July 2019 Portfolio Update

Monday, Aug 05 2019 by

A month to forget!


Hollywood Bowl Bought at 219p - July 19

I've held a starter position in Hollywood Bowl for about a year now and have been very happy with its steady progress. The share still passes my quality and value screens easily and is perhaps even better value than it was a year ago. After all the price has barely moved but profits have increased while debt is notably reduced. In addition analyst estimates for 2019 have edged up gradually over the last year to 13.7p and now point to earnings growth of 9.2%. I think that this could be a slight underestimate given that at the HY profits rose by 13.6% to 8.92p and they could easily make 5p in the second half. However when it came to actually buying any shares in the market I had a devil of a job getting a quote from a market maker for the deal size I had in mind. In the end I decided to put in a limit order at 220p and leave it for a couple of weeks to see if anyone would fill it. As it happens my order executed a few days before expiry at a price which looks more like the offer than the bid! Chalk up a victory for patience.

SimplyBiz Group Bought at 218p - July 19

I've held SimplyBiz for a while now and was pretty happy with their core business. However their acquisition of Defaqto, back in March, struck me as a genius move. In a stroke they materially grew the company while gaining a very complementary business line. Given that management believe that Defaqto will be earnings enhancing in the first year (which makes sense given that it generated £5.3m of EBITDA on £12.8m of sales in 2018) then it strikes me as odd that analyst forecasts have actually reduced a little in the last few months! At the time I didn't want to chase the price up, given that it's performed strongly this year, but after hitting a high of 240p the price came back almost 14% before stabilising at just below 220p. With a pre-close trading statement imminent I judged this to be on opportune moment to double my holding at a reasonable level. Guess we'll know shortly!

Quartix Holdings Bought at 278p - July 19

As mentioned below I like the strategy that management are…

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Hollywood Bowl Group plc is a bowling entertainment operator in the United Kingdom. The Company is engaged in the operation of ten-pin bowling centers, as well as the development of new centers and other associated activities. It has a portfolio of approximately 50 centers operating across the United Kingdom. The Company's centers are located in multi-use leisure parks, and each center offers approximately 20 bowling lanes, on-site dining, licensed bars and family games arcades. Its brands include Hollywood Bowl, Bowlplex and AMF Bowling. Its Hollywood Bowl brand has over 30 centers situated in prime locations at leisure parks. Its Bowlplex brand has approximately 10 centers in prime locations at leisure parks. Its AMF Bowling has over 10 centers in non-prime locations. The Company's family-focused arcades offer games, such as air hockey and basketball hoops, games with prizes and video games. The Company's licensed bars offer a range of soft and alcoholic drinks. more »

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SimplyBiz Group PLC is a United Kingdom-based company, which provides business support and financial market services. The Company provides with access to advice on a range of financial needs, from mortgages protection, to investments, estate planning and taxation. The Company provides guidance and support from a regulatory perspective and provides access to business development support, such as technology solutions, marketing and events. The Company has partnered with insurance, investment and mortgage providers. more »

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Quartix Holdings plc is a United Kingdom-based supplier of vehicle tracking systems and services. The Company operates in designing, development and marketing of vehicle tracking devices and the provision of related data services segment. The Company offers subscription-based vehicle tracking systems, software and services in the United Kingdom. Its vehicle tracking systems incorporate instrumentation to identify and transmit location, speed and acceleration data to the Company on a real-time basis. Its vehicle tracking software system provides business critical reporting, and analysis of vehicle and driver data, including timesheets and other customer Key Performance Indicator (KPIs) to customers via any Internet-enabled device. The Company has an overseas branch in France and an overseas subsidiary in the United States. The Company's subsidiaries include Quartix Limited and Quartix Inc, which are engaged in the business of vehicle tracking. more »

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  Is LON:BOWL fundamentally strong or weak? Find out More »

11 Posts on this Thread show/hide all

doug2500 5th Aug 1 of 11

Hi Damien,

Thanks for the write up. It's reassuring to know others are feeling a bit bruised too. A pain shared is a pain halved maybe....

I do get the feeling small caps are out of favour just now, which would be fine if I had more cash but not so cool when your mostly invested. It might be a time to concentrate on company performance, bank the dividends and try not to worry about prices.

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rhomboid1 5th Aug 2 of 11

Great stuff as ever Damian...it’s certainly a tricky market to navigate...my sense is that as long as you concentrate on the Q of your holdings..which you do...you’ll emerge in good order

Thanks for posting

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tony akram 5th Aug 3 of 11

Excellent report - I am always reassured when we share some holdings !!


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jonno 6th Aug 4 of 11

Great write up Damian, as always.  I look forward to your monthly summaries, very cogent and pragmatic.  There are a number of quality small cap shares at enticing prices at present.  I have added to a few holdings, £HAT being one,  as the price of gold in Stirling has gone through the roof, which to my view is a positive for the company and its contemporary, Ramsdens.

The elephant in the room at present, or at least one of them is the expensive squabble  between Trump and China, so it is highly probable that good small caps will get cheaper before the dust settles.

All the best

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RichardK 6th Aug 5 of 11

Thank you, Damian. I find your reviews very helpful, especially as we have several holdings in common.

I fear that the US-China trade and currency war, and the serious prospect of a no-deal Brexit will lead t a contraction of global and UK trade, and consequent slowing or even negative growth. The current market malaise looks likely to continue.


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Damian Cannon 6th Aug 6 of 11

Thanks for the feedback everyone - much appreciated. I tend to agree that we're in for some medium term economic volatility by the looks of it. Although there's some cognitive bias here in that the miserable current news flow is casting an outsize shadow. So, as ever, I think that it's best to focus on quality and trading while remaining open to opportunity.

As an example I picked up some more Burford Capital (LON:BUR) yesterday morning at £13.66 on the basis that the company is being materially under-valued due to the complexity of its accounts and natural lumpiness in its revenues.


Blog: Ambling Randomly
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doug2500 6th Aug 7 of 11

In reply to post #500736

Well that was really unfortunate timing, or luck, as there seems to be a major panic over a possible shorting attack today.

Like you I thought £BUR was a compelling share, I bought a few last week at 1440p, and I'm not sure how to react.  My gut feel is to ride it out, but I do take note when shorters pop up, I wouldn't just dismiss them as sharks.

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Damian Cannon 6th Aug 8 of 11

In reply to post #501061

Yeah you could say that! It'll be interesting to see what the shorters have to say (if Burford Capital (LON:BUR) really is the target) but I haven't found previous dossiers to be compelling. Either way I have no plans to sell my shares (without any actual news from the company) and will probably add more if the price remains under pressure. The obvious danger is that I've become enamoured with the company and don't perceive its flaws....


Blog: Ambling Randomly
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cafcash49 19th Aug 9 of 11

Hi Damian, On the subject of Burford, have a read of Mr Bearbull  in IC wk16/8-22/8. He demonstrates how we were all fooled by Burford and how with debt and the issuance of more shares the figures have been misleading. I am certainly revising and going to become a bit more in depth when it comes to the accounts. Great report as always. I am not so good at watching my capital decrease and have sold 14 shares and only kept 5. I have put my sold ones into a Stocko fantasy portfolio to see if I did the right thing or not. Keep up the great work. Charles

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Damian Cannon 19th Aug 10 of 11

In reply to post #506061

Thanks for pointing me towards that article - I found it in the google cache! There's a lot to be said for comparing operating profits to operating cash flow and I certainly intend to be much more cautious on that front in future. However I still haven't made my mind up about Burford as they say they almost never need to mark down profits that have previously been taken mid-case. I am concerned about just how true this is and then there's the small matter of actually collecting the money when a case is successful. There is much to consider here!

Blog: Ambling Randomly
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doug2500 20th Aug 11 of 11

While I agree Burford's accounts are not straightforward I always appreciated that they were not cash positive. It seems fairly obvious to me that all cash received was rolled over into new investments. I view it as a growing investment company rather than a trading company, where cash flows would be more crucial.

The next point is to take a view on whether these investments will pay off in the mid to long term. If they do the cash should follow, and if they stop growing it will be available to return to shareholders. I took their commentary at face value on the likely success of their cases, maybe naive but what else do you go on?

Then you have to judge whether having won the case they can collect any cash. This is tricky.

Then there's the issue of valuing cases and booking profits. To me I always thought they had been fairly upfront about this and pointed out that accounting rules made them use fair value on something with a binary outcome, which is tricky again but not difficult to understand.

The aim listing may be an issue for their size, but I'm invested in plenty of really good aim companies so it wasn't an issue for me.

The fact most profits come from a few cases wasn't news, my own investments follow the same pattern.

Governance may be an issue.

To me the secret is to view it as an investment company, not trading. And so maybe NAV should have been more prominent in my thinking. But it is a tricky beast to value.

I find it disappointing how many experts have appeared after Muddy waters (seldom before) and how easily holders have been shaken out with what was largely freely available info. One look at the cashflow report on stocko reveals the situation so why did it come as such a surprise to so many?

For now I hold.

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