Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 4 May 2017

Vocus crashes

Vocus drawdown

Another favourite value stock crashes, and this time it's Vocus Group (ASX: VOC).

The share price has been annihilated from a 52-week high of $9.40 to just $2.44 at the close yesterday.

At 7.10pm on Tuesday - not traditionally a time of the week reserved for positive ASX releases, it must be said - the company quietly slipped out another revised guidance pointing to another downgrade in revenue and EBITDA, sending the share price crashing another 30 per cent lower on Wednesday morning.

Actions speak louder than words

"Follow the smart money" as the saying goes.

In fact, Michael Kemp wrote a book coining this very title which argued that watching when directors buy and sell can boost returns, echoing thoughts on the subject of director dealings previously espoused by US fund manager Peter Lynch. 

The 17th Century philosopher John Locke once said: 

“I have always thought the actions of men the best interpreters of their thoughts."

In other words, look at what people do, not what they say. 

And a summary of the group's Appendix 3Y lodgements shows that the Change in Director's Interest Notices were flashing a glaring sell signal, for anyone interested in looking for one.


Source: MarketIndex

Moreover, the founders of the Vocus and Amcom businesses left the group in 2016 following post-transaction disagreements following the M2 merger. 

Strong, candid, and rational management should be another tenet for the value investor. 

The 1-year chart shows that the  company has seen its valuation chopped by nearly three-quarters over the past year, down by 74 per cent from the 52-week high.


Source: ASX

The media are having a field day with this: "plummets, warning, crashes, downgrade, gearing an issue...".

Still, not nearly as much coverage as the 0.1 per cent 'decline' in Sydney home values in April!