So today I have decided to sell off UMS, not that there was much of a fundamental change since the last time I took a look at it, but simply because after learning more about value investing, I decided that UMS having a large portion of their revenue coming from AMAT would not be a very good investment for the long-term since there’s no guarantee that AMAT will continue to provide them with business after their contract expires in 2017.
Rather than take the risk of having a concentrated customer, I would rather re-deploy my asset elsewhere, and build up my warchest. It’s a little regretful that I am giving up a good 10% yield from this great counter, but when I step back and take a look at this investment again, I can’t be certain if the 10% yield will justify the drop in price in the event AMAT decides to cease working with them. In the past year, they still haven’t acquired any new business to mitigate the risk of losing their biggest client, thus the decision was made to forsake this company.
Apart from that, share price movement hasn’t been promising, and I do not foresee any strength and conviction to break the current downtrend. Perhaps when they start diversifying their customer base, then I’ll look at it again.
Slowing Average Days Inventory & Average Cash Conversion
While most of the business remains relatively stable, the average days inventory and average cash conversion is starting to get worrisome.
Andy Luong (Director) pared down position
Also I noticed from my previous research into UMS, Andy Luong had a 21.38% holding, but since then he has pared down his holdings to 20.01%. Of course it could be for personal reasons for the paring down and shouldn’t call for too big a worry.
From my previous research: Treasure!! – Thoughts on UMS
- MACD bullish divergence
- Trading system triggered at .455 but I didn’t notice
- And my biggest surprise, projected dividend yield of 9.9% based on FY13 and 12.9% based on projected FY14 which has only 1Q left to go.
- Entry: 0.505
- SL: 0.495
- TP1: 0.535
- TP2: 0.555
- TP3: 0.580
I’m actually quite proud to say that TP3 was hit shortly after I bought it. 23 days to be exact, without stop-loss being hit. But all these means nothing because I decided to hold on, expecting a further move up.
Eventually, I’m saying goodbye to this company simply because I decided that having one key customer is too much for me to bear. Maybe I should have gotten out sooner, but maybe it’s not too late after all. At least I got out at the resistance downtrend line.