2014 was a truly horrible year for Quindell (LSE: QPP) as its share price collapsed from a 52-week high of 682p to a low of just 25p, wiping out many investors.
The turnaround in 2015 has been instant and startling. When a stock whose misfortunes you’ve been idly following leaps 29% in a morning, you have to sit up and take notice.
When it’s up 77% in a week, you really start to wonder exactly what you have been missing.
Is this just some crazy fluctuation designed to torment the unwary or could last year’s annus horribilis become this year’s annus mirabilis?
Gotham Horror
You don’t need me to repeat all the woes inflicted on the troubled AIM-listed insurance outsourcer in recent months, which saw the chairman and founder Rob Terry forced out in a row over controversial share deals, on top of a vicious attack by short sellers, led by Gotham City Research.
And you will no doubt know that the uncertainty lingers, as PwC undertakes an independent investigation into the company’s accounting practices and cash-generation prospects.
This year’s dramatic rebound has been driven by news that Quindell is looking to boost its cash position by disposing of several divisions, which should give it some stability. The board also gave assurances that it was comfortable over the company’s cash position.
A Burst Of Tosca
It got a further boost from the news that hedge fund Toscafund Asset Management had invested £16.1 million in the company, taking a 5.1% stake.
Investors were buoyed by this vote of confidence, especially given Tosca’s track record of winning risky recovery bets.
If Quindell can get its act together its prospects remain bright, as it operates in two rapidly expanding areas.
Its professional services division covers personal injury and motor accident claims management, while its digital solutions division targets the accelerating area of telematics spy-in-the-car insurance technology.
But this is a company that has grown rapidly on an acquisition spree, which makes it hard to judge exactly how much value there really is in the business.
Good Or Bad?
I like investing in good companies on bad news, my worry is you would be doing the reverse.
We won’t know how good Quindell is until PwC reports, so any investment you make now is a gamble on the outcome.
Nor do we know exactly why Tosca is investing in the company, and whether its motives tally with a long-term Foolish investment strategy.
Finally, this is a crazy stock right now, and that 77% share price surge could just as easily reverse if sentiment changes. If it continued, that really would be a miracle.
