Daily Stock Market Report (Wed 15 Jan 2025) - GYM, GLE, RWA, VTY, LIO, FDEV, CURY, NICL, GNS, BRK

Like watching paint dry. The completion of the acquisition of Equals (LON:EQLS)  moves a step forward with one FCA condition now met. Completion is still set for Q2 but given the protracted negotiations and PUSU extensions that led up to this deal, I'm a bit worried that the company feels the need to remind us:

"If any of the key dates and/or times set out in this expected timetable change, the revised dates and/or times will be notified to Equals Shareholders"

Fingers crossed.

Traders buying Finseta (LON:FIN) ahead of its TU have been caught wrong-footed with a 17% fall at open despite what Shore Capital, house broker, calls a positive trading statement. "We continue to see scope for upgrades whilst leaving our forecasts unchanged at this stage."

POLN.  And in other news the very under the radar POLN joins the FTSE 250 on Friday.  I hold.

Hi Nanotrader09. I think that’s a very wise comment. We shouldn’t forget that internet after all is a great disruptor of middlemen, be they car salespeople, retailers or headhunters.

To both your points, my nephew runs a highly successful headhunting business focused on a single role. Contrast that with the experience of one of our offspring; a coder with many years of experience who never even had an acknowledgement from the big recruitment firms to whom he sent his CV, whereas  in the end his new employer found him through LinkedIn. No wonder the likes of Pagegroup (LON:PAGE) , SThree (LON:STEM) and at the rest are struggling.

Hi Jeff, I'll add our names beside the companies we intend to cover next in the table.  Thanks.

Now the number of securities in the Securities mentioned panel on the right has exploded, it would make life easier if the list was sorted alphabetically.

Very interesting episode on Radio4 last night of ‘the bottom line’. Evan Davies interviewed various people who work in different kinds of recruitment businesses about the methods they use. Good insight into what is the same and what has changed in recruitment.

Ed,

I am sure you are right about the price movement and market expectations There is a newly posted 2025 US study “The Directionality of Earnings Surprises”, which concluded:

1. 65% of Earnings Surprises were positive, while about 35% were negative. This is consistent with the efforts of US company managers to meet or beat expectations
2. Of the positive surprises the subsequent upward direction rate was around 59%
3. Positive price movements that show high statistical significance are more likely rise.
4. That in addition to the Earnings Surprise , other aspects influence the extent of a price rise change notably; management guidance, analyst forecasts, financial statements line items, and company updates.

So Earnings Surprises have positive predictive power especially when the extent of the Surprise is significant.

https://papers.ssrn.com/sol3/p...

Markets recovering today. Let's see if recovery can be sustained! Lots of shares on the buy list, not feeling brave enough, yet

If you get time would be interested in thoughts on Brooks Macdonald (LON:BRK) chaps outflows again but not on the scale of fund managers , and given they are a dfm they can invest anywhere they have also started buying up UK IFA's as a way of increasing recurring revenues, this is tempered by the fca now starting to look into firms that have been buying up small IFA's over the last few years to see how things have been (or haven't been) bedded in.

DPLM 4254p up 4.2% on Q1 results. "Q1 organic rev growth slightly better than we expected, with DPLM noting sector trends broadly the same as last year" It's worth a little mention on account of being a multi-bagger and now on many more peoples' radar.

Over the last few years it has been increasing share count by about 4% pa, which I do not like to see.

It's also worth noting that in the past the shares have dropped 10% on adverse news. 

A fwd PE of 25 is not cheap, but it's been a great long-term performer. Do trees grow to the sky? Difficult to say, isn't it?

I have held since 2015. I'll let you do the maths on that. I didn't include it in my xmas stocks because I was worried about valuations.

DPLM is the top holding of Smithson Investment Trust (LON:SSON) , of Terry Smith fame but for smaller companies. Simon Barnard is a portfolio manager (I think there's someone else involved, too). I hear that the managers do consult with the great man himself, which should give some reassurance.

SSON seems to have followed the general pattern of FundSmith over the last 5 years: a great run-up, followed by a sharp decline.

The general consensus over on ADVFN is negative, but personally I am reserving judgement. I do not hold shares in SSON.

Ed I think that would be something interesting to look at - especially what the subsequent level of price rise tends to be.

I have been thinking recently that there are occasional opportunities where brokers have been slow to upgrade forecasts but sometimes it seems fairly obvious that's going to happen. I am wondering whether there might be good trading opportunities there if you can identify them or whether actually investors are good at identifying them in advance so maybe the upside isn't as great as I might expect when the upgrade then comes through. 

Billington Holdings (LON:BILN) is an example of a company where the broker tends to hold back in its forecasts - probably to allow some room for manoeuvre in the event a major client goes under given the sector risks. I know Graham has also suggested that it can be difficult for brokers to predict CMC Markets (LON:CMCX) performance given volatility in the markets.

RWA It looks like shareholders would have had a nasty 3 years. Fwd PE is 17, but the average EPS from 2018 - 2023 is 46p. Based on average EPS, at a price of 308p, its PE is 6.7X, a low figure. That assumes - rightly or wrongly - that there will be some kind of reversion to mean in earnings going on.

2019 and 2020 had negative earnings growth, but rebounded strongly in 2021 and 2022. 2023 was a large down year, and it looks like 2024 will be (based on analyst estimates), too. So it might experience a strong profit rebound in 2025. The shares are likely to perform really well if this happens.

We shall see.

No position.

Very interesting episode on Radio4 last night of ‘the bottom line’. Evan Davies interviewed various people who work in different kinds of recruitment businesses about the methods they use. Good insight into what is the same and what has changed in recruitment.

But which shed no light whatsoever on the slump in global hiring that is hampering recruiters, listed or private. This topic crops up from time to time here with the same errant suggestions that the recruiters are being disintermediated. This is simply nonsense. I’ve answered this in detail in the past and so those interested will have to go looking for my comments on the subject - if I remember correctly it was in October that the topic last took prominence. 

TLDR - employers are frozen with fear of a post-pandemic recession that has refused to appear -  it would be so much better if we had just got it over and done with - accentuated by the dilemma of exhausted tech budgets now facing a future with the great unknown that is AI. What employees will we need, and how many, in an AI driven business world? It is easier to do nothing and high no one.

The CEO of JD Sports Fashion (LON:JD.) just bought £99k worth of stock...

Hi

Softer US CPI than expected .... US futures markets are rising strongly as I type +1.41% S&P 500, +1.66% Nasdaq 

Dollar falling so sterling and Euro rising against it

Regards

Howard

Graham, thanks for this.  Re fund managers ( I hold LIO, IPX, ASHM, POLR) is it possible to see a comparative list of MCAP to funds FUM as a basic metric of value?  Would that be a useful indicator?  I haven't seen any update from Cockney Rebel but this was one of his ideas for the year on the basis of being extremely cheap and of course an instrument on any return to more sensible valuations of the London Market.  In the meantime, dividends are nice, though very likely unsustainable.  

i also notice that LIO is hardly down on the day despite this TU.  At what stage is it in the price? 

Brucie, my personal opinion is that the bad news is already in the price. I've been AMBER/GREEN on LIO and I think I'm GREEN on all of the others.  Market cap to AUM is something I calculate regularly when I cover these shares, I'd suggest maybe keeping a note of their Market cap (or EV) to AUM ratios in a single file? 

Having held Xaar (LON:XAR) for 10 years and seen the share price fall relentlessly from 500p  to less than  80p I sold at the end of last week realising a significant loss.  The sale should have happened many years ago but I foolishly held on in the hope that something would come up but it never did.  Graham’s most recent analysis finally convinced me it was a lost cause ‘little more than a gambling chip’ or words to that effect.  Obviously there are plenty of gamblers out there because today the share price was up 15%!! Pretty sure it’s a false dawn  (again) though the fact the departed PS on his free Substack podcast said he was considering it as trading (speculative punt) opportunity may have had some impact.  

Thanks.  to answer my own question here's something very crude that I knocked up yesterday.  Feel free to smash it to pieces.  IPX comes out cheapest of all, POLR, unsurprisingly, most expensive.  Some would say you het what you pay for.  Others might say there is a cyclical distortion at work?

AUM/mcap

IPX 34.1bln/268 mln =.78%
LIO 25 bln/259mln =1%
ASHM 49 bln/1bln =2%
POLR 24 bln/491mlm =2%

Same exercise, using Enterprise Value (MCAP + debt -Cash) gives me the following order:
(167m) IPX .49%
(316m) ASHM .64%
(167m) LIO .67%
346m) POLR 1.45%)