times are bad ...

I think there is possibly something strange going on today as nearly all Automatic trades and few Ordinary ones. Bizarre!

All the best, Si

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Carey Blunt 8th Sep '18 4 of 13

In reply to post #396394

Hi Si,
In the end I chickened out when the stock started to go under 200p which is where I hoped there would be some resistance, I had planned to buy before the Ex-dividend date but didn't do in the end.
I would guess the odd trading was maybe due to the announcement made this Friday that J O Hambro Capital Managament has taken a 5% stake. Maybe the squeeze on the liquidity was them buying everything available up. They managed to do it without pushing the price up though.

I like that the CFO bought a small amount recently at 212p, I like that an insti has bought a 5% stake and I like the general fundamentals but it just keeps drifting lower.

I'm going to keep watching it for some sign that its less of a contrarian play. It seems like decent value now but I don't like going against the momentum.
Carey

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Velo 8th Sep '18 5 of 13

Coincidentally, STCK was chosen as one of 20, by Ed, for his inclusion at the start of this year for the annual 2018 NAPS folio based on Stocko's ranking system. At the start on Jan 2nd it had an impressive Stock rank rating of 97, and by February, one month later it was the 3rd best highest performer showing a 7% gain - in one month!

By the close of the latest Month this year on September 2nd, it was third from the bottom with a 30% loss since Jan 2nd and now sports a much reduced stock rank rating of 54.

So I think you dodged a bullet there :)

Looks like there might be a ton of support around the mid 170's area I'd guess, if it's intent on retracing further,

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Taff6 12th Sep '18 6 of 13

May worth another look!

5b99158f70321stock_spirits.JPG
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ricky65 12th Sep '18 7 of 13

Stock Spirits (LON:STCK) the downtrending chart alone puts me off. Carey, fantastic performance in the fantasy fund btw.

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Carey Blunt 12th Sep '18 8 of 13
1

In reply to post #398279

Thanks Ricky, my Fantasy Fund has been on a surge recently, especially since I switched it to a technology only focus. Nearly doubled my imaginary money in only 2 years!

The downtrend is an interesting thing. I would normally never buy against the market but occasionally you see something where you can't work out what the downtrend is caused by and that is one of those cases.
I know that emotionally I need to let it go and move on to other things but i'm struggling to do so.
cheers
Carey

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ricky65 12th Sep '18 9 of 13
2

In reply to post #398294

Hi Carey

More often than not, when you can't see a reason for the downtrend, there's something wrong and it only comes out afterwards. Price action often leads the news.

I did enough bottom fishing for a lifetime in my early years. These days, no matter how good I think a stock is, if the chart isn't in an uptrend, I pass. I leave those for the bottom fishers and fundamental valuation guys!

Ricky

P.S I hope my fantasy fund can give yours a run for your money at some point :P

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jonesj 12th Sep '18 10 of 13
1

Problem #1 appears to be falling profit margins over the last few years.

I've not trawled through all the evidence, but it seems price cuts by their main competitor are a major contributor to this.
They don't say who, but elsewhere in the report, they say the main competitor is Roust, which is a Russian company. The annual reports for Roust are password protected, so I cannot assess their financial strength.  

Then considering competition,  if I go down to the local supermarket in the UK, there are any number of spirits brands on the shelf. The recognized mid market & premium ones, plus a load of budget ones.    Now Diageo have done alright over the longer term.

So the big question is what about the strength of Stock brands in their core Eastern Europe markets ?     
Perhaps a field trip to Eastern Europe is needed to assess where these brands fit in ?

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andrea34l 13th Sep '18 11 of 13
1

The recent interims from Stock Spirits (LON:STCK) show single digit growth in both revenue and profit, I don't see any reason why the share price should change to an uptrend any time soon, as the PER is still rather higher than the profit growth.

I much prefer Distil (LON:DIS) even though their stockrank is worse, though the Piotroski score is better. They are showing much better growth, albeit at a very low base. If one looks at the share price graph it is very cyclical, pretty much every time results or trading announcements come out the price goes up quite a bit followed by a steady and slow decline. I think this is one to very much buy on the dips, and potentially one to short-term trade.

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Carey Blunt 11th Feb 12 of 13

Looks like our conversation on here pretty much marked the low point for this share and its been slowly heading upwards ever since. I can't claim any particular foresight here but it is good to see when a share that you can't really see any real solid reason for a downtrend starts to pick up.
It always seems it start going up at the point of maximum despair for me!
I'm still slightly underwater on these but hope to be in the black soon!

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simoan 11th Feb 13 of 13

In reply to post #446008

Looks like our conversation on here pretty much marked the low point for this share and its been slowly heading upwards ever since. I can't claim any particular foresight here but it is good to see when a share that you can't really see any real solid reason for a downtrend starts to pick up. 
It always seems it start going up at the point of maximum despair for me!
I'm still slightly underwater on these but hope to be in the black soon! 

Yes, I bought a few sub 200p but not that many I'd have that kind of effect on the price :-) I like the company and the recent acquisition looks well judged. As you can tell, I'm not the kind of investor who pays much attention to downtrends!  Personally, I would have a larger position but I'm not entirely happy with the decline in operating margin. It remains to be seen if the acquisition will help improve them; indications from the RNS show it has margins of circa 20% so it should be the case. 

All the best, Si

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