Small Cap Value Report (19 Sep 2014) - Mello2014

Good afternoon! The celebrations continued well into the night here in North London, and the sun is streaming though the windows. I couldn't be more delighted that Scotland has voted decisively, and once in a generation to stick with us sassenachs! It makes sense for everyone, and if anyone finds my Tweets on the matter too hot to handle, then I understand there is a button you can press to "Unfollow"! They tried in vain to silence me on Quindell, Naibu, and Globo, but they'll never silence me on the integrity of our nation! I'm nearly always right in the long run. Although I think we could all do with a break from this stuff for a good wee while! I don't want to hear any more from Salmonds, Sturgeons, or any other type of miserable fish!! Let's hope the incalculable damage from this ill-advised, and ugly matter can be gradually repaired. Nationalism is an ugly thing, which releases the most base and negative human instincts, in my opinion. 

Maybe we only appreciate things when we consider what life would be like without them? I shall certainly look forward to planning my next trip to Scotland.

Mello 2014

I understand that 3-day tickets are selling like hot cakes for the new investor event of the year - this is a quality investor event, being organised by the redoubtable David Stredder - a highly successful investor, and all round nice guy - with the key point of difference being that he's eschewing commercial sponsorship and only inviting interesting companies and speakers that he wants to see and hear from.

So instead of the usual motley collection of hopeless junior resource stocks, we will be able to meet small caps which are hand-picked by David, with an emphasis on profitable and dividend paying small companies. We often hear that AIM is a casino, populated with poor quality, and ethically-challenged companies & advisers. To a large extent those criticisms are valid, and it's appalling that such a lamentable situation should have been allowed, indeed encouraged, to pertain. Light regulations, which are not really enforced at all, are going to be a magnet for spivs, as indeed AIM is.

However, amongst the dross, there are perhaps 300-400 good companies on AIM that are worthy of our consideration and support.

Tickets to the Mello 2014 conference in Derby (1h 25m from London by train) are selling like hot cakes, and you can join the happy throng in Nov 2014 by clicking here. When they're gone, they're gone. I shall be in full attendance, and very happy to ramble on about small caps for the price of a large gin & tonic.

Clean Air Power (LON:CAP)

Share price: 3p
No. shares: 256.8m
Market Cap: £7.7m

I attended a very enjoyable investor conference yesterday, and a recurring theme was asking the question "When to sell?" Or the same question really, "When to admit you're wrong?" This is particularly pertinent for value investors, since we are drawn to bargain shares, and embrace negative sentiment - since (selectively) this is what provides us with buying opportunities.

I threw in the towel with CAP a little while ago, at 4p, the catalyst being a small (and desperate-sounding) £1m Placing.

Today's trading update couldn't be clearer in my view - the business model is not working, and therefore sadly I think the shares are probably now worth nothing. With regret, I am adding them to my bargepole list. A deeply discounted fundraising, or insolvency, now look imminent. It's a pity, but story stocks very rarely work out.

Whilst there have been some notable recent successes, including the Letter of Intent announced 10 September 2014, current trading has been very challenging. The introduction of Euro 6 emissions standards in Europe at the start of 2014 means that opportunities are now consolidating around a small number of operators who continue to run large fleets of Genesis-EDGE compatible Euro 5 vehicles. Whilst the Genesis EDGE system continues to prove its ability to generate attractive fuel savings in customer trials, it is increasingly difficult to predict with any certainty the timing or quantum of future orders in Europe.

The challenging European market coupled with unexpected technical delays in achieving EPA certification and the first sales of the US Genesis EDGE Dual-Fuel product mean that full-year results are expected to be significantly below market expectations.