Divining meaning from prices

If I were a price-watcher, I would be worried about Thrifty 30 member Autologic‘s share price. The company that transports cars for motor manufacturers and distributors has been on the slide since the day I added them to the portfolio in June 2010.

The share price has roughly halved.

But I’m a fundamentals watcher and the company seems to be turning slowly around, or at least stabilising, under a management team that previously turned Universal Salvage around. It’s said nothing particularly scary this year to lead me to believe that we’ll experience a major reversal when it publishes its preliminary results next March. Little bumps, due to the end of the scrappage scheme that temporarily increased demand for cars and lack of economic recovery, are to be expected.

Now here’s the wrinkle in the market (perhaps).

Last month there was a huge change in the shareholder register. Investment company Guinness Peat sold its entire shareholding, 26.2% of the company.  It looks like Invesco picked the shares up.

Guinness Peat’s sale was not a vote of no-confidence. The investment company announced a year ago it’s selling off its minority shareholdings to focus on wholly owned Coats.

But, if investors have known for a year that Guinness Peat is preparing to dump a quarter of the shares in an out-of favour company on the market wouldn’t that depress the price temporarily?

Perhaps I’m grasping at straws, and the explanation for the price weakness will prove to be more fundamental, but if its not, I’m thinking it might be time to think about adding more shares to the Thrifty 30, particularly if the results are reasonable.

I’m going to write a two minute monologue and see what that tells me.

One thing I will have to include, is negative though. The management team led by Avril-Palmer Baunack, brought in to rescue the company, have not invested a single penny of their own money. Why not? They’re very well paid, and in the driving seat.

John Talbot, the recovery expert turning Johnson Service around, sets a better example. He now owns nearly 2.5% of the company he’s rescuing.

I’m also intrigued by Coats, which is my kind of company: a ‘world leader in sewing thread and needlecraft products’ that also produces the fiber used in fiber optic cables. It has a long history, and it’s hidden in Guinness Peat.

But soon it will be all that Guinness Peat is, and since since the financial statements on its website go back to 1999, it should be fairly straightforward to decide what it’s worth. I wonder how it compares to Guinness Peat’s market valuation minus whatever investments remain in its portfolio.