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28/02/22
01:05
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Originally posted by whytee
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Well I can think of four reasons for the sell off.
1. In the run up to $4 investors got overexcited by the story and the stock trend so it went too far. That's not uncommon, and it was partly encouraged by statements from the company about doubling revenues every year which was unsustainable even without the Covid Pandemic.
2. The company got a lot of negative press from quite a few analysts working for brokers like Bell Potter and a few others who were appearing on internet financial shows recommending "competitors" like AVH and ARX with smaller market caps. Even though the information they were providing was inaccurate and misleading or even completely wrong, since they tend to have only a superficial understanding of the company and its products. I still think certain brokers and a part of the financial community don't like DW and take time out to black-mouth his investments especially when their overtures to help raise cash were rebuffed. I consider MacQuarie to be a bit more balanced in their view.
3. There was disappointment when Covid impacted sales more then expected and then there were delays announced in development of the hernia and breast products. But I still think BTM is capable of driving revenue growth of 40% pa for a few years anyway and clearly the partner in the breast product development wasn't right.
4. The presence of hedge funds on the register is always a mixed blessing. They typically own quite a lot of stock and trade in a way to make predictions become a reality, manipulating the price especially when there is negative market sentiment such as economic concerns about inflation and interest rates or the impact of wars and sanctions. On the other hand the fact that they want to accumulate it and trade it is probably recognition that it has potential. But when the share price starts to fall significantly investors lose faith and capitulate which causes an overshoot in the drop, just the same as over excitement causes the price to appreciate more than it should. And the hedge funds will drive the price lower since they are holding significant short positions and looking to increase their holdings as cheaply as possible over the longer term. So they will give it a good kick down if the opportunity arises.
My average price is pretty low, but even so the drop in market cap is still a potential "loss" on paper from the peak valuation, and many newer investors will be in the red. I think the share price will come back in due course to MacQuarie's valuation and possibly become a market darling again. But of course KS is right that its good to be able to know when the highs and lows have been reached and make perfect trades, only its a lot more difficult than his crystal ball posts suggest. He didn't predict China would inadvertantly unleash a Covid pandemic or that Putin would start a European war or inflation would rise significantly. I would say he was right for the wrong reasons, which translates as just a lucky guess. He's wrong that management is "bad", since the company is growing at a respectable clip and hasn't needed to dilute shareholders like the other company he was so fond of. If there is a criticism it probably relates to the internal friction which affected morale and lead to the loss of key management. Hopefully that's going to become a footnote. But it also probably affected sentiment temporarily.
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Fair analysis. Bottom line is: Do you think the company can grow sales as fast as they say they can.
I do, because the company has positioned itself to do so. It has made the necessary investments is capital plant and key personnel in a timely manner. It has done so without a cap raise it decided it didn’t need. There is not much point to discussing the timing of an unnecessary cap raise, is there?
On the other hand, if the sales aren’t there to be made, then I have to ask, why invest in this company at all? And what would be the purpose of a cap raise then?
I accept that others may have views that differ from mine. I find value in open and frank discussion. But so far since the half year results were announced, and since the conference call, I have read nothing that calls into serious question the path that management have chosen. Frankly, it seems a bit tendentious at times, but when the discussion centers around how fast sales and revenues will grow over the next 48 to 60 months, I’ll take that any day over the kind of questions we grappled with even as recently as a few years ago, when we had NO sales and no revenues, and a similar valuation.