"Hi Madamswer, with that in mind, do you usually sell down the...

"Hi Madamswer, with that in mind, do you usually sell down the stock or hold as you believe it is still undervalued according to your analysis?"

@baroona,

No, I wouldn't sell now.
Because I'd probably be zigging when I should really be zagging.

The time to sell was when the headwinds, that fed into the second-half performance, became observable... which was a few months ago.

Because by the time the result becomes known, it will be more a case of "Sell the Rumour, Buy the Fact"

Which is what I was trying to flag concerning the GP Margin pressure in a cautionary tone in this post: https://hotcopper.com.au/posts/62538379/single

I guess the logical reason to ask is why I didn't sell out completely before the result: I have a tranche of shares in a family entity which is sitting on a capital gain (yes, hard to believe, given the share price performance over the past 6 months) and I thought I would first wait to see what the full-year result looked like before crystallising the CGT liability.
(As it happens, I should have sold given the update, but one can never get these things right 100% of the time.)

The next logical question I ask myself is, "What do I do now? Do I:

1. Add to my holdings by buying buy back the shares which I had sold YTD?
2. Exit completely?
3. Do nothing?


I find, in these sorts of situations, that thing not to do is to make an emotional decision and rush into any hasty decision.

Especially in a case like this where the fundamental value is such that it presents a share price floor.

So I will most likely do nothing, and have a study of the upcoming Annual Report and accompanying notes to understand the quality of the headline results just announced (in isolation, the headline numbers might not mean too much, because they could either be over- or under-stated, and I will only know that once I've scrutinised the full set accounts in a bit of detail.)

Also, I want to hear management clearly articulate the updated ERP roll-out situation ... because that is a very big deal: it can either make or break the company.

So, long answer, I know, but can be summarised as,

The residual downside for the stock over the next few months is negligible, and in a few weeks' time I get access to a whole lot of critical information which will better inform me of which way to go.. i.e., Get Big or Go Home.

At the moment I'm 60% - Get Big and 40% - Go Home; I'd like more than a 20 point spread (either way) before I act.

Hope that makes some sense.

.