Quindell Portfolio - Incredibly cheap or crash and burn - Part 2.

Quindell Portfolio is one of the smaller AIM companies that I have been following recently. On paper it seems a remarkable story and looks like one of those penny share tiddlers that many investors dream about. The type of share that can be had for a few pence, but looks to have the potential to go much higher, a ten bagger or much more.

For some investors it is psychologically nice to own a lot of shares in a company and penny shares have always had their own unique attraction, although in reality they are often expensive if only because there are often hundreds of millions or billions of shares to be had. Penny share companies will often have a new issue to fund new ventures going forward or simply to raise more cash in order to survive. This will dilute any holding you may have, even if it does look good to hold a lot of shares you still don't have value and many small investors have been burned by smaller company penny shares.

Such companies tend to attract a strong vocal following and Quindell, certainly if bulletin boards are anything to go by, has its fair share of committed followers. It was recently in the news for all the wrong reasons as mentioned here which attracted the attention of short sellers, the share price being in free fall for several days. The debate on the BB's got very heated between defenders and attackers (bulletin boards on fire), the share price recovered slightly, but still lags, the trend looking horribly down.

Some have suggested that there are enough red flags about this company to make it one not to invest in. Others that the story is a good one with enough positives to suggest that the market is seriously undervaluing its worth. The market can be a strange place, because there certainly are plenty of companies doing far less than Quindell that have silly valuations applied to them. Nevertheless the market still doesn't quite believe the Quindell story, that what looks to good too be true may be exactly that.

Furthermore, the CEO of Quindell was previously the CEO of a similar company called the Innovation Group. That company grew by acquisition and its share price flew on the back of it. The rapid growth by acquisition at that time didn't stop the share price eventually collapsing though and Innovation is still a long way off its past share price highs and may never get back there. Thanks to the internet it is not that difficult to dig up some of the past history of Innovation and you do wonder if history is repeating itself.


However, despite the recent controversy, Quindell continues to announce contract wins, the latest one being today with Honda.

The three year contract follows a successful period of cooperation which started in January 2013 and with the opportunity represented with Honda as a major brand, we expect Group revenues to build to a significant level during the three year term, as under the terms of the agreement, Quindell will deliver a range of accident management services to Honda customers.

Marcus Comfort, Aftersales Programmes Manager, Honda (UK) commented: "Quindell have created a compelling proposition for Honda, and we believe the partnership will deliver an improved customer experience. We're convinced our customers will welcome the extra security that comes with contacting Honda and knowing we will help them from the moment of the incident, through to their car being repaired and returned to them."

http://www.digitallook.com/news/rns/20926260-2564291/QPP-Three_year_contract_with_Honda_UK_html

The share price has hardly moved on this news, up around 2-3% which would be significant perhaps for a FTSE100 company, but for an AIM company that might expect a sizeable move on a contract win it is small. However, Honda isn't the only big name company to have signed up with Quindell, RAC is another. One assumes that these companies did their due diligence and concluded that Quindell was better than their competitors. Furthermore, the recent bad news hasn't put off the likes of Honda, new contracts are still being signed.

Quindell is not an easy company to figure out. Potentially it is very good and represents a ground floor opportunity to be in on something big. Alternatively, the red flags that have been raised may have some credibility and this company will go the way of many that promised much, but in terms of shareholder value delivered little. Although many of its supporters would probably deny it, I would say it is a gamble stock, anyone buying into it needs to realise that it is possible that this will fail to deliver and it just might be a repeat of Innovation Group, but it's just possible that it is a ten bagger plus in the making.

http://sevenpillarstrading.blogspot.co.uk/2013/05/quindell-portfolio-incredibly-cheap-or.html

http://sevenpillarstrading.blogspot.co.uk/2013/05/quindell-portfolio-bulletin-boards-on.html