Mello London 2018 Notes: Gervais Williams, Lord Lee, Bioventix and others

Wednesday, Nov 28 2018 by
69

Stockopedia had the pleasure of attending the recent Mello event in London. Below are notes on some of the day one presentations:

Gervais Williams, Miton Group

Unsettled markets: The implications for the smaller company sector

  • Miton has £1.5bn AUM
  • Gervais Williams' (GW's) big investment themes going forwards are:
    • the implications of phasing out quantitative easing and a global shift towards tighter monetary policies
    • Correlation across markets
    • Portfolio positioning

GW's take on economic conditions and outlook

  • Productivity stagnation around the world is increasingly being linked to QE
    • Productivity flat-lined globally in 09/10, picked up a bit but has since reverted
  • QE was the right call at the right time but it probably lasted too long and outstayed its welcome
    • Flushing the system with money has led to sub-optimal capital allocation (less capex, more dividends) and bubbles
    • A Warren Buffett quote occurs:  'Only when the tide goes out do you discover who's been swimming naked'
  • QE has been phased out in the US, the UK, Europe and other places & is now back down to mid-Noughties levels
  • People have been voting for political change (Brexit, Trump, Five-Star in Italy) —> this will drive changes in long-term economic trends
  • Liquidity is decreasing around the world —> emerging markets that are marginal borrowers are at risk of entering recession/stagflation; this will also happen to marginal borrowing companies
  • GW's 'risk radar is on maximum right now' (note to self: buy risk radar)
  • Markets are de-rating everywhere. The FTSE has fallen from 14.6 times earnings to 12 times earnings (December 2017 up to November 2018)
  • Unlikely tail risks are increasing
    • eg. US sanctions on Iran oil
    • The world needs c90-100m barrels everyday
    • If war breaks out in gulf regions, oil flow will be compromised
    • If oil price goes up to c$100, there could be a spate of recessions (what can we do? We used up a lot of ammo in wake of '08)
  • Dividend covers have come down —> companies will be quicker to cut dividends this time around

Miton strategy

  • There are still plenty of agile, well-financed companies around
    • eg. Kape Tech (LON:KAPE), which is in cybersecurity (note: Paul Scott also mentioned cybersecurity firm Intercede - LON:IGP)
  • Choose companies with very strong balance sheets, net cash, low net debt, or high cash flows relative to debt
  • Companies' share prices are selling off faster and more steeply on bad news

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Bioventix PLC is a United Kingdom-based biotechnology company. The principal activity of the Company is the development and supply of antibodies. The Company specializes in the development of sheep monoclonal antibodies (SMAs) for use in immunodiagnostics focusing on the areas of clinical diagnostics and drugs of abuse testing. The Company's non-vitamin D business consists of antibodies, NT proBNP (heart failure), testosterone, Free Triiodothyronine (FT3) (thyroid hormone), estradiol, and various drugs, such as tetrahydrocannabinol (THC)/cannabis, and progesterone. The Company offers products for indications, such as thyroid, fertility, oncology, cardiac, vitamin D, drug of abuse, infectious disease and miscellaneous. Its sheep hybridoma technology produces cell lines that secrete SMAs. The Company offers a panel of SMAs to 25-OH D and has various 25-OH D2 and 25-OH D3 specific antibodies. It sells its products through direct sales and through distributors. more »

LSE Price
3175p
Change
-1.1%
Mkt Cap (£m)
165
P/E (fwd)
27.0
Yield (fwd)
2.5

Volvere plc is a holding company. The Company identifies and invests in undervalued and distressed businesses and securities, as well as businesses that are complementary to existing group companies. Its segments include Security Solutions, Investing and Management Services, and Food Manufacturing. Its food manufacturing segment consists of the Company's subsidiary, Shire Foods Limited (Shire), which is engaged in manufacturing frozen pies, pasties and other pastry products for retailers and food service customers. Its security solutions segment consists of the Company's subsidiary, Sira Defence & Security Limited, which is engaged in digital closed-circuit television (CCTV) viewing software business. more »

LSE Price
1044p
Change
1.9%
Mkt Cap (£m)
32.0
P/E (fwd)
n/a
Yield (fwd)
n/a

Treatt PLC is a United Kingdom-based ingredients manufacturer and solutions provider to the flavor, fragrance and consumer goods markets. The Company's geographical segments include United Kingdom, Rest of Europe, The Americas and Rest of the World. The Company's products include Essential oils, Citrus, Treattarome, Functional ingredients, Chemicals, Organic essential oils, Vegetable oils and Treatt brew solutions. Its Essential oils include Amyris Oil, Angelica Oil and Aniseed Oil. Treattarome products include Pineapple Treattarome, Honey Treattarome and Cucumber Treattarome. Its Citrus products include citrus oils, CitrustT, TreattZest and Citrus add-back range. Its Functional ingredients include beverage specialties, fragrance ingredients and sugar reduction products. Its chemicals include aroma chemicals, natural chemicals and Treatt Flavour Wheel. Its Vegetable oils include Borage Oil and Baobab oil. Its organic essential oils include Organic Aniseed Oil and Organic Lime Oil. more »

LSE Price
407p
Change
-0.5%
Mkt Cap (£m)
238.8
P/E (fwd)
22.1
Yield (fwd)
1.3



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20 Comments on this Article show/hide all

shipoffrogs 28th Nov 1 of 20
3

Good write up - thanks.

Just on your comment on the audit at Cake. I don't think you'll ever see the internal audit cost disclosed in the annual accounts. The requirement is to disclose the cost of the annual external audit.
Any internal audit costs would likely be an undisclosed element of administrative costs.

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timarr 28th Nov 2 of 20

Hi Jack

Fine write up, thank you. Can you elaborate on what Gervais meant by the phrase "marginal borrowers"?

timarr

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mmarkkj777 28th Nov 3 of 20
1

Well done Jack.

Sounds like Mello was really good. I wish I could have made it and listened to the talks and met some fellow PIs.
I must try to make the next one.

I'm really interested in Volvere and am looking to add it to my portfolio in the next few days.

Are there any videos of the event, do you know?

Cheers, Mark.

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ACounsell 28th Nov 4 of 20
5

RE Patisserie Holdings (LON:CAKE) comments - all very well in hindsight but why was no one flagging this up before the 'accounting irregularities' emerged. Look at the accounts, the Stock Report, analysts view, shorters: absolutely nothing from any of them. Even Paul Scott in his Small Cap Report 15th May was moved to say 'This business really is a class act, which is reflected in a forecast PER of 22.4'. If Paul can be taken in what chance the rest of us!

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momentofclarity 28th Nov 5 of 20
1

Thank you Jack, really appreciate the write up. I'm looking forward to getting to a Mello event in the future.

Cheers

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Jack Brumby 29th Nov 6 of 20

In reply to post #422498

Cheers, definitely worth attending if you can. The main room (which includes the Volvere speech) was being filmed - not sure when the video comes out though.

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Armorduck 29th Nov 7 of 20

Thank you for this. Another interesting Mello event that I failed to attend! I was particularly interested in the comment from the Lord Lee talk.

"Get brokers to invoice you outside of your ISA when possible as ISA cash is tax-free and therefore more valuable"

Does anyone know which brokers might do this and for which charges?

| Link | Share | 4 replies
Jack Brumby 29th Nov 8 of 20
1

In reply to post #422538

This was going through my head as well - hindsight is 20/20 and all that. I don't remember any warnings before the shares were pulled & I don't recall anyone publicizing any short positions... Still an interesting chat.

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Jack Brumby 29th Nov 9 of 20

In reply to post #422493

I wasn't 100% on this, GW said it and moved on fairly quickly. I interpreted it as countries/companies that will trigger an increase in their % cost of debt should they need to borrow more.

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Jack Brumby 29th Nov 10 of 20

In reply to post #422463

My pleasure. The £100k must have been in reference to the external audit cost then. I've had a quick check of the accounts and that seems to fit, I've edited to clarify.

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Howard Adams 29th Nov 11 of 20
4

In reply to post #422763

Hi Armorduck

Hargreaves Lansdown (HL) allow you to allocate your account management charges for your SIPP & ISA into your HL Trading account. This a cut/paste from one of their help options .....

'Can I choose where my charges are collected from?
Yes. To change your fee collection option, please;

Log in to your account
Just above the table showing your account(s) and its value, you will see a number of links. Click the ‘Account Settings’ link towards the right hand side of the screen
Select the ‘Fees and minimum cash balance’ option on the left hand side of the screen
In the ‘Fee Collection Options’ box, click ‘edit fee collection options’
Choose your preference for each account and click Save.'

Regards
Howard

| Link | Share | 1 reply
Silver Moon 29th Nov 12 of 20
1

In reply to post #422763

The Share Centre has obligingly performed this function for me over many years.

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mmarkkj777 29th Nov 13 of 20

In reply to post #422853

Good tip, thanks Adam.

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simoan 29th Nov 14 of 20
2

In reply to post #422763

Does anyone know which brokers might do this and for which charges?

Well, not AJ Bell! :-) As Howard says, HL are really good for this. All account charges for my SIPP and ISA accounts are paid from the cash balance in the Dealing account. It works well for me.

All the best, Si

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mattomattor 29th Nov 15 of 20

In reply to post #422763

Barclays smart investor allow you to do this quite easily within settings.

That is if anyone still uses Barclays after the switch to Smart Investor!

| Link | Share | 1 reply
Armorduck 30th Nov 16 of 20

In reply to post #423168

Thanks all. Good to know some options.

I currently use Halifax and AJ Bell but should consider switching.

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George Short 5th Dec 17 of 20
1

Excellent feedback from Mello, thank you. Personally I always like to hear the bigger picture (macro overview) but there are times, like now, when all investors need to understand where we are in the economic and business cycle. More of this please Stockopedia. Well done!

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cafcash49 5th Dec 18 of 20
1

Great write up Jack, thank you for it. I was there but couldn't possibly go to every presentation so you have acted as my eyes and ears for some I missed. Great service and well written. Charles

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Jcorsellis 5th Dec 19 of 20
1

Where can you purchase the 'risk radar' from?

| Link | Share | 1 reply
Jack Brumby 5th Dec 20 of 20
2

In reply to post #424773

I couldn't find it in Argos. I'd like to get some in before Christmas because I know a couple of people that could do with one!

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