Black Monday Sells…

Excuse my post title – its not really black monday I don’t think… but the title hints at the fact that I got hit today by a profit warning on one of my holdings today.

That was ARC Arcontech Group PLC – they were already on shaky ground for me with my decision to hold on to them back in September at the time of their final results coming back to haunt me! In September they said the following

The future for our market remains uncertain and it may be some time until it returns to previous levels of activity. We continue to work towards future sales and already have a high level of pent up demand with the strongest list of prospective new customers for a long time. However, due to the impact of Covid on net new sales in the 2020/21 financial year, this year’s profit is expected to be flat or lower, as any pick up in revenue will not be fully reflected in our results until 2022/23.

Arcontech Group PLC Final Results 01/09/2021

At that point I decided to grimace and hold on for the longer term story – questioning in my mind if they would ever gain the traction I hoped or whether or not the larger players would adapt their offering and render Arcontech products redundant. This morning they released the following RNS

trading performance has regrettably fallen below current market expectations due to one customer reducing its market data spend with the Company, and notification from another customer that it will not be renewing its contract from the start of second half of 2022. The two changes are unrelated and do not involve customers with Arcontech’s core MVCS server-side solution. They instead reflect one customer greatly scaling back its market data team and market data requirements, and a second choosing not to renew its contract for one Arcontech product because it is switching to use a solution included in a legacy, bundled contract.

Arcontech Group PLC Trading Update 29/11/2021

Oh dear oh dear not so good – at this stage I am out of here like a scalded cat! My general rule is that when the story changes for the worse I need to get out… that coupled with my desire to preserve capital and cut losses at between 20 and 30% means it is time to move on.

I read all this before the market open and was ready on the opening bell, placing a limit order to sell expecting the price to fall to around 100p from the previous close of over 120p. My first order was killed after a few minutes unfulfilled with the price on Level 2 showing 105p to sell which was a bit puzzling. I replaced this order with another straight away again limited to a lowest sell price of 100p… by this time level 2 was showing 100p to sell so was looking like a close call.

I got onto the phone to Hargreaves Lansdown dealing team who went away to investigate the order and when they were away the trade went through at 102.75p. The broker returned and explained that my first order was killed as the price offered for my deal size was 97 spot 5 or 97.5p in layman’s terms.

So it is gone and forgotten with a loss of approaching 40% so not the best trade in the world!

As ever hindsight is 20/20 should I have sold at the final results in September? Possibly, but I am an eternal optimist maybe to my detriment. I had hoped that this would be a slow burner with new contracts that would drop lots of free cash to the bottom line, in reality they were almost flatlining and now revenue is set to decline so better to move on.

Another interesting point of note is that the Stockopedia Stockrank has been low on Arcontech for some time now… I sometimes take this with a pinch of salt but maybe like so others I should be selling anything that drops below a stockrank 40 or 50?

ARC before the first Profit warning – Stockrank already at 32
ARC today stockrank 33

Looking at the rest of my portfolio I have other stocks with low stockranks which will have to be monitored closely.

Thanks again for reading and good luck in the markets!

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Investor John

Investing as a Private investor John has shown success over the last 15 years with a straight forward common sense approach to investing - He can help you to learn and will gladly share his knowledge to get you started.

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