Six months ago, I wrote about NXT and DEB with a view to updating the subsequent progress of the shares today.
On 4 Jan, NXT dropped 11.5% to 4222p on the back of its trading statement. My standard procedure in those cases would be to sell. I noted that the shares were in value territory, but that may be a trap.
How well would you have done by selling? The chart gives the answer:
Although the share price eventually recovered above the initial sell point, the shares subsequently declined below that figure. I claim this as “mostly” a victory on my part, because you would not have necessarily known when to sell. You might also have assumed that the share price was in recovery, only to have been disappointed.
NXT currently has a StockRank of 56, and a Value score of 79. It is described as a “balanced contrarian” share. It also passes the Richard Beddard’s Nifty Thrifty screen, which has been quite successful at picking winners.
NXT has a PE of 9.8, a dividend yield of 4.7%, and an EV/EBITDA of 6.9. So there’s something to be said for investing in it. I do not own any shares in NXT, though, and I am not eager to buy in. I would look to see if the Value score edged higher. NXT reported an 8.1% decline in full retail sales looks bad for the future of the shares.
I said back in Jan that internet retailers were doing well, and it looks like it was at the expense of the high street.
So on balance my opinion is: stay clear, it could get worse, and there may not be enough value in the shares to justify the dangers. That’s just my opinion, of course. I would be interested in following this up in 6 months time.
I had also commented about DEB in my Jan post. Stockopedia describes it as “adventurous contrarian”, with a Stock Rank of 63, and a Value score of 98. It has an EV/EBITDA of 3.4, which is amazingly cheap.
DEB issued a trading update on 27 Jun. They said:
Having announced our new strategy, Debenhams Redesigned, in April 2017, we are making good progress putting in place our plans to drive growth through Social Shopping and our shorter term “Fix the Basics” plan.
Personally, I think their whole “Social Shopping” idea smacks of desperation on management’s part. In my opinion, they are clutching at straws.
On balance, as with NXT, I would rather be out than in.
However, rather than pontificate on that too much, I am really happy about how my technical reading of the chart turned out.
My reading of the chart was as follows: the downward trend (1) was disturbing. The gap down (2) confirmed this, and was a signal that if you were long, you were wrong, and should probably sell. There followed a period of consolidation (3), which I considered to be “marking time” ahead of the next move, which would be in the direction of the preceding trend.
This turned out to be spot on, as the current share price (4) shows. You cannot always get it right, of course, but I am growing in confidence that the chart pattern I mentioned is reasonably reliable.