Q: Hi Peter, I'm looking at the WELL.TO chart and see that three times over the past half year there has been a dramatic spike in share price followed by an immediate and equally dramatic sell-off taking the stock lower than the pre-spike level. I know you don't have a crystal ball but you do have a lot of experience with Canadian small/micro caps and was wondering how you interpret this price action. Is it people who lost on the stock and are waiting to recoup some of there losses?
Do you still consider this a undervalued small cap stock? Technically, it is a basket case.
David
Do you still consider this a undervalued small cap stock? Technically, it is a basket case.
David
5i Research Answer:
WELL’s price action could be because of a lot of things. One of the reasons could be institutional shareholders wanting to get out but due to its small size, indirectly put pressure on WELL’s share price. On a technical basis, previous buyers want to recoup some of the losses. In the near term, a lot of things such as liquidity, interest rates, macro, etc. could affect a company’s share price. But, unless a fund or insider actually discloses a position change, there is no way of knowing for sure. Thus, we tend to stick with fundamental analysis as a basis for long-term investment decisions, and we think WELL is still cheap, and WELL continues to execute well on acquisitions and cost control. We are okay to hold it here.