From the Vault: Learning from others and some old research on Hansen Technologies (ASX: HSN)

Hansen Technologies Limited (ASX:HSN) will increase revenue by over 50% and achieve EBITDA of well over $20 million in FY2014, according to their recent update.

The share price is now over $1.45, making it not unreasonably valued at a far higher price than when I stupidly sold it some time ago. It was my friend Damien Lynch who first told me about Hansen when the share price was under 80c. He also told me to look at My Net Fone (ASX:MNF) when it was around $1, told me to seriously consider TFS Corporation (ASX:TFC) when it was about 60c, and suggested TPG Telecom Ltd (ASX:TPM) to me when it was trading at but a fraction of its current price.

Here is an excerpt from a private email I wrote to him in early 2013:

I’ve sold my entire holding [of Hansen] at 85c, which, accounting for all costs and dividends, puts me at only a mild profit… I don’t see Hansen growing until 2014, at the earliest. I think that once more information becomes available about the acquisitions, then the company’s prospects will be a lot clearer.”

Here’s my original research that I wrote and shared when I bought Hansen shares in 2012. You can see how my style of analysis has changed quite a bit since then (although I do tend to post shorter blog posts more these days – which are more about sharing ideas than presenting full research.)

HSN Compiled Research (opens pdf)

It’s interesting to note for me because the research is very basic (but proved to be roughly correct). If I had stuck to my guns, I’d be sitting on a big gain.

In retrospect, from March 2013 – October 2013 I was overly influenced by another investor, because I was focussed on learning as much as I could from others. Whoops.

The big lesson for me is not to let someone belittle your research and make you doubt your own intelligence. A good friend will disagree with you, strongly if need be, but they won’t attack you personally. One such example is the personal attacks I got when I suggested Sunbridge Group Ltd (ASX: SBB) might be a trap rather than literally the best value opportunity I have ever seen on the ASX. One acquaintance told me to stick to my knitting. A bit rude but forgivable.

But that relatively benign ad hominem shot seemed to encourage some lunatic to start trolling me on twitter. He [the lunatic] demanded to know what “black flags” I was talking about. Blocked.

A few hours later the CFO resigned. But in more recent news, the stock is up strongly on the latest quarterly which – surprise, surprise – looks good. Sunbridge just may have been the cheapest stock on the ASX, but I couldn’t be sure of that, so I gave it a miss. I regret the bumper profits I’ve missed, but I don’t regret questioning the opportunity (indeed, I still wonder why that insider was in such a hurry to sell).

Funny how some traders see fundamental analysis something to use to their advantage, whereas others see it as a threat to their profits (they need stocks to be overhyped or hit by panic to make money).

I’d suggest that if you want to find a good technical trader, look for the ones that aren’t afraid of fundamental analysis, but rather use it to their advantage. Assad Tannous seems to be able to combine the disciplines effectively although his core strength is in Technical Analysis. There is of course an element of self-fulfilling prophecy about his buys – given his truly phenomenal twitter following – but I’ve found his and Bill Pavlovski’s technical analysis to be extremely useful. I think if I let their opinions guide me a little more I could probably improve my returns. Technical analysis remains a significant weakness of mine (although I think I am learning a bit…)

My main teachers are the market and of course my investor friends. However, friends don’t attack you when they think you are wrong. They simply disagree with you politely and try to convince you otherwise. Sometimes, they just tell you what they’re buying or selling (as that is a good signal they may disagree with you.) For example about 2 months after I sold Hansen (in May 2013), Damien emailed me that he “Recently bought HSN (earlier in the week)… Overall, cashed up as well.” 

At least I have had long term exposure to Hansen through my investment in this boutique ethical fund.
The author owns shares in My Net Fone. The author has an indirect interest in Hansen Technologies, TPG Telecom and TFS Corporation through his shareholding in August Investments. Nothing on this blog is advice, ever, and may even be plain wrong. The purpose of this blog is to document my thoughts on different companies in an easily accessible way and to make connections with likeminded investors. Subscribers to the Free Newsletter get sent research first, and have access to the Hidden Research.


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4 Responses to “From the Vault: Learning from others and some old research on Hansen Technologies (ASX: HSN)”
  1. Michael says:

    Good post. I’m a holder of HSN myself, although haven’t posted a blog about it. Good little company – quite boring and little organic growth but has a solid history of successful acquisitions. Recurring revenue and high switching costs are a plus

    • Thanks Michael. Yea I really screwed up not sticking to my conviction on HSN. Once I sell out and watch a stock rise, I have more and more psychological hang-ups about it. Hard to have a clear head by that stage…

  2. Ari Gold says:

    Hi Claude,

    Thanks for sharing your story on this. I definitely don’t get hangups on missed opportunities, but as these happen all the time, and new opportunities emerge. Happened to me when I was looking for opportunities to play the “Machine to Machine” theme. Looked into Sierra Wireless (NASDAQ:SWIR) a Canadian company who had a dominant market position and found a small company called NetComm Wireless (ASX: NTC). An initial glance led me to believe that this company would find it difficult to compete with big players like Sierra Wireless but my research stopped short of discovering that NetComm was a key distributor and implementer of Sierra Wireless’ products locally with key telecommunication operators! Of course the share price had to go from around 20cps to 72cps before I realised my fatal mistake – ha!

    Opportunities come and go and come again, but for every one of these stories, most importantly I hope to gain a good learning experience, which you no doubt continue to display throughout your journey.

    In respect to Sunbridge Group, there is a bit of craze going around, but through further research I think many of the items/concerns raised can be addressed quite rationally, and really SBB hasn’t quite grown out of its adolescent years as a sole proprietor type business, but I think it will continue to improve with more experience as a listed entity and improved corporate governance.

    You may have seen this on my blog @ http://www.alphainvesting.net but I do share my thoughts and valuation as well as respond to a couple of reader queries.

    Hope that helps and look forward to hearing more.

    Regards,
    Ari Gold

    • Hi Ari,

      Thanks for your comment. I had a similar experience with NTC – the worst part is, it even dropped to my buy price (I still have the trigger email in my inbox!) Unfortunately I didn’t buy it because I had convinced myself that hardware was too poor a business, with fairly high working capital, etc. Turns out these guys are more professional than I’d given them credit for – a fact I may well have been able to glean with more research or thought.

      As for SBB, I read your original post on the company. As much as I respect the fact that you are a serious investor (and can therefore discuss disagreements), I still get the feeling that it’s a fundamental style play with an element of hoping to sell to the greater fool. For example, in this article you ask whether SBB is a gem or a trap, but fail to really cover the reasons that many experienced investors are avoiding the company. Truth is that I know a lot of serious investors and the fact that only 2 or perhaps 3 of them are openly long SBB – when it’s such an obvious ‘value’ play, really says something. Clearly, I’m not the only one that is questioning the accounts. Indeed, as far as I can find on the internet, no-one has managed to answer the questions raised by Mike King in this article. I also haven’t read an answer to these concerns. Have you checked out the history of the Australian directors? Are you telling me they are impressive directors? They clearly aren’t. In so many ways, SBB fails the basic quality screening I do for an investment. I’m always open to bending the rules a little, but buying shares in SBB (for the long term) would be tantamount to throwing out the rule book.

      Indeed, the market is still pricing the company as if it is dodgy, it’s just that there are now enough believers in the story to push the share price from under 7c to over 10c. Maybe a dividend will convince more people and you’ll exit at 15c, but it won’t be me buying your stock – I don’t want to be the greater fool providing your alpha.

      I realise you’re capable of sensible debate, but some of the other SBB longs are not. Indeed, the ad hominem attacks against myself (and to a far more serious and outrageous degree, against Mike) have been truly obscene, and indicative of some truly moronic retail shareholders. If they were so sure of themselves, why not sell your house, and borrow your mum’s money because SBB is the cheapest stock EVER!!! Instead they busy themselves attacking those suggesting caution is the greater virtue in this instance.

      On that note, have you sold at all? You’re a smart guy, and I bet you have – it would be incautious not to in my opinion. However, the fact that you have sold (if you have) shows that you know there is some risk here. Otherwise, why not hold until it reaches a fair valuation based on the numbers given? If you haven’t sold then I applaud the fact that you are holding to your convictions, but I wouldn’t begrudge you offloading some to someone else – that would seem prudent to me.

      Asides from you, there’s one (or maybe two) other SBB longs that I admire. As my good friend (who is long) put it, the only people who really know whether the accounts are true are in China – I really think this is a true statement, that many longs want to be able to dispel, but can’t. There are enough questionable decisions to make me uncomfortable with that situation, although people will always be able to come up with a plausible (even if not probable) explanation.

      I considered buying around 7c with a plan to sell above 10c for a quick profit. However, the writing I do for Motley Fool pretty much precludes me from making this kind of trade. I have non-trading periods and minimum holding periods to contend with, so it tends to force me to stick to long term investing, which is not a bad thing.

      Thanks again for your comment and sharing your story on NTC.

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