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My attempts to add a growth component to the portfolio have been pretty disastrous, I have to admit.
I dumped Quindell back in October when I decided I didn’t trust its management — and if I don’t trust a company’s management, I’m out regardless of anything else. The price was down 29% to 139p at the time, and it’s since crashed to 62p. I now expect it to go all the way to zero.
What killed the video star?
My other growth pick was video advertising technologist Blinkx (LSE: BLNX), which rose impressively. From a purchase price of 36.9p back in July 2012, the shares soared to more than 225p by November 2014. But since then it’s been downhill all the way to 23.5p. What went wrong?
Blinkx has been under pressure from a short-selling attack, with the seller having recently been revealed as $6.5 billion hedge fund Tiger Global, operating through Cayman Islands subsidiaries to avoid disclosure rules — and it turns out the same outfit has been heavily shorting Quindell.
But short-selling alone isn’t enough, and Blinkx’s performance has been weakening badly. For the first half of this year, reported on 11 November, the firm slumped from a reported pre-tax profit of $10.8m to a loss of $9.7m (in adjusted terms from plus $15.2m to minus $3.4m). That was in large part due to the company not really having noticed the massive transition to mobile computing and having stuck with its desktop offerings.
That’s a big red flag for me, at a crucial time when Blinkx was supposed to be growing its earnings, and it means it’s lost its early momentum and whatever first-mover advantage it had. So I’m out, at a loss, recording the sale at 23.5p as the offer price on 1 December at 4pm, and adding £299.97 in cash back to the portfolio.
A proven winner
But I still want a solid growth aspect, so I’m taking the cash from Blinkx and adding it to the money from selling Quindell, and I’m putting it into ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US).
ARM is a company I’ve admired for some time, and recent falls in the share price have made it look too tempting to ignore — it’s down 16% since the start of 2014. That’s partly because short-term forecasts have been scaled back a bit over the past year, but they’re picking up and analysts are very bullish in their recommendations.
A forward P/E of 31 for 2015 is the lowest it’s been in years, and I reckon that’s cheap for such great growth potential.
So I’ve added 80 shares at a price of 913.5p to the portfolio, for a total outlay of £744.46 including dealing costs.