Ann: AMA Acquires Australia's Largest Accident Repair Group, page-12

@gosouth - Well done with how you played GXL, not many could say they let that one run as long as it did.

I don't have a hard and fast formula for selling stocks like this, but as a general rule, I work under the maxim that the numbers follow the strategy. So taking that a step further, when the strategy changes to one that is more likely to put downward pressure on the share price at the next results announcement in terms of lower returns on equity, lower earnings per share or more shares on issue, I take that as a red flag.

The first red flag for AMA was the $45m capital raise that wasn't offered to retail investors, that had a dilutionary effect on the returns on shares, then a much bigger raise to fund this buyout of Gemini.

That being said, the stock may well have further to run but there are some risks that could limit future share price gains:
1. Any loss of the relationship with the major insurers
2. Any of the major insurers deciding to vertically integrate panel repairers into their business - Suncorp has already started this process - if they "double down" on it and start to expand their own repair divisions prices paid for new acquisitions will rise and existing profitablity (per store, not total) will fall.
3. Improved driving technology (parking sensors, automatic braking, collision avoidance systems) being adopted by more and more cars reducing minor fender benders
4. Limited market size, Australia has a scattered population and only a few profitable hubs where there are enough cars and people to warrant investment - AMA has an estimated 10% of the total market, but not all of it the remaining 90% will meet the earnings quality criteria that apply to acquisitions to date - so you increase your risk of paying higher premiums for higher quality assets or paying the same premium for lower quality assets.
5. And finally the "black swan" event - driverless / collision free technology with smart cars equipped with sensors avoiding most collisions - seems far fetched but hey, if you'd said five years ago that a US based app (Uber) would kill the business model of Cabcharge and put the taxi industry on its knees within 18 months, people would have rolled their eyes.

Good luck to everyone who still holds, don't forget to realise some of those gains though