Sims Metal Management (ASX:SGM) share price plunges on poor Q1 trading update

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The Sims Metal Management (ASX:SGM) share price has plunged $1.40 or 10.5 per cent to $11.98 after the scrap metal recycling company warned first quarter FY19 earnings would be lower than anticipated.

In a statement to the ASX, Sims Metal said that while first quarter profits would be a significant improvement over the first quarter of FY18, they would be less than the fourth quarter of FY18.

The company blamed trading volatility and challenging Zorba sales.

Sims said a further update on trading conditions and outlook will be provided at the company’s 2018 Annual General Meeting on 8 November 2018.

The falling Sims Metal share price will be a further blow to the Firetrail Australian High Conviction Fund, which in August added to its overweight position in the company.

The L1 Long Short Fund will also be feeling the pain, the fund recently saying it expected the Sims Metal share price to reverse course.

This highlights how difficult it can be investing in highly cyclical stocks. A low share price can compensate for some of the risks, but rarely does it protect investors from deteriorating trading conditions.

Sims Metal shares don’t look cheap, but these 3 shares do…

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Sims Metal was not one of them, but the list does include one tiny gold mining stock, and the company one top fund manager calls the cheapest stock in the ASX 100.

Find out why these 3 Cheap and Good Stocks could be better buys than Sims Metal. But you better hurry… these stocks may not stay cheap for long.

See the 3 stocks

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au