April SA and the momentum issue
At current prices (EUR 14,60 per share) and based on the underlying business developement, the risk/return profile is not attractive enough.
Now the stock price is close to last year’s lows and we certainly don’t see a lot of positve momentum:
After the reading of O’Shaughnessy’s book, momentum is such an important factor, that one should keep way from a falling stock. On the other hand I am quite sure that the business of April is worth much more than the current 10,80 EUR quoted on the stock exchange.
So should I wait until the stock gets more expensive and buy then ? This sounds still very counterintuitive for me. O’S strategy relies on not analyzing the companies but “data mine” for factors to produce historical outperformance.
Does a active value investor really have to wait until the stock gets more expensive before on invests ? I would agree for distressed or turn around companies. But in other cases this “negative momentum” might even create investment opportunities
By the way, April issued a relatively positive trading update for Q1 2012 and a comprehensive presentation in English for the 2011 results and the strategy.
As I really like April’s business model, I will ignore momentum and starting to build a position in APril from today. I will start with 1% and then increase in increments.
Edit: For some strange reason, the stock jumped immeadiately after my posting almost 9%
My limit was 11 EUR, so I did not get any shares and will wait for the time being.