Case Fingerprint Cards

Hi,

I don’t know what to say, except ARRRGGHH! 😈 Okey, this was a learning experience and in the end, I managed to get out quite cheap. This a good example of diversification and importance of it.

So, today I will talk about a company called fingerprint cards. It is a tech company which manufacturers fingerprint readers for the cell phones (Huawei, Oneplus, and other android devices) and lately also for computers. It also bought an iris scanning company few months ago. Revenue was growing quite nice and company had a good margin with sensors and everything looked good what comes to figures and future.

It was discussed that due to management issues (inside trading and some other reasons) the company valuation was drop to p/e of 8. This was a cheap price when compared to the competitors which were trading +30 p/e values. I also thought you can rely to figures and estimates and due to the management issues and some challenges in today’s market the company value was pushed down.

Few days ago, Fingerprint made an announcement and oh boy was I wrong. Only few days left the first quarter they come out with news that the revenue will drop more than 50% and they will cancel the dividend payment which was planned to happen in May. How incompetent and lying the current management can be?! 

This week the value of Fingerprint stock has dropped around -35%. After the first drop (around -25%) I decided to sell all the Fingerprint stocks that I had and decided I will never touch to this stock again. Off course it is possible that the company recovers from this situation, but it will recover it without me. 😀

So, what we can learn about this case. It is wise to buy stocks which are pushed down for other reasons than financial reasons. In this case I really thought that the company products, financials and estimates were fine and the price was pushed down due to reasons reported earlier. Also, there was a large hype around this company in Nordic countries. Okey, there is still a large hype around this company, but this time the reasons are different. 😀 Now I know, don’t go with the hype, make your own study about the company situation and direction and the most important one, check who is running the company and their competence to run it.

And last, please remember to use diversification. The fingerprint had something around 5-6% role in my portfolio, so the total losses were around 1 to 1,5%. I also sold 1/3 of the FING stocks I had when those were up around +10%, mainly because those were having too big role what comes to diversification. I have seen many only having FING BULL X3 in their portfolio and due to Tuesday’s morning drop of -40%, they lost it all.

Regards,

CVM