Longs said it is Cheap......I say don't touch it yetFact No. 1 Never listen to the old longs in this board. They cried it is cheap, it is cheap every time after a selloff like a record on replay. Every time comes another 30 % drop. So it is better we assume they are fools and clowns rather than they open their mouths and leave us no doubt.
Fact No. 2 the word CHEAP has meaning depends on the circumstances.Longs say it is cheap because fundamental analysis shows that. I acknowledge that. Just remember all numbers used are dynamic and should take it as is for the moment. So let me look at it if we may invest in it like a value stock which is undervalued. The analysis is based on the current numbers and the assumption that the projected revenue will not be terribly impacted by the overhanging issues of CMS and unforeseeable insurers cutoffs that may follow. The magnitude of the impact is in fact unknown. Another assumption is coming acquisitions will add revenues to moderate some losses in revenue as mentioned above. So the scale and quality of the acquisitions is another unknown. The time factor is important. I see that it is high probability it could take a few quarters before any result to remove the uncertainty. Deals always take time to get signed and no guarantee every talk will turn to a deal. So at this moment I will put the company on my watchlist.
Fact No. 3 Fundamtals do not move share prices. It is always the market perception of the short term prospect of the stock that moves it. That is why we have value stocks waiting for the market to pull the trigger. The market sentiment on this stock warrants further downside if no good NR in between quarters. Never buy on a well established downtrend like CRH now until I see confirmed signs of a share price turnaround. A stock can be oversold and undervalued for a long, long time.
Fact No. 4 with all of the above in mind I avoided all selloffs. Check my previous posts on CRH.
Fact No. 5 Smart money ran for the hills leaving it a short term traders' stock with no firm support levels. Volatility is the name of the game.