Why Aconex Ltd shares are going nuts today

Credit: Steve Webel

One of the best-performing shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has been software as-a-service company Aconex Ltd (ASX: ACX). In afternoon trade its shares are up a staggering 13% to $5.93.

There are a number of potential factors contributing to its rise today. The first is of course the post-election rebound rally that we are experiencing. At the time of writing the benchmark index is up by around 2.7%.

Another factor is the speculation that President-elect Donald Trump will embark on major infrastructure projects in an effort to stimulate the US economy once again.

Whilst I’m not convinced we will see the Mexican wall constructed, I do expect Trump will follow through on his promise to do more to repair highways and other critical infrastructure.

The prospect of Trump doing so was enough to send the iron ore price surging to a 12-month high, taking BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) along with it.

As Aconex provides a cloud collaboration platform for the construction industry, I believe it is likely to see demand for its services rise over the next 12 months on the back of Trump’s election victory.

Prior to Trump’s victory management advised that it expected sales to grow by 39% to 46% year on year in FY 2017. After which it predicts revenue growth of between 20% and 25% per year through to FY 2019.

But if a US construction boom materialises during Trump’s reign, I wouldn’t be at all surprised to see it outperform these growth forecasts as demand for its services increases. After all, management is of the belief that its platform can accelerate the pace of product delivery and help build five hospitals for the price of four.

A final factor that may explain today’s rise is the growing short interest in Aconex. As of last week 10.4% of its shares were in the hands of short sellers.

But with the company’s prospects suddenly becoming brighter, I expect a good number of these short sellers may have been buying shares today in order to close their short positions.

Overall I think Aconex is fantastic company with strong growth prospects. Even after the rise in its share price today I still think there is a great long-term investment opportunity here that will reward patient investors handsomely.

Finally, make space in your portfolio for Aconex by selling these three wealth-destroying shares. Each could be harming your portfolio and might be best swapped out in my opinion.

3 Rotten Shares to Sell, and 1 to Buy Today

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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