As stated in my About me page, I traded heavily back in 2012. One of the strategies adopted was picking stocks on the cheap after a great fall.

Picking it back up is certainly not easy, however, I am determined to pick this back up. Armed with an operations background, I will aim to come up with a streamlined process to identify such opportunities. So, stay tuned!

Life has been busy and challenging. However, this is not going to stop me from studying the markets for opportunities. And one such trade made, was in Micro Focus International  Here is the company website : MicroFocus.

Nature of business: Micro Focus International PLC provides software solutions. The Company transforms digital business with enterprise application software, as well as provides tools to build, operate, secure, and analyze the enterprise which bridge the gap between existing and emerging technologies. Micro Focus International serves customers in the United Kingdom and the United States.

Close competitor: BMC - American technology company. BMC produces software and services that assist businesses in moving to digital operations. Its software serves functions including IT service management, data center automation, performance management, virtualization lifecycle management and cloud computing management.

It has bought a Software division from HP back in 2017, and integration into its own business seems to be an issue. Let's take a look at its share performance.


29 Aug: MFGP fell 30% to range of 12.80 to 13.60.

I have entered at 13.40.

30 Aug: It opened at 13.57 and closed at 13.80.

Stock fundamentals

Ticker:
MFGP (NYSE)
MCRO (LSE)

PE ratio : 3.32
Market cap: 6.89b

HP's PE ratio is 6.74
IBM's PE ratio is at 9.69.

All ratios are PE ratio (trailing twelve months).

Price-Book ratio is 0.6371 upon the 30% tumble according to Y-charts.

Rationale for the tumble of 30%

Micro focus issued a profit guidance.

As quoted from Bloomberg:
Micro Focus International Plc cut its outlook for full-year revenue causing its shares to plummet, blaming uncertainty among its clients to sign new software deals.

The U.K. tech company is cutting its full year constant currency revenue guidance to minus 6% to 8%, down from minus 4% to 6%, according to a statement Thursday. Shares in Micro Focus fell as much as 34% during trading in London, the most since March 2018.

Trading strategy - Some pros and cons of the trade

Well, I feel the drop is overdone. In the near term, I would sell off my position once it hits the range of $14 to $15. Any strategic review can mean a boost to its price.

I would fairly say this is rather risky. Operationally this company is not exactly profitable, and is looking to further sell off other businesses it has.

Share buyback programme is ongoing for this counter too. It really depends on what happens in the next few days.

Strong cash position of $2.6b, per latest interim results dated 30 Apr 2019.


Trade quality: 6/10


Below part is reflections updated on 7 Sep 2020

In the end, Micro Focus was sold off at price of 13.25.

It represents a loss of 1.11% and another other commissions involved.

Mistake was simply that you should capture it at a lower price. I could have sold it at prices arond 13.50. However, I required cash for other trades, and i have only limited USD cash.

MFGP was losing in volume and action. Its time to put the cash to better use elsewhere.

Stay tuned!


2 Comments

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  2. Thanks for sharing your valuable information on this article. This post is helpful to many people.stocks4all is a stock related website which provides all stocks related information like new stocks and shares available in the stock market.
    share market
    tax in India

    ReplyDelete