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Countryside Properties 50% Drop In Profits

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This thread seems to be mixing up Countryside Properties and Countrywide plc, the estate agents, who have just provided us with its third profit warning.

I have noticed an interesting development in Countrywide's share price.

In June when it was first quoted, share price was about 300. Remember that those were the days when life was beautiful for estate agents. It then rose to a max of 340, and then the profit warnings started coming thick and fast. After each warning the share price took a dive but then rapidly recovered. So we have now had the third warning but the share price is only a few percent below what it was in the "halycon" days of june. What is happening? Is there something I don't know. Who could be buying? You would have to be insane given that the company itself has announced that its turnover is down by 30% and that it has relatively fixed costs.

My own personal theory is that there are some estate agents out there that bought some kind of derivative to take advantage of what they thought was going to be a buoyant Countrywide share price. Now that the price is falling they are trying to prop it up by buying any dips. They must think that the stock market is an illiquid market like the housing market. I smell a free lunch.

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Yeah, those graphs are strange and even stranger if you look at the detail of what has happened since june. Look at the movement of the share price immediately after each of the profit warnings and you will see how strong the rebound is.

12 August

23 September

19 November

In the last profit warning, the statement is something like:

"profits for the full year will be SIGNIFICANTLY BELOW market forecasts", I translate this to "we believe our stock to be SIGNIFICANTLY overvalued".

And when you issue such a warning three times when the share price keeps on rebounding, what they are saying to the market is "Don't you get it, our stock is overvalued".

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One way of looking at it is that these shares are and have been trading on low PE's based on the fact that the city knows fully well a likely hit at some point in time would be coming from a fall in the housing market.

If this were the case though, and this forward-looking nature were truly responsible for the strength on the actual announcement of bad news then (in the case of Countrywide) there seems to be little reasoning in their apparent upsurge from early in the year. Most confusing.

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  • 440 Brexit, House prices and Summer 2020

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      • down 5% +
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