Two of the hardest questions an investor has to answer are these: when do I sell a very good performer or a very poor performer? And the second question is this: when should I take on the short-term nature of the market and dollar cost average to lower my cost base of a poor performer?
Right now, I’m pondering whether I should take my whopping profit I’ve made on that great company, Macquarie, but that will be a debate for another day. However, the three stocks I’ve got on the mat and taking a hard look are Megaport, Audinate and Tyro, or let’s call them my MAT stocks.
ZIP
My gut tells me I should buy more — dollar cost average down what I have forked out to hold these once highfliers. Making me focus on these losers is the fact that we did well buying Zip at 40 cents and it’s now $2.69. Of course, we made a lot. But we also lost a big chunk of that gain when the stock went from $12.35 all the way down to 26 cents. But at least we bailed out a long time before the bottom was struck.
If I simply want to accept what the analysts are saying with their price targets, the question of should I buy more of MAT is easily answered and it’s Yes with a capital Y!
Here are those price targets and predicted rises, thanks to FNArena.
Megaport (MP1): consensus +61.2%!
Audinate (AD8): consensus +34.7%!
Tyro (TYR): consensus +96.3%
Looking at these ratings of these recently poor performing companies, it’s clear that not one analyst recommends that stock players should sell these stocks.
For Tyro, the count is 5 out of 6 say “buy!”
For AD8, two analysts are buyers. while two are holders. And for Megaport, three out of five are more adders than sellers.
On Tyro, the survey of analysts was before the Federal Government decided to ban debit card fees. When the news broke on October 15, Tyro’s share price fell 12% to 80 cents. It’s now 77.5 cents but the market is down 1.3% from that day. My research says the hit to Tyro’s bottom line was seen as bigger by the market than what reality suggests, making me think the current price is a good dollar cost average play and a nice entry point for non-holders of Tyro.
I think all three stocks in MAT selection will be beneficiaries of lower interest rates and some of the negativity could be related to the impact of high interest rates on the costs of these business and the demand for the services these businesses work with, such as hospitality and entertainment.
One of the important points of assessment when buying a beaten up stock, is to ask this question: Will the trading environment be better for these businesses in a year’s time? If the answer is yes, then it could indicate that a nice annual return is likely when say interest rates are lower, people are going out more and the MAT operations will be beneficiaries of lower rates and the great economic activity that comes from lower rates.
With AD8, the Macquarie 69% rise was made before the latest results, but the other three analysts reacted to recent results, and they made their comments only five days ago.
This is what FNArena said of the UBS report: “UBS maintains its faith in the longer-term fundamentals of Audinate Group but recognises near-term uncertainties need to be worked through after a “soft” 1Q update by management.
“The analysts always felt Q1 would be the weakest quarter due to prior over-ordering by customers. Lower gross profit guidance was the result of ongoing challenges including softer demand, shorter lead times and increased inventory, explains the broker.”
These guys still see a 42% rise for the year ahead.
And what about Megaport, whose chart shows how disappointing this company can be?
MP1
The one standout observation from this chart is the fact that it seems to be around a price where there has been plenty of resistance to go much lower.
The most recent analysis of MP1 comes from Macquarie, which underlined some problems with the company’s pricing compared to its rivals, but it still maintained a 54% upside call, after slashing its target price.
This is how FNA reported it: “Macquarie slashes its target for Megaport by -21% to $10.70 following recent channel checks where customers reported Megaport was more expensive, especially when using Amazon Web Services (AWS).
Based on financial year 2024 results, the analyst believes charges relating to port hour fees and a data levy are being removed for new customers.
Despite pricing concerns, the broker retains an Outperform rating as there is already a repricing of the back book implied in the current share price.”
The bad news for MP1 came in August and Macquarie made its new call around mid-September.
I think all three companies in MAT group are worthy of consideration for dollar cost average players and those wanting a speculative punt.
Remember, these companies are not like BHP, which is a quality company that has been beaten up by the market and is bound to do well in the future on lower interest rates helping a stronger global economy and greater Chinese stimulus. It also has a great exposure to copper, which is a metal that will be in demand in the hi-tech future that lies out there.
Important informati on: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
