|
How can it be? I speak here of GTP. They have gone into administration in the last few days. Administration is like Chapter 11 in the USA – it is a last gasp before the final blow is dealt. It happens generally because a company has significantly more debtors than it has cash. This happens because usually its model or management or a combo of both is flawed. And for shareholders and lenders it is like throwing more good money after bad and one day comes when financiers say enough is enough.
Yes sad but true and 45,000 investors and banks and oodles of creditors got caught. Years ago when I was a CEO I actually used to run ‘technical’ checks on any creditors and debtors if they were a listed company just to see how they were perceived by the market and to look for danger signs.
GTP was once a $5 (February 2005) stock – so what a fall from grace. For many of you that have been a client of HUBB’s for years and have been smart enough to undertake education I am sure you would be asking questions about GTP. Such as why and how could investors – including ‘advisers’ – allow themselves to get caught?
Let’s take a look at a simple daily line chart:
click to enlarge
Looking at such a line chart does not bring you into the ‘technical analysis’ realm. To my mind it is a natural thing to do – to visually see what price has been doing.
The above is of course history and it is easy to see what has happened but I am going to go back in time – to the top - $5 but on a weekly chart:
click to enlarge
And what I have drawn there is a simple trend line – a line of best fit at the base of price.
At some point in time one needs to get out when a stock is falling. For me that is when price or a market – as with the All Ords a year or so ago – falls below the weekly trend line.
And so you may say “Tom this is an old lecture”. Yes that’s true but I know many educated investors do not follow their basic rules and in any case it is good for us all to have a friendly reminder to revisit our rules and to make sure they are still relevant and in place, ready to be invoked when needed.
Enjoy the ride
Tom Scollon
Chief Analyst
|