Editorial Contributor
Buy Iomart (IOM) @ 236p Recommendation Summary: Although it could be said that “The Cloud” (detached data storage in vast centres located away from the main server you are using) was so 2012, or perhaps even 2011, the fundamental concept of network delivered / stored hardware and software cannot be underestimated as a major transformation event even within the fast moving computing space. It is also the case that even though the stock market went crazy over this new buzz concept, we may not find, for quite some time, just how great the benefits will be, if only in terms of infrastructure cost savings for corporates. In addition, if I am being a little on the facetious side, my guess is that given that most people are relatively technologically un-savvy (me anyway!), Iomart may have the advantage of relative pricing unawareness amongst its customers when offering up its contracts.
CHART - IOMART
76 | www.financial-spread-betting.com | May 2013
This is over and above the company’s statements that with most of its contracts lasting 2-3 years and so delivering great earnings visibility it locks in “today’s” prices in an area where deflation is quite severe over time as competitors come on stream. But despite the soaring earnings, prospects and acquisition boosts, Iomart would not be in my top three AIM stocks were it not for the supportive technical’s to back up the fundamentals. The shares have almost exactly doubled in a year, something which together with the PE ratio hitting 30 for FY 2013 might ring some alarm bells for cautious traders. However, this does not concern me after looking at the daily chart where we have not only seen a relentless uptrend (“the trend is your friend” and all that), but also one that has a very bullish construction with new support coming in at or above old resistance. The view currently is that while there is no end of day close back below the floor of a rising July price channel at 230p, the upside over the next 1-2 months should be towards 280p. The best stop loss level in my opinion is the 215p March intraday bear trap low.