I see RGS (Regenersis) has fallen around 19% today qto 163p. Paul Scott picks up the story on Stockopedia (http://is.gd/dcjBmF):
this is another share that I’ve come to increasingly distrust … overly complex presentation of the results … Matthew Peacock cashing in £17.5m selling 5.8m shares at 300p in Jan 2014. … I’m wondering if today’s share price fall has possibly been a bit harsh?
I had written about RGS myself on 21-Nov-2014 (http://is.gd/9yi16u):
Come March 2014, I decided to bail out at 339p. The company had just released some results, but there was a bad market reaction to the news. John was bullish, but Paul Scott expressed concerns about their margins, balance sheet and “exotic accounting measures”. Dividends were up, and the outlook seemed generally bullish. Sometimes shares can offer you a dilemma, where any act, or its ommission, could be the wrong one. I decided that car dealer LOOK (Lookers) was a much easier call to make, so I decided to do a swap. … Shares are a funny old game. Quite often the obvious is wrong, and all sorts of things happen that you never expect. Also, standard stock market lore says that you shouldn’t make investing decisions hastily. I’m not sure I agree with that. I have made some pretty good decisions under time pressure.
“Shares are funny old game”, I said. Damn right! It’s often difficult to tell the difference between inspired insight and random guess that just happened to be right. At least that’s how it is for me. I was clearly spooked by the market’s reaction to the news in November. Despite the dividends increasing, normally a bullish sign, my sense unease was enough for me to bail out.
I think it’s a generally sound strategy: if the market reacts badly, or in a way you don’t think it should, then you should probably think about getting out, especially if you’ve made a nice profit, as I had done. There’s no point in giving it all back.
I say “generally”, of course, because it’s difficult to come up with a an inviolable rule in investing. When DTG (Dart Group) plunged last year on a release of its results, I held on. Fortunately, it recovered quickly.
Sometimes the market gets it wrong, sometimes it gets it right. Figuring out which is the tricky part, and it’s something that one can’t expect to get right all the time. Despite DTG having had some good momentum, I still persuaded myself that it was reasonably cheap. I also really had in the back of my mind that DTG could keep growing.
The thing about DTG is that it doesn’t seem an acquisition-hungry business. It seems to grow mostly organically. Contrast that with RGS, that was keen on making acquisitions. I think that, especially if you invest in an AIM company, that’s something to think about. Companies that seem to grow step by step look to be better bets than those who always seem to be on an aquisition spree.
Just because a company makes an acquisition doesn’t mean that you should immediately cross it off your watch list. But you do have to be extra careful!
Just try to buy half-decent companies that look of reasonable quality and you think has a reasonable growth path without gimmicks, overindebtedness, over-reliance on single customers, government policies, fad business themes, consumer scams, and so on. Let’s remind ourselves that RGS is taking a dive today because of an over-reliance on a main customer. Corporate customers are not stupid, if they think they can squeeze a supplier they will.
May you all be well.