The rally in the share price of Safestyle is losing steam. After hovering near the 100p per share mark near the end of 2018, it looked as though those who ditched shares and sent them falling to the 30p mark had overdone it. After the SafeGlaze news was digested we saw a sustained drive back upwards as investors looked to make the most of a bit of good news for the company.
Since a November high of 96p per share however, prices have fallen back under 70p per share. So what’s the cause? And should we all be looking at this as a wider sign of market health?
No news
Here is the chart that tells the story:
Credit: Bloomberg
The decline isn’t dramatic. It’s a straightforward slow selling of shares as people believe that they have made the money they can from their investments. The question we need to ask is why they think that.
There has been no new news from the company since before Christmas. No end of year reports, quarterly results or anything else more dramatic. All quiet. So this drop in the price is nothing to do with the company as I see it. I think this is a symptom rather of the wider market and is something I think we should be looking closer at.
This is a company that is consumer-facing. There are other companies in our industry traded on various markets, but they are B2B companies and don’t have any direct exposure to the general public. That means any tangible changes in spending patterns isn’t going to filter through to those sorts of companies until later on. A company like Safestyle however deal directly with the consumer. So, if there is a change in spending habits these are the types of companies that are going to feel it first.
So, is this slide in the rally a sign that consumer confidence or consumer spending is already waning before we even get to the end of Q1? Perhaps it is.
Fuzzy February
I do see this as an indication that trading conditions out there in the market place are starting to grind a bit. I have been having a few conversations with industry friends in the past couple of weeks and the general commentary seems to be that after a busy January things seem to be slowing down a bit.
For me, this feels very much like it did prior to the EU Referendum vote in 2016. Home owners were happy to have quotes all day long. But they sat on their hands until the result of the vote was known, the dust had settled and life got back to normal. From what we’re seeing at our place, coupled together with the sorts of conversations I am having with various people in different parts of the supply chain it’s mirroring events nearly three years ago.
The slide in the Safestyle share price could well be a reflection of this and I think we need to be taking notice. Nothing utterly dramatic is happening out there. It’s nothing like the 2008 implosion and it now looks like Brexit is going to rumble on for a few months more now. I think what we’re seeing instead is a slow grind to a less energetic spending general public. Now, whether that changes after we eventually get past the Brexit hurdle remains to be seen. I remember in the second half of 2016 we had the busiest 6 months in at least ten years after all that pent up demand was released. I suspect the same thing could happen again. So I would argue that if we can leave on March 29th and get it out of the way, the country can get back to normal things again.
For ourselves in the industry, what this means is that we have to step it up a gear and increase our exposure outwards to the home owner and inwards within the industry. The last thing we want to be doing as a sector if things are slowing out there is taking a step back, that will only make things worse.
My February review and a new Brexit related post will delve into this in a bit more detail.
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