ASOS have dropped quite significantly in the past week for no particular reason and I view this as the perfect opportunity to invest as I can see them bouncing right back up to the 5.50p mark in the next 2-3 weeks. STRONG BUY!!

Surely the time to recommend selling a share is BEFORE it falls through the floor, not afterwards, when it's likely to stage a recovery.

This seems similar to the situation with MFI last year their sp slumped due to distribution difficulties hitting sales, but I bought when the shares were down and made a handy profit once they began sorting out the problems and confidence returned.

RD: Your approach is known as 'Contrarian Investing' based on good instinct...long may it continue to bring home your gravy! As for the Shares Sell recommendation today, I think you are right in your damming judgement, they should have called it before now....let's all hope they don't go the way of the Investors Chronicle!

John

Good points, both of them RD.

The market seems to think so too, holding at 57p, only 0.5p down since the Shares sell note.

Not so with poor old DEMG to which I am clinging like the wreck of the Titanic - still the orchestra sounds very nice to night, dear, don't you think?

SD

SD: Had a quick look at DEMG, for those LONG it is really a question now of how much pain you can take. The Charts suggest it could easily fall by another 50% or so! You must love the torture or have an arbitrage position running? John

jgt - I wish I did have some sophisticated safety net - alas no.

I shall sit it out a little longer to see what transpires. Seems to be holding steady currently at 17p bid a smidge off its floor so far today.

SD

I am no chartist nor do I claim to be an expert, but given the current climate the shares did look expensive at 80p.

I have no doubt that the company is excellent, me and friends buy from it and it is popular among young people. However, I think there are other better things to be in at the moment.

If you are holding for the long term, then good luck all, hopefully you will be ok.

Legend

In spite of nothing bud red and some sizeable trades at that, price seems to be holding firm at 55p mid.

Guess MMs quite happy to take on board a fair amount of stock (1.28m shares traded so far today). Do they know something - or is it just fair value on fundamentals we are seeing reflected here? I think the latter - there can't be much more to know about such a widely exposed company. Perhaps the directors have been unduly pessimistic about the effect of the warehousing problems on the out turn for the year which will be better than recently supposed??

Pathetically grateful Shares has not crucified more than one of my holdings today!

SD

I visited the stand at Master Investor and he had a lot of booklets that no-one would show much interest in. I believe it will return to good but not yet. The TA (if you are a tech believer)after the recent falls shows a clear fall for a while, maybe even down to the 30p mark. Although it is stated that warehouse is the problem we should see a turn around before putting faith back in the sp. Furthermore wait for all the retail ASOS's to buy / read their copy of shares magazine tonight when they get home from work.

imho sell up and buy back in June.

I really think that was about the worst recommendation I have seen from Shares. If it had been a report by John Marshall then it would have been well-researched - it may just possibly have ended with a SELL recommendation. However, John is a holder of ASOS and has written informative pieces in the past. If he had been involved he would have given a balanced opinion and would have talked with the company (they may though be in a close period). Quotes from the article: (1) "ASOS said last week that it was having more problems in its warehouse and current-year profits would be around 1.1m to March 2005"; (2) "This was below some expectations indicating slowing growth"; (3) "Though prospects remain bright the best is over for shareholders".

Someone who knew the company well and had studied the RNS would not have made these comments. First, the warehouse problems related to the Christmas season, when, because of volume, they needed to operate from four warehouses and systems were not geared up to that, resulting in delays to getting new merchandise onto the website and sales at lower prices in January and February. The new warehouse is coming on stream mid-May. All other indicators are positive. ASC is not "having more problems" - it has had problems.

There is no indication of "slowing growth". This is a problem of accelerating growth ahead of budget. Sales in Jan and Feb were up 120% and 140% respectively. "As a consequence we are bearing the costs associated with higher volumes but without the costs assocaited with them".

It is a mroe reasonable conclusion from the RNS that sales growth will be strong in 2005/6 and a considered conclusion may well be that another summer of growth awaits shareholders. The best is not "over".

I intend to write to Shares in a less critical mode but suggesting that we have definitive comment from John Marshall in the next issue. I will post the letter here.

Eric

Don't think this has been posted yet, from pat lays small caps section on TIM 03.03.05. Nothing new, but worth a read.

As seen going cheap

NICK Robertson, chief executive of on-line retailer Asos, probably has always known that the market success the company achieved last year - the shares rising from 5p to more than 80p - would be difficult to maintain, but I doubt if he ever considered he would be too successful for his own good.

A trading statement today said profits for the year to 31 March are now likely to be between 1.05m to 1.2m. Although that compares with 625,000 in the previous 12 months, he says 'this is a disappointment'. And the market agreed with him, hitting the share price by more than 7% as the news sank in.

Like many a conventional retailer before him, Mr Robertson found a problem of having too much stock that had to be off-loaded at knock-down prices. It is an indication of the size of the problem that January sales were up 120% and February 140%, but the company says: 'As a consequence, we are bearing the costs associated with very high sales volumes but without the gross margin to support them.'

The company has been operating out of four warehouses and that meant stock that should have appeared on the website before Christmas was being offered in January and February. It is some comfort that the group has now signed terms on one new 70,000sq ft warehouse which it hopes will be operational by May.

Rhys Williams at Seymour Pierce is one who has not lost faith, however, even though he is revising his original profit forecast downward from 1.55m to 1.1m. He says any weakness in the share price should be regarded as a buying opportunity. So, as Hughie Green - who more-mature readers might remember - would have said: 'Opportunity Knocks'.

oops missed a bit!

John Morgan and Quentin Griffiths, who left the board of Asos last year, have set up e-retailer, a new company to invest in, and encourage other online retailers (of whom there are many I am assured) to develop their operations and make their own way to market. They plan to raise 1m and come to Aim early next month.

Maybe some future Competition?

Thanks Eric - I' right there with you. Look at the fundamentals post-new wharehouse.

Also thanks to dawsinho for interesting post. Will QG get lucky again withouut NR?

I always preferred Michael Miles - open the box / take the money!

SD

SD Shows your age! These young folk won't know what you're barking on about!
Well done, dawsinho. Competition is necessary as it increases the development of the overall market to the benefit of the innovative leader. The key figure will be SP's forecast pe for 2005/6. PBT between 2.5M and 3m in my book or a pe of c. 13 at current prices. "Opportunity knocks" but for how long? By the way, John Marshall, I believe, will be in tune with SP and will be singing from a different hymn sheet to Shares mag. this week (actually they are in concert with Evil!). I bet he is remonstrating with them right now!

Eric

Yes, but I caught you, Eric, didn't I!

Did you say "yes"?

No.

Boinnggggg!

SD

Copy of letter to editorial@shares.msm.co.uk

Dear Sir

Is the best over for ASOS and its shareholders?

In January, John Marshall painted a rosy picture of the future for ASOS. Whilst accepting that trading margins were down over Christmas, he remained a committed investor in the company.

Today's Shares marked ASOS as a Sell at the much lower price of 59p. The claim was made that ASOS was "having more problems in its warehouses"; the profit forecast was "below some expectations indicating slowing growth". For those of us who follow the company closely, this profit warning was the first time that ASOS have acknowledged warehousing problems. They are the victims of their own success in outstripping capacity through sales success; this has caused the need to split stock over warehouses, causing, in turn, delays in updating the website during the critical Christmas season. The result has been an extended sale during January and February which, whilst resulting in average monthly sales being up 130%, has damaged margins.

The new warehouse comes on stream in May. It should then become apparent that this has been merely a blip in their progression. The observation of "slowing growth" is unfounded, as can be seen from current Hitwise figures. I believe it to be important that John Marshall is allowed his say. If he is a seller of ASOS, so be it, but I would be mightily surprised. I suspect he is quietly tucking away more shares in his portfolio!

Eric Robson

Don't tell me, I got it , wait a minute it's, yes . . .

Stairway to Heaven

Hoy, stockdog, you pinched that bone from bos on the SEO thread! Naughty boy! Mind, it just could be that with ASC, although its more likely returning from the coal cellar. Perhaps that's where you hid your bone!

Eric

Apologies to bos - bone returned, bit chewed, but still intact. Thought it was mine when I found it under that pile of non-laminate lids. What you might call a marrow escape - arf, arf!

So ASC survives the Shares attack, having recovered from the same low as 27th September, giving a good symmetry to the chart . Good letter, by the way.

Admit to being deeply infuriated by my own stupidity on DEMG where I allowed myself to be shaken at the lowest price yesteday, I do wonder what in-house rules Shares has for its staff and contributors who have a position in the shares they write about. Looking at DEMG at the end of today, it just feels like the writer of that article was purely opportunisitcally shorting the two stocks. Do you think that is possible? If so, the FSA might be concerned by it. It did seem highly gratuitous at this late stage, after recommending both as buys originally - suspicious, I call it.

Older, wiser, poorer . . except for all my other holdings which went blue today - DOO, BFC, DFD and of course our old favourite SEO looking strong for next week, as you say on that thread, not to mention my mines and oils - such a comfort during this cold snap I find.

Eric, when do you sell a new stock with no profits as a guide and a vertical rise behind it - when you stop believing, when it falters, with a tight trailing stop loss, or never? Can't settle on a philosophy that feels right. Ideas welcome.

Happy weekend everyone.

SD

stockdog

I really liked that 'marrow escape' presumably you'd sucked bos's bone-marrow dry! lol!

I expect that Shares give the plays review section to a trainee to learn the job; no malice, just incompetence. It seems to be about stop losses being triggered rather than a real analysis of the fundamentals. I don't know DEMG but companies like MLS, MDW and HCEG have found the going slow in dealing with the NHS. My key question for Shares would be: On what do you base your statement that 'there are plenty of competing devices which seem to have brighter prospects'? Where is the research to back this up? Its easy to write these short paragraphs but I won't comment further until I see the trading results on Tuesday. When the profit warning was given in January it related primarily to the delay in the signing of NHS contracts; they also stated that they reckoned that they had enough cash at 1m to see them through to profitability. The cap is down to 10m - is this too high or too low?

I don't think its easy to make decisions on new stocks. Take GGK, launched a few days ago and recommended on the GMC site at around 1.7p; doubled the next day and if I had read the advice earlier, I would have taken my profit and run. Today they went to 5.75p and the company issued an RNS referring to an acquisition as their interpretation of why the price had moved. I think there is a great deal of uncertainty where there is no track record. I prefer to focus on the 'emerging company' where there is a track record and the company is emerging into profitable trading. Examples would be SEO, ASC, GMC where there is a track recod which you can check out, weigh the sp against the fundamentals and make your decision. But I would tend to put DEMG into this category - their problem in comparison with SEO, for instance, may be that one is dealing with the NHS and the other is dealing with ASDA! Having been introduced, however, I will put them on my watchlist. If they've been over 30p they can quite easily return there; MLS are a similar candidate.

Eric