Equipment rental firm could suffer sharp pull-back

By GRAEME DICKSON
Updated:

 

The recent dead cross in Ashtead (AHT), the construction equipment rental business, might be an early signal to sell the stock:

Ashtead Group PLC chart

The company receives the vast majority of its income in US dollars, which following its recent performance against sterling, may force analysts to revise their forecasts.

What is more the company trades on an astonishing 435 times last year's earnings, which if all goes to plan will fall to 16 by 2013 based on consensus forecasts.

The balance sheet is also nerve racking, which if you use net gearing as a gauge, it shows an eye watering 165 per cent.

Given these factors, should ever the company warn on profits, which following the company's approximate six fold increase since early 2009, then a sharp pull-back could entail.

Whilst I am not expecting any warning given the buoyant non-farm payroll figures and the quantitative easing programme in the US, it should be noted that this company is highly geared to the continued recovery and progression of the US economy.

Thus if you are bearish about the US economy, then this could provide one with a high-beta exposure to the vagaries of US business health. Expect support to come in at 130p, possibly down to 110p, where the 200 week exponential moving average sits. Resistance should kick in circa 210-211p.

Update

SThree (STHR) - tipped as a sell at 400p, it closed at 411.1p, providing a better level to sell from. Expect resistance at 420p and 450p.

Hochschild (HOC) - tipped as a sell at 515.5p, the shares closed at 530p. Hold for now given the rich rating it has relative to the issues it has regarding production in Argentina.

Premier Oil (PMO) - tipped as a sell at the equivalent of 480.25p, the shares closed at 476.7p. Continue to hold but cut the position if it closes above 503p.

QinetiQ (QQ.) - suggested to sell at 121.1p, the shares closed at 114.6p. Lower the stop to 121p.

Inchcape (INCH) - suggested to sell at 358.9p, the stock closed yesterday at 393.2p. Sit tight for now - if it closes above 415p, cut the position.

Smith & Nephew (SN.) - suggested to sell at 676.5p, the stock closed yesterday at 677p - the stock has perked up since it issued its Q1 results. Nonetheless keep the stop based on a close above 700p.

Carpetright (CPR) - suggested to sell at 636p, the stock closed at 722.5p - surprising given the multitude of profit warnings. Watch out for resistance at 755-760p.

Aveva (AVV) - suggested to sell at 1591p, the stock closed yesterday at 1667p. Keep the stop at 1675p.

The writer does not hold any shares or derivatives in the above mentioned companies. The material for this report comes from Sharescope.

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