"It's not about your good or bad call. Merely highlighting that there you were gushing about their good management and long term structural advantages and here we are a few months later, the same company is 20% cheaper and you're totally bearish.
Oh, I still love management and I still believe the company has a good long-term future, but I participate in the equity market in order to
maximise the investment returns on the capital I manage, in order to beat the market by an wide enough margin to account for my portfolio's tracking error (otherwise, if I didn't believe I could do that, I should simply buy the Index and play golf every day).
And my assessment is that while SDI's share price isn't going to crater, allocating incremental investment capital to it today will result in an opportunity cost compared to the investment alternatives I currently identify [*].
So while I cannot see any reason to add to my shareholding, let alone commit to "full weight", I remain a shareholder because I don't see the value of my capital being permanently impaired given the cheap valuation of the company.
So "totally bearish" is clearly a wholesale exaggeration.
"What's changed in their long-term prospects that wasn't already apparent after their JobKeeper boosted recovery results to justify your 180 degree reversal? I'd argue very little."
I argue a lot more than "very little" has changed.
A 1,250 bp compression in Gross Profit Margin is, objectively, a big change:
Now I know there's a product mix influence in there, but that doesn't detract from the fact that when that kind of crunch happens you've got to run a darn lot harder on sales in order to merely maintain gross contribution.
I had suspected that a GP Margin hit would happen to a degree (you'd have to be living on Mars to not have expected it), but not to the sheer extent that it is happening.
So that's the first part that I got wrong. (And I daresay its not just me that was analytically incompetent in that regard; I suspect very few followers of the stock anticipated that degree of diminution in GP Margin.)
The second part I got wrong is that I thought the inflation impact on CoGS (and CoDB, too) would be relatively short-lived. But subsequent research and consultation has lead me to believe that it isn't going to be nearly as transient as I had initially thought. (I must have been listening to too many central bankers' speeches.)
So the facts, as I perceive them, changed.
And when my perceptions of the facts change, I respond by changing my position.
"Not every stock can be a screaming bargain, especially at present.
I have a fundamentally different investing philosophy: if I make an active decision to go "full weight" on a stock in a concentrated portfolio, then it jolly well better be a screaming buy or else I can't see the point. I'd likely be better served buying something like SMLL.AX than allocating a big slug of my capital to a small cap stock with mediocre risk-adjusted investment return potential.
Apart from some tinkering here and there I've really just been taking a few profits and getting ready for June bargains.
You may see an ASX smorgasbord but to me, unlike 2020, wherever I look all I see is relatively slim pickings."
Not sure why bargains necessarily appear in June and not at other times of the year, because if someone today gave me a million dollars of their money to invest I would not find it at all difficult to initiate a portfolio, containing 20 or 25 companies which are also micro-cap stocks like SDI, which are also well managed like SDI and which also have durable business models like SDI, but which offer far superior risk-adjusted investment returns than SDI.
[*] A bit like CSL during the initial throes of Covid. Great business; great management; great everything, but massive opportunity cost compared to investment alternatives at the time.
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(20min delay)