Year-to-date, Quindell (LSE: QPP) has been an astonishingly strong performer, with it racking up gains of 226% since the turn of the year. Of course, that comes after a disastrous 2014, when 85% was wiped off its valuation, with corporate governance issues and rumours of aggressive accounting hurting investor sentiment. However, with a new management team at the helm, the market appears to be warming to Quindell and, looking ahead, could it be a surprisingly strong performer?
Of course, Quindell is a very different beast to the company that was in existence even six months ago. As mentioned, it has a new management team that includes individuals with excellent reputations and, while it is currently seeking a new CEO, it appears to be ready to make a clean break with its past and transform itself into a different kind of business. A key part of this strategy has entailed the sale of its professional services division, with the majority of the cash expected to be returned to the companys investors.
As such, Quindell is a mix of relatively small businesses (compared to the professional services division) and, looking ahead, it seems likely to concentrate on its telematics and technology divisions, which themselves were rumoured to be bid targets in recent months.
Clearly, Quindell has not yet restored confidence in its business among all investors. This is perhaps understandable, since the director share sales, corporate governance issues and concerns surrounding its accounting practices (which were aggressive, but acceptable) left a cloud under the business. On the plus side for Quindell, though, is the fact that investors can be very forgiving if the financial performance of a company improves. So, if Quindells new management team can start to generate a strong return then it is likely that the market will warm to the company in a relatively short space of time.
The difficulty, though, is that the investment case for Quindell is very opaque. In other words, the company has no CEO, has just sold off its major division, has a questionable track record when it comes to corporate governance, and its strategy appears to be undecided at the present time. Clearly, this is a company that is experiencing a major transition in a very short space of time and, while the new board appears to be doing all of the right things, it seems to be a little premature to invest in the company especially when the exact products and services it will supply are yet to be set out in stone.
However, this does not mean that Quindell will fail to surprise us. On the contrary, Quindell could very well deliver stunning share price growth in future and put its annus horibilis behind it. It could focus on telematics and technology, bring in a superb CEO and rebuild investor confidence through a rising share price. For now though, it seems prudent to wait for further developments before adding it to Foolish portfolios.
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