We take a look at AB Dynamics, and see how it has fared three years on from our initial recommendation.
Our first ‘exclusive share tip’: AB Dynamics three years on
Three years ago, almost to the day, we introduced our ‘exclusive share tip’. The idea was to provide our customers with an investment idea a few days before putting it on our website for everyone to see. There is not a fixed timetable or frequency of these recommendations, with it purely being about timing and confidence in that company.
About AB Dynamics
Our first recommendation (and to date our most successful) was AB Dynamics, which has risen from 210p to a recent high of 1,420p. The group is involved in the design, manufacture and supply of testing and measurement products for cars. Their products are used both in laboratory testing and outside on the test track, with driving robots, soft vehicles and pedestrian targets. We often put potential shares on a watch list, and in this case, our interest had developed from another company in the car industry, which had previously been taken over. We followed AB Dynamics for around nine months, before deciding to highlight it as our first ever ‘exclusive share tip’ in October 2015.
It turned out that we were extremely lucky with our timing! The company were about to release a bullish statement, which of course led to a sharp rise in the share price. This helped the shares return a gain over the first year of around 90%, compared to a 10% rise in the FTSE AIM index.
Share tip criteria
When choosing exclusive share tips, there are a few things that we look for and some guidelines that may rule out some shares. To begin with, it is very unlikely that the recommendation will be a large FTSE 100 company, or a very small one. FTSE 100 companies are widely researched and we comment on each one of them on our website, while with small companies, the lack of liquidity may mean it is not suitable (in our view).
AB Dynamics ticked a couple of boxes which made it worthy of consideration:
- It has developed a niche for itself, where its products are used by well-known companies around the globe, including BMW, Audi, Honda and Ford.
- It appeared to be well positioned to benefit from changes that are being made to cars, especially in the field of Advanced Driver Assistance Systems.
Great numbers followed
Our hopes for the group have been born out, in an ever-improving flow of impressive results and confidence for the future. Results in November 2015 reported revenue of £16.5 million and an operating profit of £3.74 million, while in 2017 this had risen to £24.6 million and £5.9 million respectively. Our expectation of positive results this year was ‘rubber stamped’ on 4 October 2018 with a short trading update, which stated that “the Board expects both revenue and profit before tax to significantly exceed market expectations” - the results themselves are due on 14 November.
A longer-term view
Although we had instant success with this recommendation, which was partly down to luck and timing, we are always trying to take a longer-term view and hope that patience will be rewarded. This was true in the case of Virgin Money, which was recommended in April 2017 and did nothing for exactly one year (other than drift lower!), before receiving a take-over approach from CYBG.
Buy or sell?
‘Buy’ recommendations are far more common than ‘sell’ ideas across industry publications and websites. Were we tempted to lock in some of AB Dynamics’ gains by moving to a sell? The simple answer is yes, but so far we have resisted and kept the company on our buy list. Our commentary has, at times during that period, highlighted a sharp move higher, and suggested that new investors should drip feed into the shares. If asked, we would not have put off investors from locking in some of that gain by selling some shares. Here’s hoping we can build on our tip’s initial success going forward.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.