Four Shares to Watch in 2016: Vela, Croma, Fastnet and New

31st Dec '15 by AnonymousUser3343

61 comments 38211 reads

Below are four AIM listed tiddlers that could potentially provide their shareholders with a welcome New Year cheer. All four companies have interesting aspects which may add considerable value in 2016. The companies listed below are ones I have personally added to my portfolio and in my opinion could potentially offer good share price appreciation, but as always on AIM, if it does not go to plan and the next few key announcements do not meet market expectations, then a disappointment could also be on the cards.

Over the years the oil and gas sector has been very kind to me and have contributed nice gains to the ISA account, however the rapidly deteriorating economic conditions in the oil and gas sector during the last year has meant a change of focus was needed. As always, when looking at most AIM stocks, the risk element needs serious consideration alongside the future economic outlook and the ability of companies to raise future funds, but all four have some very interesting characteristics which are worth a place on the "research and watch" list in my opinion.

Without further ado, I will cut to the chase and give a brief overview of the 4 I have chosen:

Vela Technologies – Disruptive Technology

Vela Technologies (LON:VELA) at the current market cap of just over £1m is an interesting company that invests in disruptive technology and has stakes in a spread of nine companies. These include some very exciting holdings such as the recently TSX listed Blockchain Tech Limited a technology company exploring applications of blockchain technology in a variety of industries including money transmission, insurance, voting and smart contracts. Their Interbit remittance solution is set to be launched in January and this should generate financial sector interest.

Also within the portfolio is the very interesting Air Portr service which offer an on-line demand airport luggage transfer service. AirPortr has recently signed a long term agreement to operate its on demand luggage service at Heathrow Airport in addition to Gatwick and London City, which attracts around 75m passengers per year. Other investment include a stake in Nektan plc through the Disruptive Tech holding, Stream TV Networks, The Social Superstore Limited, Revolve Performance Limited and 23m shares in 3Legs Resources which has Jim Mellon involved and has signed non-binding heads of terms for the acquisition of SalvaRx Limited.

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Novice Investor

3rd Jan '16

The reason why I subscribed to Stockopedia's screening facility, is because I am changing my strategy.

I have always made very good money without screening, as I've run a concentrated portfolio and didn't need many candidates, being a medium term investor. I only use screening to produce a list of candidates for further research.

It almost feels like research, as in researching a company, is a dirty word here. While I agreed with Mark about the content of some boards on ADVFN, I disagree vehemently that one can't gain an edge with research. Obviously not with FTSE 100 companies, and usually not popular companies, as defined by the number of posts on ADVFN bulletin boards. I am still buying shares and spreadbets in some companies, so obviously I won't discuss them directly. I've always thought that fantasy funds are of very little value, although they are fun. I never bother. It's a bit like paper trading, which IMO is a complete waste of time.

NI

PhilHofGrowYourDough

It almost feels like research, as in researching a company, is a dirty word here.

Please show me a post where someone has said that you are making a mistake by researching a company?

I've always thought that fantasy funds are of very little value, although they are fun. I never bother. It's a bit like paper trading, which IMO is a complete waste of time.

You misunderstand. I own all of the stocks listed in my 'fantasy fund' but in smaller proportions as I haven't quite managed to make a million ... yet!

You could evidence the efficacy of your approach by mirroring your portfolio investments in a fantasy fund. After all, talk is cheap.

DWit199

NI is making a good point. FAST is an example where the Stockrank is deceptive. My brief research indicates that FAST is probably a £10 million cash shell rather than an oil and gas explorer. All past activity is irrelevant as the assets have been sold, so the Stockrank is not predictive of future performance. Since the Stockrank is low nobody is likely to inadvertently purchase this share. However, there are other examples of high stockranks where all is not as it seems. Recently this would include PACE (bid) and Pure Wafer (fire and insurance claim). Meggitt is showing a big recent increase in Stockrank but the price history seems too short and there are no momentum figures in the stock report, so I suspect the Stockrank is spurious.
I am not convinced that spending a lot of time researching a share is going to lead to a significant increase in my ability to pick winners unless I am in possession of genuine inside information, but if I am using a factor based portfolio approach I do try to check that the reported numbers are plausible and that the share is not in a special situation that renders the numbers invalid.

timarr

Hi Ian

Well the evidence suggests that most people aren't very good at making investing decisions. Some of this at least (some people argue all of this) is due to behavioural biases. There are countless issues but, for example, people tend to be biased into buying what they've heard of over what they haven't heard of and there are some really peculiar issues around stock naming (people prefer to buy stocks they can pronounce over those that they can't). And those are just a couple of random examples.

I do think that combining high StockRanks with some additional factors - such as no AIM stocks (to avoid the Globo issue, among others) - can be used to create a portfolio that outperforms most manually selected portfolios. However, cig's later point about factor outperformance attracting hot money which then moves onto the next great thing when the approach starts underperforming is precisely to the point: most methods that work do so because most people can't stay the course when they temporarily stop working. It's counter-intuitive, but there it is.

Also it should never be forgotten that the behemoths of the investing industry are constantly tweaking their algorithms looking for exactly the type of risk-adjusted returns we're discussing here. I suspect that most of us will only get an edge by either taking a long view (so buying high QV and low M and waiting) or looking at market caps below where most institutions would find it effective to trade.

But I really wouldn't put any faith in broker estimates. They'll be right (because they're guided) right up to the point they stop working. What drives up share prices over time are increasing earnings, and that comes from having a business that can generate those earnings across the business cycle regardless of the vagaries of the management, economy or investors. To paraphrase Buffett: buy businesses that can be run by idiots, because one day they will be.

timarr

Rusty2

Yes I agree with David, there are special situations with some high ranking shares, like Pace (LON:PIC) and Pure Wafer (LON:PUR).

Also some balance sheet issues do not show up in the Stockranking, this is where Paul is so valuable

One thing I have noticed with quite a few of the top ranking companies is the estimated EPS for this year are a negative figure, for example Inland Homes (LON:INL), Wizz Air Holdings (LON:WIZZ), Character (LON:CCT), United Carpets (LON:UCG) H & T (LON:HAT) now I don't about you but I would rather invest in companies that are growing as long as they are good value.

No I did not invest in Globo (LON:GBO) or any chinese companies, I can't believe some experienced investors were tipping them. Apart from numerous red flags in Globo (LON:GBO) the figures never seemed to add up to me.

Hi David,

Everyone accepts that there will be some stocks with a stock rank of 90+ that blow up. Also everyone accepts that there will be stock with a stock rank of < 20 that will do well. Perhaps FAST is one of those stocks?

I'd suggest you have a read of Ed's blog A Gratuitous Deconstruction of the StockRanks and the subsequent discussion and in particular this comment which indicates the following ...

Breaking the StockRanks down into quartiles it was found that number of stocks that fell by > 30% in Q1 2015 was broken down as follows:

0-20		31
20-40		36
40-60		17
60-80		9
80-100		3

That was for > £10m market cap. I suspect that the figure would have been ever higher for the bottom quartile if it had been > £1m market cap (which would have included FAST at £9m)

For me, the big bonus of the top quartile is that it appears to bring with it highly defensive characteristics.

So maybe FAST is a special case and doesn't belong in the bottom quartile but that is where it finds itself. There will probably have been other special cases in the bottom quartile for Q1 2015 yet that quartile still had a significantly higher number of big losers. Best of luck trying to differentiate the champs from the chumps.

Why fish in that pool?
Why wade through crap and spend all that time researching when the odds are so stacked against you when I can select from a massively less risky bundle of stocks?

Best of luck to the hunters, but I'm more of a farmer.
Phil

underscored

The future is unknown, and cannot be solved with more information.

Underscored, that statement needs qualifying. We can predict a lot of things with more information.

The future hasn't happened yet, but I am going to get more flack from the cheerleaders. I could solve that with less information of course. ...

NI

I think that in general we agree. I try to fish in the high stockrank pond, but before investing I do check that the stock rank is valid by doing a little research.

I wouldn't normally look at a share with a stockrank of 20 but FAST is quite different. It is an opportunity that has been brought to our attention by this forum. The OP and NI make the case that this share does not have a stock rank. It cannot be assessed by the stock rank system. It is a cash shell with a p/b <1. Just about every other number is irrelevant. A cash shell with a recently appointed celebrity director is always interesting. I can't find any evidence that private investors would do well by following this particular celebrity so I am unconvinced by the long term investment case. £10 million is not sufficient to do anything meaningful so I am expecting some feverish ramping of this one around the bulletin boards followed by a discounted placing to the insiders mates at some time within the next year.

kalkanite

Hi David

NI is making a good point. FAST is an example where the Stockrank is deceptive. My brief research indicates that FAST is probably a £10 million cash shell rather than an oil and gas explorer. All past activity is irrelevant as the assets have been sold, so the Stockrank is not predictive of future performance

Completely disagree with this - If the management is still the same, to take a companies number of shares from 3m to 345m in just 6 years and have 'nothing' to show for it and then decide to change the business to a different sector demonstrates that FAST is not an investment but a complete gamble that would not be taken by a serious and experienced investor.

NIs claim to have 40 years of investment is either misleading or he has learnt next to nothing in those years. He has had the opportunity to show us his investment wisdom but he disengeuously makes up excuse after excuse why he wont do this. The real reason I suspect is because it will highlight his ignorance in investing.

He says that he has a concentrated protfolio and that he is a long term buy and hold investor, yet he also claims to be buying a number of shares at the moment! the two simply do not compute.

I will sign off with the following......

"No disrespect intended" (see comment 9)

"Never argue with stupid people, they will drag you down to your level and then beat you with experience"

Mark Twain

Well ... Let's play the game that FAST is a special case and shouldn't be judged on its StockRank.

NI has decided that he would question:

1) the whole evidence base of StockRanks and the academic literature that supports it
2) Ed's motives

rather than putting forward his knowledge of the company and why it should be treated differently.

On another thread he commented that a poster had made an "absurd comment" without having the good grace to either offer an apology to the OP or to offer his informed position.

Back to FAST ... the whole healthcare/pharma sector took a whack recently when Clinton made some comments about increasing taxation (I think) if she got elected so best of luck with any investor in that sector over the next few years.

Let's review in next January.

Phil

It's not really a game as FAST clearly is a special case. That doesn't mean I think it will be a good investment. The outcome is almost entirely dependent upon some form of deal being done, probably in the next six months or so. Reverse takeovers, takeovers, ramping, placings etc. Who knows what will happen. Harry Stratford's involvement makes a deal of some sort a racing certainty but I can think of plenty of ways for the private investor to get shafted. As has been said, a complete gamble... but it is a shell with a market cap < cash pile... Whatever happens, the stock rank is irrelevant.

NI may question the evidence base for stock ranks and Ed's motives but I wouldn't let him get under your skin. There is strong evidence in the literature to support QVM and in the long term I am reasonably confident of market beating returns although some research to confirm the database numbers seems prudent to me.

4th Jan '16

Phil H,

The poster did make an absurd comment. No apology was required, nor informed comment. Surely even an ex software engineer who is now a counsellor, and who has designed an Ichimoku app (you read that right..) can understand why.

Reading your profile, all is now clear.

Kalkanite, I don't lie, so don't question the veracity of my comments again.

NI (Medium, NOT long term, investor, with 6 shares, including two I am still buying)

imranawan

Thought this blog post may also be of interest: http://www.lsesharetalk.com/fast-group-report1.php

gus 1065

Thanks Imranawan for the post - good to have the commentary on the history of Fastnet Equity (LON:FAST). An interesting proposition; as I see it, essentially a start up with a reasonable amount of seed capital (c,US$15m) and an entrepreneurial board with some specific sector experience and contacts looking for opportunities in the Bio-pharma sector.

I appreciate this post has taken on a broader remit about the merits of Stockopedia vis other investment strategies, but in the more limited context of investing in the Bio-pharma sector, does anyone have any views on the merits or otherwise of the Woodford Patient Capital Trust that was launched last year?

(https://woodfordfunds.com/our-funds/wpct/trust-facts/).

I'm quite interested in taking some exposure to the Bio-pharma/healthcare sector but lacking a scientific background feel singularly unqualified to pick the likely winners form the losers. Fastnet Equity (LON:FAST), at least initially, seems to offer a one-shot investment which will either fly or tank depending on whether the management are successful with their first investment - this may or may not be "risky", but I do not feel in a position to judge.

The WPCT seems to offer a different approach in that there is a significant amount of capital (about £800m equity raised so far with I believe a facility for a further 20% leverage) which will take stakes in, rather than acquire outright, a broad portfolio of (predominantly) Bio-pharma/healthcare etc. related stocks. The Trust is already substantially invested in about 65 holdings, offering immediate exposure and diversification albeit with the potentially diluted returns from a portfolio as opposed to a single targetted investment.

One thing I quite like about the WPCT approach is that rather than take a fixed fee based on assets under management, there is a relatively small admin fee and then a profit share based on a percentage of annualised returns above a minimum 10% investor return threshhold. It's kind of a hybrid LTIP rather than conventional fund management fee structure.

Any thoughts either way?

Thanks, Gus.

Cisk

Elias, you've certainly assembled a collection of something. Whether they qualify as investments as opposed to gambles - only time will tell.

As for fastnet, I remember some years ago attending a proactive investors presentation and bumped into Friel in the loo. He was crowing to all about winning (or could have been nominated for?) AIM share of the year award. Utter rubbish. Needless to say the share price was decimated afterwards.

I would definitely consider entrusting my cash to a BOD who have a proven track record. His record is of losing investors money. And what qualifies him to head a biotech / medical company?

Can't comment on the others but suspect their spreads will be huge. And zero liquidity to get out if / when everything goes tits up. Far better to pick up bargain, good companies at rock bottom prices if this happens.

bsharman

I would avoid Fastnet Equity (LON:FAST) unless you are a masochist and like loosing money. My experience of them is to ramp ramp ramp everywhere - for a period of 2-3 years they were all over the city like a rash pumping up their prospects off the coast of Ireland and Morocco. It was utter bulls*it and they cannot or should not be trusted. All in my honest opinion of course!

I also seem to remember (one of the 000s of times i had to sit through their promotional presentations) that the then FD was asked directly if they would need to raise funds - he categorically said no and then in the very next few days they went aheads and issued more shares.

There is in my experience an inverse correlation between the number of times a company presents and their share price. The more you see a company present at places like Proactive and Edison the more worried i would be. Good management should be in the business of running their companies and not have the time to pump their share price every 5 minutes to private investors.

LEAVE THEM ALONE!!

Edward Croft

5th Jan '16

Timarr - you might enjoy reading Andrew Ang's book "Asset Management - a systematic approach to factor investing". It's very expensive, but the rub of it is available in a free chapter on SSRN as a PDF http://papers.ssrn.com/sol3/papers.cfm?abstract_id...

AnonymousUser3343

10th Jan '16

last week I put some questions to the CEO of Croma Security Roberto Fiorentino, Q&A article link below:

http://www.stockopedia.com/content/ceo-interview-croma-security-solutions-117328/

22nd Feb '16

As speculated above the appointment of Harry Stratford as FAST NED was a hint as to what was to come, he is also on the board of the acquisition target and set to be the chair of the new company.

FAST announced today that it is in very advanced discussions with Amryt Pharmaceuticals. If the Acquisition proceeds, the enlarged group will become a late stage, specialty biopharmaceutical company and will constitute a reverse takeover.

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/FAST/12706969.html

Four Shares to Watch in 2016: Vela, Croma, Fastnet and New

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