Lock in the profit while the going is good

Reach (RCH) 143p

Gain to date: 45.8%

Original entry point: Buy at 98.1p, 5 December 2019

We identified the old Trinity Mirror Group, now called Reach (RCH), as an outstanding value opportunity on 5 December 2019. Negative investor sentiment had resulted in the shares trading at a valuation that looked too pessimistic, especially with the improving balance between digital and print revenues.

Given the difficult industry backdrop we were prepared to be very patient for the fledgling signs of revenue stabilisation to have an impact on the share price. In rare cases, but less rare than we might suppose, value can in itself be a ‘catalyst’ and propel once nervous buyers and enriched sellers to revise their expectations.

There has been no news since our article on 5 December to justify the strong share price performance – up nearly 50% – but even after such an impressive move the stock remains one of the cheapest on the UK market.

Shares can understand why long-term investors may wish to stay the course in anticipation of more gains, but that will require the fundamentals to continue to improve.

Reach will announce its full-year results on 24 February. At the same time the senior management team will present their strategic plans for value creation.

SHARES SAYS: A near-50% gain in such a short space of time is fantastic. However, we’re going to lock in those profits while the going is good and sell out now.

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