Monday, 10 January 2011

Carclo: The Perils of 20/20 Hindsight!

Funny old thing, my watchlist, which has grown over the years. I occasionally delete a few off but it probably still runs to about 150 - 200 prices with lots of companies and funds that gained a place from a tip, strategy, or idea, picked up over the years.
Occasionally, a past decision pops up to haunt me like Carclo did today up 50p to 300ish with no news!
The company is principally a specialised plastics component manufacturer (think automotive and mobile phones) but had developed and licensed a new technology for production "printing" with metallised ink (Conductive Ink Technology) that could bring lower production costs to the manufacture of RFID aerials. Radio Frequency IDentification tags and chips were (and could still) revolutionise the logistics of many businesses by replacing bar codes with an electronic tag containing product information and allowing the whereabouts to be tracked (think taking a trolley through a check-out without unloading it and having all of the items cash totalled).
The use of RFID goes beyond the current use of bar codes though. I have seen programs demonstrating Microsoft's usage of the technology in their "home of the future" to automatically set room lighting, temperature and entertainment systems to personal settings upon entering; and other sources have suggested a "Harry Potter like" home GPS terminal to track the whereabouts of your children.
Unfortunately, costs and privacy concerns (there are 2 types of RFID: passive and non-passive), continue to be issues so the market has been limited to the transport of high value items around the globe e.g Boeing's tracking of parts in its global supply chain.
This drawn out frustration of "jam tomorrow" led to my selling the shares at much lower levels than today (I had bought for an RFID revolution not plastics manufacture).
Anyway, as there is no published news, I don't know what has driven the share price today but, in digesting the recent newsflow, I assume that it is growth in the plastics business not CIT that is driving it.
Back to the thread, 20/20 hindsight is only useful if lessons can be learned.
In looking into the rear view mirror, it is really important not to put any emotional weight onto a past decision in order to review the facts, and I trust that I made the right decision with the information that was available to me at the time (balancing risk and reward), and have subsequently re-invested and made profit.
But, if I was to take any lesson from this it would probably be a reminder of the need for discipline in a strategy (as opposed to a scatter gun approach) and, in reviewing Carclo, to not invest in such a small company without it having a strong underlying business with enough free cashflow to direct into the development of new technology as well as the influence to create the market for the product.
As Carclo didn't meet this criteria it wouldn't find a place in either of my 2 portfolio strategies today.

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