BIG FALL FRIDAY BIG VOLUME, page-30

looks like im back on board at 4.10.
not quite the bottom but a reasonable risk reward entry position.
definitely has been under pressure due to:
- hangover from downgrade earlier in year
- broader market negative sentiment
- us tech stock weakness
- aus property market inflection point
- uk uncertainty following the election
- stronger aud
- tax loss selling

i am happy to ow take a buy and hold position in the full knowledge that sentiment is fragile and it could go lower over the next week.

my thesis now:
1) acx short interest is on an established weekly downtrend in recent months, they are trying to exit positions slowly without triggering a squeeze before the next results
2) the price is on an established uptrend although the short term weakness of last week created a nice buying the dip opportunity that many of us have been waiting patiently for
3) the 20% long term annual growth strategy has been reiterated consistently
3) lots of skin in the game from the board/ founders etc
4) easy to understand business
5) good r&d investment to drive long term product moat and product differentiation creating an actual moat; a large percentage of revenue is being invested in r&d for growth such that short term ebitda and npat is not reflective of the margin leverage that they can pull the trigger on whenever they want
6) smart synergistic acquisitions which after initial 'indigestion' are going to start to flow through to being eps accretive in fy2018
7) property market fears in anz have been analysed as likely to be a modest correction and then plateau rather than a dramatic crash and thus not impacting the runway of approved construction on track for the next 3 years
8) massive opportunities in china, usa, europe and middle east all of which are in infancy in terms of penetration long term (think 4-5 years not 1-2)
9) healthy balance sheet
10) sticky clients which generate more profit by moving to a subsription based rather than one off / contract purchase model for long term recurring revenue
11) undisputed market leader, has competitors but not as strong so has some pricing power.

i could be wrong but i think acx represents at least fair value at this level, if not a bargain. ultimately the euphoria in the stock has disappeared which was inevitable and is good to have behind us, but now it is up to management to execute their strategy and deliver on their guidance and generate some trust with retail and insto investors then if possible generate some upside surprise / revenue upward revisions to create some momentum. ultimately the huge persistent short interest is waiting patiently and hoping they fail to deliver and that the first downgrade is not the last as so often happens. i hope they are wrong.