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That’s a very good question. What do a retail candy store chain and an IPTV company have in common? At first glance, it would appear that the answer is “nothing”. May I suggest that on this date, 15 July 2013, they both prove that what they teach in art appreciation courses is true. That is, “Don’t stand too close. You have to back away from the picture to fully appreciate it.”
I’ve discussed this in the past, but Thorntons’ (LSE:THT) and Amino Technologies’ (LSE:AMO) share prices today prove the fickleness of the short-term, quick-trade style versus the wisdom of having the confidence to make long-term investments. The share price of both companies dropped this morning. Thorntons’, the popular candy retailer, had fallen 6.19% from 97.0 to 91.0. by the noon hour. Amino had dropped by 8.29% from 90.5 pence to 83.0. So the question now is, “Why the drop?”
The obvious answer would be that Thorntons issued a 4th Quarter trading update and that Amino reported its six-month interim results. And the conclusion that would follow is that both reports were negative in nature. But, au contraire, mes amis! They were both excellent reports by any standards.
Thorntons reported UK commercial sales growth of 11.8%, international sales growth of over 100%, and private label sales growth of 210% for the final quarter. Total sales for the year increased by 5.6% to £26.8 million. No profit numbers were reported, but the company said that the figure is expected to be ahead of market expectations.
Amino reported a 1st Half operating profit of £2.6 million as opposed to £0.2 million for the same period in 2012. EBITDA increased 83% to £3.3 million and net cash rose by 32% to £18.2 million.
So, we have to conclude that the “obvious” cause of the falling share price must not be the regulatory reports. It has to be something else. Perhaps it is a gloomy outlook by the CEO’s. Of course, that doesn’t make sense. Any CEO is going to say that the outlook is good even if the company was staring into the headlight of a freight train. And, in fact, both CEO statements were quite positive.
Well, then it must be that these good reports are the only good news from a company whose share price has been in trouble for quite some time. The information must be misleading. Let’s check.
- On 17 July 2012 Thorntons’ share price was 23.73. That price increased steadily throughout the last half of 2012 and more dramatically in the first half of 2013. In the past year Food and Drug Retailers have remained relatively flat, up 14.68% as a sector. Thornton’s share price is up over 300%
- Amino’s chart is amazingly similar, although it’s assertiveness began in December 2012. On 17 July 2012 its price was 51.0 pence. Before today’s decline it had increased by 79.3% during the year, fairly well aligned with the growth of the Technology Hardware & Equipment Sector, which is up 61.1% on the year.
Well, that’s not the answer either. These companies are excellent examples of the wisdom of long-term investing, just like standing back and looking at the picture as a whole. So, why has investor trading caused these two companies share price to drop today?
Frankly, the only answer that makes any sense to me is what I mentioned earlier – the fickleness of short-term traders. As the great financial guru, Forrest Gump, said, “Short-term investors are like a box of Thorntons chocolates. You never know what you’re going to get. And some of them are nuts inside.”
