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Sudden share-price sell-off should be seen as an opportunity to buy more stock at a lower price
Thursday 20 Jun 2019 Author: Daniel Coatsworth

Filta (FLTA:AIM) 187.7p

Loss to date: 15.4%

Original entry point: Buy at 222p, 18 April 2019

Our trade on filtration expert Filta (FLTA:AIM) was going so well until a trading update on 12 June triggered an aggressive sell-off in the share price.

The company talked about the benefits from the acquisition of grease and drainage management group Watbio starting to feed through via operational synergies and improved customer servicing.

It also said US operations were doing well, including existing franchisees broadening their territories and increasing the size of the fleets. In Europe the strategy is on track with further franchisees and vans added to the estate and guidance for the European arm to be trading profitability on a monthly basis by the end of the year.

Unfortunately investors didn’t like news that group revenue and profit would be skewed towards the second half of the year. This can be a precursor to an eventual profit warning.

We think the market has completely overreacted to the trading update and that the focus should remain on the potential to grow across Europe and improve the quality of North American franchisees.

SHARES SAYS: We see no reason in the latest update to change our positive stance. Investing in a stock like Filta requires taking a long-term view of the growth and cash flow potential. Small setbacks should be seen as an opportunity to buy more shares.

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