Thursday 29 November 2012

Can Invensys revive AIM?

Invensys PLC (ISYS.L)The Execs at Invensys deserve their champagne today after the deal announced to sell their Rail Unit to Siemens for a price not unadjacent to the share price for the whole business. Now analysts are speculating that there may even be a counter-bid.

For years the management have said the company is under-priced, but the Markets of late have been uninterested in long-term value stories. They saw a pension deficit and a boring company. Plus the markets have been moved by macro events for some years now. What a company was actually doing, or whether it was any good in its markets, has been of little interest. Value Investing had gone the way of the Dodo and those who practised it had gone to the wall unless they had very deep pockets.

For the smaller AIM market, this has proved a toxic mix. Poorer retail investors have pulled money out, day traders and high frequency trading rule supreme and the net effect has been a huge drop in volumes and a massive spread of P/E ratios. Companies that were highly valued on speculation then drop - even as they deliver on their business plans. Crazy city lore such as buy the rumour sell the news seems to have been applied without thought (this is the role of algorithms after all).

But one day, the tide will turn. Pure momentum trading has been suffering from the law of diminishing returns and then there are companies like Invensys that can suddenly show a huge return for the patient investor.

A move away from macro risk-on/risk-off would be a welcome boost to the markets and indeed will help companies to complete placings and raise finance again to get the markets moving again which in turn will feed through to the real economy fairly quickly.

4 comments:

DJK said...

Really, what is the point of the City of London (a shorthand term) if it's not to invest in British companies? Jaguar Land-Rover springs to mind too.

OK, the City supplies the pleasures and profits of a giant casine to the inhabitants of central London, but how exactly is the gross distortion in British government policy to indulge the City helping the rest of the country?

I realise, of course, that a dearth of investment is the flip side of the continuing attacks on private pensions by successive governments.

CityUnslicker said...

I think the problems with the capital markets are driven by the fall in savings due to low interest rates, the use of HFT with momentum strategies only and the ongoing effects of the financial crisis.

All these issues are global and effect global capital markets - its got feck all to do with London/Regional UK fight in the UK. of couse some people wish this were so, generally those who suffer from a form of regional envy.

I don;t see the Govt indulging the city much at the moment beyond keeping interest rates to low for which there are perfectly sensible policy reasons; I just happen to disagree with them.

Jackart said...

Thanks to Invensys which I have been quietly picking up for a year, I have enjoyed my best day ever yesterday.

Agence communication said...

wel said i like this so much and as well i enjoy it a lot "" The Execs at Invensys deserve their champagne today after the deal announced to sell their Rail Unit to Siemens for a price not unadjacent to the share price for the whole business. Now analysts are speculating that there may even be a counter-bid.

For years the management have said the company is under-priced, but the Markets of late have been uninterested in long-term value stories. They saw a pension deficit and a boring company. Plus the markets have been moved by macro events for some years now. What a company was actually doing, or whether it was any good in its markets, has been of little interest. Value Investing had gone the way of the Dodo and those who practised it had gone to the wall unless they had very deep pockets. ""