...it was oh so quiet. I last wrote about this one back in September after their Q1 IMS. At that time markets had been becalmed and quiet as is often the way at that time of year. IG had fallen to the bottom of their range at the time and I felt they looked OK if not outstanding on around 14x with a 5% yield and I said: "being oversold there may be an opportunity to get in for the medium term if their business and financial metrics appeals to you."
Fast forward to today and they have put out a strong Q2 / H1 Pre Close IMS benefiting from the increased market volatility in their 2nd quarter. On this they said:
"client activity levels increased significantly in the second quarter, particularly in October, as the financial markets presented considerably more trading opportunities. The company performed very well over this period and will achieve quarterly revenue ahead of its previous highest quarter at the end of the 2013 year. This will place IG in a robust position as it enters the second half of the financial year."
So nicely set up for some good interims and possibly some upgrades to full year numbers, although I seem to remember that last years second half will present tough comparatives so I wouldn't get carried away. The other reason for caution is the fact that the shares are now 100 pence higher than when I last wrote at 670 pence this morning and this leaves them on a fullish looking rating of around 16x with a 4.4% yield on limited dividend growth forecasts which suggest a dividend of 28.4 pence (source: Stockopedia). However, there's a chance we will see upgrades to both earnings and dividends on the back of this update which might make them look better value.
Technically as you can see in the chart above they have now rallied to the top of their one year range which has been between about 560 pence and 650 pence and they have this morning broken out to a new 12 month high and they are now close to being over bought. Momentum traders like to buy stocks that do this as the theory is that stocks at new highs put investors off or cause some to take profits when in fact it is a signal that the business is improving and therefore under priced as a result. I guess this could be true in this case given the update and the possibility of upgrades. In addition technical theory might suggest if it has broken out of the range then it could progress by the extent of the previous range, which in this case would give a target of around 740 to 750 pence or 10% or so on the upside.
Summary & Conclusion
A not unexpected strong update from IG Group today given the recent volatility in the market. This sets this well managed group up for a strong first half and possibly some upgrades, although tough h2 comparatives may mean that analysts are cautious with their numbers. Technically the shares have rallied from the bottom to the top top of their twelve month range in short order and are showing signs of breaking out which could lead to further upside. If you are a momentum jockey then you might want to jump on board for this, or if you are a Timmy trader and got in at the lower levels, then you might want to take some profits soon. Personally I'm happy to hold for the medium term, although I wouldn't be buying more up here, as I did that in September! Probably best to wait for when its oh so quiet again if you like the story here and are not a momentum jockey, if not enjoy a eild ride with the wacky Bjork song instead.