Don’t Be Afraid!

This week we saw headlines such as “Don’t be afraid to make short term portfolio changes.” Stockomendation stock pickers understood the mission and top picks this week are a mix of HOLD, AVOID and BUY.

1. HOLD Knights Group

Top share pick this week was HOLD Knights Group Holdings by Shore Capital with a stock pick performance of 9% Shore Capital changed their rating from SELL to HOLD this week on the Staffordshire professional services company.

The detail is revealing.

Insider David Beech bought 1.2m shares this week at 99GBX well above the price of stock. Knights Group has had rather a tough year. We see shares fell off a cliff in March from a 358GBX to 150, a drop of 60% which was caused by a profit warning with the company blaming COVID after a ‘quick return to the office’ not working out. At that point the services company stated a 14% profit which without mentioning gauging, is, well... unusually large.

Then further falls to today’s price.

In its most recent financial statement this October the company said pre tax profit was up 18% to £9m yoy. Mostly insider moves can tell us about confidence in the company but not always indicative of the real picture – indeed at first glance it may seem a little… odd. Especially if you consider Beech was up around £61m in 2021 from selling 15.7m shares he owned when the company floated (at 175GBX, almost half the price). Beech owned 16.8m shares after that sale in 2021 and he can’t sell the remaining shares until 2023 due to a 2 year rule. Without casting aspersions, 1.2m shares is small fry considering these numbers. Beech may be hoping for a miracle before that 2 years expires but he will not have lost money in Knights Group Holdings, especially when you consider his salary of £250k on top. We can only hope the company survives.

2. AVOID Genedrive

Second interesting top stock pick this week was AVOID Genedrive by everyone’s favourite stock journalist Tom Winnifrith in ShareProphets with a stock pick performance of 8%.

Genedrive produces diagnostics for infectious diseases. Shares fell on Monday with the announcement of pre-tax losses.

The company floated in 2007 at 160GBX and any smart investors sold shares at 574GBX in 2013 when it was on the cusp of a rapid tuberculosis diagnostic tool. It never got back to that former glory even in the height of COVID when it reached a high of 163GBX, only 3 points higher than its float price.

The report said the company was ‘adversely impacted’ by the loss of COVID-19 revenue, which is a huge win for everyone except shareholders we suppose. Ambulance chasers must be faced with the moral question at some point, why are we doing this, with any hope Genedrive can move on to the next discovery that will benefit humankind by early diagnosing instead of wallowing in the past. We know we know, R&D eats money and time, but the future is almost upon us and unless Genedrive embraces it with a new license, patent or invention the company will almost certainly be a thing of the past.

Tom says “Genedrive rewards executive failure & deserves to go bust!”

3. BUY Discoverie Group

Third interesting top stock pick this week was BUY Discoverie Group by Peel Hunt with a stock pick performance of 5%.

Discoverie Group is an interesting little company that makes electronic components like magnetics & sensors for industrial use.

Peel Hunt reiterated it’s BUY rating on 23 November at the ‘profit and revenue surge’ interim announcement (Morningstar). Revenue is up a full 26%, underlying profit is up 46%: unsurprisingly, shareholders are not complaining, and shares were up 6% at the announcement. It paid a dividend of 3.55p per share up from 3.35 the year before.

The global shortage of semiconductors may affect the company in future but overall extremely positive results and sunny times ahead for these Guildford techies!

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Disclaimer: The contents of this article should not be considered financial advice. Pricing data correct as at 24th November 2022..