Views on Life & on Equity Investing

Wonder, Wealth & Abundance

ABDP UK – Dream investment

with one comment

What a dream type of investment this was for a buy and hold investor – ABDP UK Ltd.

I earlier wrote about it here: https://lifeandequities.wordpress.com/2018/04/13/abdp-uk-ltd/

https://www.abdynamics.com/

Since the IPO in 2013 the company has been a 13+ bagger since placing its share on AIM market at 86 cents per share.

i.e. 68% CAGR since the IPO.

They were always punching above weight and had blue chip clients to start with. I had bought it for the Fund and investors sometime in September-October 2017 at ~5 GBP at 22 times earnings and 5 times revenues and sold recently at ~10 GBP.

ABDP

What the company does ?

It makes driver-less testing cars and motorcycles software and hardware.

Who uses it?

All automotive companies in the world

Why I bought it?

Two reasons:

1/ Because I read a statement in its corporate presentation “Our products are routinely used by 20 out of 20 top automotive companies globally”.

One qualitative statement is all you need sometimes than a boat load of scuttlebutt! I knew that everybody’s uncle is investing in driverless car for R&D.

2/ Company was expanding factory to meet more demand

Other reasons:

3/ I love companies that are Global and not dependent on single geography

4/ Niche company with the primary sin of being a small cap. The best kind of sin. I don’t yet, have the problem of investing 100s of millions of dollars.

Why I sold?

I get uncomfortable when a company trades at 10 times revenues and 50 times earnings if the juice of efficiency and operating leverage has been extracted and the secular growth is not above 30%.

The company could still be a long run winner and have respectable growth of 20-25% in revenues ahead but I don’t think it will be easy to replicate the past performance in stock price now that it trades at 50 times earnings. Something very spectacular would have to happen to grow at even 30% CAGR in share price let alone 68% that it did in the past.

I think its time for individual and small institutions to quit and let the big Funds who are satisfied with 10% CAGR invest in it.

6 out 10 such investments is all one needs. Damn, I will be satisfied with 5 out of 10.

 

Disclosure: Vested interest in positions discussed. Views are personal notions and do not represent any organisation or company. Investment in stock market can (and many a times do) result in loss of principal capital.

http://www.elevendimension-funds.com

 

Written by amitdipsite

June 23, 2018 at 9:57 pm

Posted in Uncategorized

One Response

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  1. Hi Amit,

    Is sharp India a good stock to buy for long term, promoter holding is also very good, kindly suggest.

    Regards,
    Shailesh

    Shailesh

    June 26, 2018 at 8:10 pm


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