Harvey Norman Up 4% after Owner Puts $9 million on the Line

Harvey Norman Holdings Ltd [ASX:HVN] climbed 4.3% this morning, to $4.54 per share. The retail giant is still down 11.8% year-to-date, but is outperforming their competitor, JB Hi-Fi Ltd [ASX:JBH], which is down more than 13% over the same period.

What happened to the Harvey Norman share price?

This morning HVN responded to an ASX query. From 17–20 March, HVN dropped from $4.90 to $4.33. The ASX wanted to know why the $5 billion retailor shed 11.6% of its value. Was there information that investors didn’t know about?

According to HVN, they have no additional information for investors. But they believe their share price dropped on speculation.

HVN referenced an article in The Australian titled, ‘Behind Harvey’s Zombie Trust’. In the article, HVN thought the following passage encouraged investors to sell the stock:

The Australian Securities and Investment Commission is reported to be reviewing how Harvey Norman reports its exposure to franchisee losses and $1.15 billion in sometimes troubled franchisee loans.

What now for HVN?

If you own HVN, this particular incident isn’t a cause for concern. To boost confidence in the stock, Gerry Harvey, the chairman of HVN, bought $9 million worth of stock at prices he believes have been depressed by short sellers.

Reported by The Australian:

Mr Harvey said Harvey Norman was the target of an “orchestrated’’ attack by a “conspiracy” of local fund managers, short sellers and overseas players who should be investigated by the corporate regulator and the ASX, with the alleged conspirators conducting a “potential scam’’, and likened the move to insider trading.

I wouldn’t be concerned with the recent short-term volatility of HVN. Instead, take a long-term perspective. If you believe HVN can reliably grow profits into the future, now might be a good time to buy the stock. If not, look for an investment elsewhere.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: It’s not always easy to find growth among billion-dollar stocks. Unless they can significantly increase earnings, you’d be lucky to get double-digit returns. That’s why some investors prefer the smaller end of the market.

Small-cap stocks are a riskier investment. There is no running away from it. But they can potentially grow earnings 10-fold in a short space of time.

Small-cap specialist Sam Volkering has been on the other end of small-caps running up 1,000% or more.

So far in 2017, Sam hasn’t recommended a losing stock yet. In his advisory service, Australian Small-Cap Investigator, his top three active investments are up 304.57%, 466.04% and 1,624.49%.

To find out more, click here.

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