I have a contrarian section on my FTSE best stocks to buy now list. Contrarian investing is an investment style in which investors purposefully go against market trends by selling when others are buying, and buying when most investors are selling.
Could Card Factory (LSE:CARD) be a shrewd contrarian investment for me, based on its recent update? In the prime of the crash I decided I would avoid it for my portfolio. I want to re-evaluate now.
FTSE market crash victim
Card Factory is a specialist retailer of greeting cards, gift dressings, and party products in the UK. It has over 1,000 retail outlets in high streets across the UK and Ireland.
When the first lockdown struck, Card Factory saw all its stores close. As I write, all stores are open and there have been several updates from the retailer on liquidity, trading, and debt. I see it as a more traditional retailer as it relies heavily on high street footfall. Although it does have an online presence, it is on the contrarian section of my best stocks to buy now list as a retail option.
Impact of restrictions and updates
Since the market crash last year, Card Factory’s share price has experienced a roller-coaster ride on the FTSE AIM. Between February 2020 and May 2020, it lost nearly 70% of its share price value as it tumbled from 87p per share to just 28p. As I write, shares are trading above February 2020 levels for 96p per share.
In its most recent update on 30 April, Card Factory announced a debt refinancing package. The update stated further details will be provided in the coming weeks. The announcement has seen an increase of 10% in it share price in the past week. This deal could stabilise operations, pay off debt it accrued due to the pandemic and begin to work towards growth and progress once more.
The refinancing of debt is a crucial step Card Factory needed to take in order for me to consider it a potential addition to my portfolio rather than a contrarian long shot. In a positive development, it did confirm trading “exceeded expectations” since stores reopened last month.
Contrarian best stocks to buy now carry risks
There are two primary risks linked to Card Factory for me right now. Firstly, Covid-19 is still rife and if restrictions were to come into force once more, non-essential retail closure could affect sales. It does have an online presence and that brings me nicely on to my next point about risk, which is competition and shopping habits changing.
Card Factory has lost market share in recent times to online-only firms. These firms, like Moonpig, appeal much more to the retail savvy younger generation as shopping habits change. People prefer to shop from the comfort of their own home on their smartphone or tablet. The high street has seen many big name closures in recent years as online shopping thrives.
Overall, Card Factory will remain on the contrarian section of my FTSE best stocks to buy now list. Full-year results are due next month, which could reveal more details about this refinancing package. Right now I would be willing to risk a small sum of money on a contrarian option like Card Factory, which is something I like to do from time to time.