"On the face of it, our suggestion that readers buy shares in Kromek, the Aim-listed maker of advanced detection equipment, has not gone well.
We first tipped the shares at 27p in March, and reiterated the advice at 29.75p in May, and at 26.63p the following month. At 23.25p last night, readers who took our advice are sitting on paper losses of 13.9pc, 21.8pc and 12.7pc respectively.
But this is a case where it looks as though the market may have got it wrong something that is more likely in the case of a small stock such as Kromek.
Various factors can cause the market to misprice a small business, ranging from technical devices such as stop-losses to simple impatience on the part of investors. Gervais Williams, a respected investor in smaller companies, who holds Kromek in his Miton UK Smaller Companies fund, said that because there hadnt been much upward momentum in the share price, even a small amount of trading in the stock could move the price.
To some degree this can be self-fulfilling in the short term, he said, pointing out that some recent falls will have triggered a few stop-loss limits for some small holders, leading to more selling.
He said disposals by another fund management firm might also have been a cause of recent weakness.
Williams added: The key fundamental is that we are all excited about the potential orders for Kromeks products, and if these announcements take a while to arrive then the market gets a bit bored. The lack of momentum does leave the share price at risk after a short-term spike.
"I suspect we will see an institutional investor stepping in at some stage to see if there is any real volume of stock about. I dont think there is, and after a few days, all things being equal, I assume the price will revert to where it was previously.
Currently the shares are flirting with record lows close to 20p. If Williams is right about the trading dynamics, we can perhaps expect them to return closer to 30p which would of course represent a substantial increase.
Ultimately, though, Questor is more interested in companies that have good products and can sell them profitably than in the day-to-day moods of the stock market.
In this respect, Williams is unworried. Am I holding? You bet, he said. In terms of conviction in the company Im not the least bit bothered.
Readers can also take some reassurance from the fact that there has been some small-scale buying by Kromeks directors at the depressed share prices of recent weeks.
Yes ,not happy.Its been a steady drift down,although its not popped below mid twenties for some time.As usual PIs are the last to know....
Topped up recently but I may add soon unless there is bad news around the corner?
If we knew why we would all be wealthy people.I just buy on weakness and prepare to bail out sharpish if there is something fundamentally wrong-I've learnt the hard way.
Another contract announced today.
Today 14:16We already know that the Civilian defence dept. in the US has been testing KMKs technology in Wahington in the thousands of units successfully ...with the potential to rollout and equip dozens of US city's with KMKs devices.
What we did not know, until now was when would the US Army start to implement interest in the same handheld devices such as KMKs....confirmation indeed that the US army are moving forward on purchasing this technology.
In March we tipped Kromek, the maker of hi-tech sensors including dirty bomb detectors, as a buy at 27p, impressed by the enthusiasm for the stock of Gervais Williams, a fund manager He pointed out that the company was on the brink of breaking even and that any increase in sales would feed straight through to the bottom line, as research and development accounted for most of its costs.
In a trading statement last week Kromek said it expected a step change in revenue growth this year and confirmed that its products continue to gain traction in all business segments.
The shares have risen by 10pc since our tip, which followed several months of falls. Mr Williams said: Although the share price has recovered to a degree, we are happy to retain our clients holdings.
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