I reduced my holdings considerably today. My rationale: - I am...

I reduced my holdings considerably today.

My rationale:
- I am concerned that BAL has released its half year results (1st half ebit 19m therefore approx 50m full year ebit imho) and the market is not driving its sp up to new highs. BAL is currently priced at a forward pe of 37 [ 12.5/((50 x 0.65)/96) ]. BKL and BGA forward pe's are also in gradual compression.
- In comparison, A2M is currently priced at a forward pe of 60.5 (1.8/((35 x 0.92 x 0.65)/704)).
- I now find it hard to reconcile the significant difference between the forward pe's of A2M and BAL.
- If A2m do not upgrade their earnings forecast on 17 feb, the market may become brutal and revalue the stock more in line with BALs forward pe. A slow pe compression may take place as opposed to a sudden drop.
- With no earnings upgrade, a forward pe of 37 in line with BALs, would equate to a sp of $1.10.
- I detailed my rationale of why I am not confident of an earnings upgrade next week in this post 16963828

So in conclusion, I have reduced my holdings to just a speculative holding now. If they upgrade earnings it will be happy days and the show will roll on. However, if they just reiterate the previous guidance of nzd 32-37m ebita, I am worried a gradual pe compression may set in. Happy to protect my capital and wait and see what eventuates over next 2 weeks.