Buying a share is easy, perhaps too easy, but when should you sell a share?
Well, renowned investor Philip Fisher explained all about this in his book Common Stocks and Uncommon Profits. His focus on the qualitative aspects of value investing was a big influence on Warren Buffett and this book deserves a place on the bookshelf of every investor.
I’ve recently written an article for Reader’s Digest that explains when you should sell a share, drawing on the ageless wisdom of Philip Fisher. Enjoy!
Seeing Machines has announced its much anticipated Aviation license deal with Collins Aerospace, the worldâs largest Tier 1 avionics company – as predicted here back in February.
The âexclusive” and âperpetualâ license deal provides a license payment of US$10m ($3m immediately and the $7m balance over the following 2 years). Collins will also pay Seeing Machines non-recurring engineering (NRE) payments to develop the solutions, evolving into potential future royalty payments as products are released to customers.
Although details as to what exactly is covered under the license were missing in the RNS, Iâm hoping to eventually get some answers to those questions from the company. Or, maybe, weâll be treated to a video of Pat Nolan taking a bow in conversation with Paul McGlone. (Certainly, both deserve a round of applause for this deal!).
Muted response
What has really surprised me is the muted response from brokers covering the stock. None issued an upgrade, although they were all positive on the stock. Unbelievably, at the end of a huge week, the price has barely risen in response.
I have a sneaking suspicion that the 333-plane deal mentioned in the infamous âItalian Jobâ video will materialise fairly soon. My guess is that some analysts are keeping their powder dry for that announcement. In the meantime, I can imagine paper-thin âChinese wallsâ mean some salespeople are telling their very special institutional clients to: âBuy, buy, buyâ.
The writer holds stock in Seeing Machines.
Peel Hunt has initiated coverage of Seeing Machines with a 12p price target in a note published last week.
In the note Analyst Damindu Jayaweera argues: âWith EU regulatory deadlines in mid-2024, we are starting to see a ramp-up in requests for quotes in the DMS market. Given its asset-light, flexible opex model, this should yield a Free Cash Flow (FCF) inflection. The well-funded balance sheet de-risks medium term.â
He went on to state: âWe see further potential upside, based on the following potential catalysts:
We predict that the company will be FCF positive by 2026E, supported in the meantime by its cash reserves and the Magna facility.â
Later in the note (Page 10), Jayaweera provided more details on these potential catalysts. âFirst, signing an Aviation licensing deal would lead to a material uptick in revenues, as we have kept them immaterial in our forecasts. Second, Aftermarket product sales and accompanying monitoring contracts have the potential to outstrip our estimates: management is confident it can achieve over 10,000 unit sales in 2H23, >10% higher than our forecast. Finally, a shorter timeline to more equipped cars being on the road would generate upside, as we have been conservative with our royalty earnings assumptions given historical delays.â
For 2023 Jayaweera predicts sales of US$53.8m with FCF of minus $41m. Sales then continue rising to $118m in 2026, with FCF cash flow of $18m.
Certainly, long-suffering private investors should take heart that more and more analysts are starting to beat the drum for DMS and Seeing Machines in particular.
The mantra we should be chanting is: âWe werenât wrong, we were just earlyâ.
The writer holds stock in Seeing Machines.