Hornby Returns To Profit And Big Gains

November 9, 2020

Picture the scene.

The movie opens with our young inexperienced trader in a lift to the 90th floor of the skyscraper. As he walks into the giant office, the legendary billionaire swivels in his chair to welcome him, with a lesson on how to make a fortune.

I’ve got two words for you kid.” He takes a long puff on his cigar. “Model. Trains.

An Overlooked Market

It’s not exactly the world’s sexiest commodity. Still, like jigsaw puzzles, the world of the model railway had enough devotees to provide the industry leaders Hornby (£HRN) with a good turnover once upon a time.

From 2008 though the company has been in severe financial trouble, operating at a loss for many years.

Then along comes lockdown and suddenly this hobby has gained a considerable number of new enthusiasts. The change of lifestyle pushed their sales to surge by 33% and the stock price to follow.

All Aboard!

And so a company that was losing 10M a year appears to be back on the right track. On the 29th, the model makers share price rose a staggering 30% to 44 GBX.

Should this be the beginning of a new uphill journey for Hornby, there is still another 500% gain to go before they reach the highs they traded at before the Credit Crunch.

A long haul, or a short trip?

Whilst this sudden return to profit may justify a period of volatility Hornby’s tank engines have a long journey ahead of them to reach sustainable yield.

Meanwhile, day traders can look forward to a mountainous few months as the market begins to wonder whether a £17k profit warrants the increase in stock value.

Head Analyst at DayTrading.com, Tobias Robinson,  said:

“It is too early to say if Hornby have overcome the fundamental issues they were experiencing before the ‘lockdown boom’. But the volatility may present opportunities over the coming months.”

That said, Christmas is looming closer than ever and no doubt all the new train buffs will be finding line extensions and new engines under the tree.

Over the next months and possibly even years, this easily overlooked stock could prove just the ticket for savvy traders looking to go short and long as the lines rise and fall.

As always trade carefully, and don’t expose yourself to too much risk.