Continued from Part 1:
4) Lo-Q - LOQ
Lo-Q (LON:LOQ) is a company I liked from the first time I heard what their product was. As a big fan of theme parks and rollercoasters I'm aware of how terrible the whole queuing system is, no one wants to wait an hour or more for a one minute ride (One of my favourite memories is going to Universal Studios in the American off season and being able to ride this crazy thing over and over and over with almost no queue... bliss!). Lo-Q offer a product that theme park fans like me love and the theme parks love. You use their devices and virtually queue for a ride rather than physically, allowing you to go off and do something else (and importantly for the parks, potentially spend more money whilst you're not queuing) and when the time comes you just turn up to the ride and walk straight on. Theme parks love it too, as it brings not only an extra revenue stream from customers purchasing the devices but they also have more time in the park where they're not queuing when they can be buying other rides, food, toys etc. The model also has high barriers to entry as there will be switching costs and inertia for any new supplier who'd want to break in to the market.
As an investment, the company fell very much in to the GARP category for me - it was trading at only 15x earnings when I first bought at ~180p (it later fell to 150p in October 2011 and I bought some more) and the potential for further roll out of an already proven, profitable business seemed pretty obvious. I'd never heard of the product before and I like to think I've been to a fair few theme parks in my time so there was obviously huge scope for adding incremental parks. Also the company had been trialing a wrist-band for water park queuing, opening up a whole extra adjacent market. The company had a new CEO with a good track record and £6m of net cash on the balance sheet to comfortably support further expansion.
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