Just a quick update to the recent post on Alliance Pharma (APH) about the welcome news of their anti emetic drug being approvable. At the time I thought it might be positive for earnings but not until next year and since I wrote that I saw reference to a broker saying it could be worth 10 to 15p onto the share price.
Since then the shares have moved up from the 90p they were at the time to around 100p having gone xd the final dividend of 0.888p on Thursday this week. Having seen the shares double in under a year I think the re-rating has probably nearly run far enough as it is now trading on around 20x December 2019 earnings, although of course given the above these may at some point be upgraded if the launch goes well. The yield is also now well below my usual 2% threshold too at 1.5%.
Thus following my valuation discipline and ignoring all the suggestions of running your winners, I have reduced my own holdings this week post the XD for risk control and to rotate into a better value higher scoring stock. I note that the current CI Score would also mean it being sold for the CISP if it were being screened this week.
In addition on the chart the shares are overbought (although they could of course still get more overbought) and there is negative divergence on the RSI which normally pressages a correction. They are also very extended above their moving averages and have had a very large one month return. It is also well known that there is a tendency for mean reversion of big one month moves which is why price momentum indicators (including the one available in the CI Scores) tend to be based off of 12 month - 1 month performance to correct for this effect. I also note the gap on the chart at 90p and I have noted in the past that these usually tend to get filled if you are patient. So I'll set myself an alert to perhaps revisit it as and when or if it should get back down there at some point.
Finally in case you are wondering I started a holding in Ramsdens Group (RFX) with the proceeds which is a high street currency provider, pawn broker and jewellery retailer. This is on around 11x with a 3.5%+ growing yield & a clean balance sheet and scores very well on the CI Scores and the Stockopedia Stock Ranks too. I do note however that recent support is closer to 180p and there's also a gap on the chart here at about 145p which might be a more interesting longer term entry point if you are patient and of course depending on how the shares have come to get back there if they should.