The relationship betweenand is the relationship between the reality and the perception of that reality in a . The fundamentalist searches for the ’s real value by studying the company’s . The technician studies the impact of ’ perceptions as they are reflected in the share’s and .
The share’s price and volume movement can also sometimes be a good indication of the inside information known only to a select few within the company.
The investment analyst community mostly relies on a detailed evaluation of the financials supplemented with information obtained from the company’s top executive in interviews. The problem with that is that the company’s financials are anything between 3 months and 15 months old which tends to limit their value. Furthermore, the financials are not always an accurate representation of what happened in the company (as has been the case with Steinhoff, Tongaat et al).
But there can be no doubt, however, that, despite their limitations, the fundamental facts, when they are known and accurate, do impact share prices.
In the case of Aspen Pharmacare (APN), it published itsfor the six months to 31st December 2020 last Friday (12-3-21). On the day, the information did not have a major impact on the share’s price – which implies that it had mostly been ascertained by the investment analyst community and contained relatively few surprises.
Everyone knew that Aspen was trying to reduce itslevels. By the end of 2014, the had allowed debt to reach unacceptable levels and ultimately had to sell its European Thrombosis and other assets to bring the debt down. By 31st December 2020 debt was down to R27,7bn from R35,2bn six months before and finally within the company’s . A further R7bn was expected from the sale of the European Thrombosis assets which would bring debt levels down further to just over R20bn. Consider the :
Here you can see that until the start of 2015, six years ago, Aspen, anfavourite as a share was rising steadily. Then the analysts began to become concerned about its debt levels and the share entered a period of movement with declining and at about R244. Those fears reached a climax in September 2018 and the share fell sharply to levels around R70 by August 2019 as the investment community tried to digest the implications of its over- .
From that point the recovery began as the company’s board of directors realized that they would have to sell assets to bring the debt back under control. Their seriousness about reducing the company’s gearing resulted in a new upwardwhich is still in progress.
In our view, this is a massive international pharmaceutical company which offers thea solid rand-hedge. It is inherently , and it is in an industry whose high- products are always going to be in demand. If had not become excessively enthusiastic about new , gearing levels would have remained under control and the growth path up to 2015 would have continued indefinitely.
The current situation therefore represents a. This share, which you can buy for under R150 today, once traded for R434 – so we believe that there is still plenty of .
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