Small Cap Value Report (14 Jan 2016) - HOME, LVD, BLNX, JD., RDT, TSCO, CAMB, GOAL, ASC, BQE, ZTF, MOSB

Thursday, Jan 14 2016 by
38

Good morning!

Another avalanche of trading updates today, so I'll do my best in the relatively short time available today - I'll be interviewing the CEO of Proactis (PHD) at 11:30 today, the audio of that I'll publish tonight. Any last questions for him, here is the link again (closes at 11am today).


Firstly, my topical retailers update (not small caps, so skip this bit if you're only interested in small caps)

Home Retail (LON:HOME)

Share price: 157.8p (up 5% today)
No. shares: 813.4m
Market cap: £1,283.5m

(At the time of writing, I hold a long position in this share)

Trading update - mildly disappointing, but that's hardly a surprise, given the widespread reports of lower footfall on the High St. The exceptionally mild weather undoubtedly had some impact, but also increased online competition. Although note that Argos is at the forefront of the push for online - with about half its sales originating online, and its click & collect option being increasingly popular.

Argos (about three quarters of group sales) achieved a lacklustre sales performance, LFL of -2.2% in the 18 weeks to date of H2. That's not good enough, because of course costs are rising, and will continue to rise (e.g. the Living Wage).

Homebase (about a quarter of group sales) sales were better, with LFL of +5%.

Overall, profits are down, but not catastrophically so;

"As a result of the most recent trading period, we expect that Group benchmark profit before tax for the financial year ending February will be around the bottom of the current range of market expectations of £92m to £118m."

My opinion - it could have been a lot worse, so I think this is satisfactory, given low expectations.

Offer for Homebase - probably of more interest, was the news last night that negotiations are at an advanced stage for the disposal of Homebase to large Australian group, Wesfarmers, for £340m. This looks a very good price, so let's hope it proceeds. It also smooths the way for the sale of Argos to Sainsbury - a deal which looks likely to go ahead, in my opinion.

Few divorces are cheap, but this one looks particularly expensive - of the £340m proceeds, shareholders are only likely to receive £200m (or 24.6p per share), see this table in the RNS last night;

56975b855f782HOME_separation.PNG

My opinion - Reports…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

Disclaimer:  

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. 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. ?>


Do you like this Post?
Yes
No
38 thumbs up
0 thumbs down
Share this post with friends




Lavendon Group plc is a United Kingdom-based company engaged in the rental of powered access equipment. The Company's segments are the UK, the Middle East, Germany, France, Belgium and Corporate. The Company's business includes Nationwide Platforms, Rapid, Gardemann, Lavendon France and dk rental. Nationwide Platforms is a powered access provider with a fleet of over 10,350 machines operating from a network of over 30 depots. Rapid is engaged in the rental of powered access equipment in the Gulf region. Gardemann is engaged in rental of truck mounted powered access equipment in Germany. Lavendon France is a provider of powered access equipment in France. dk rental is engaged in the rental of powered access equipment in Belgium. The Company operates a fleet of approximately 21,000 machines through a network of over 70 active depots. The Company manages a fleet of over 21,000 access platform units. more »

LSE Price
269.5p
Change
-0.1%
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a

RhythmOne plc, formerly blinkx plc, is an online advertising company that connects digital audiences with brands through content across devices. The Company is engaged in offering online advertising through a range of formats and pricing options that include video, mobile, social, display, native, text and media covering brand, and performance advertising campaigns, sold both directly and programmatically. The Company offers RhythmMax, which is an integrated programmatic trading platform. The RhythmMax platform offers a common point of access to RhythmOne inventory across owned, controlled and extended supply sources. The RhythmMax platform includes specialized brand safety technology, RhythmGuard, which combines third-party verification methodologies with filtering technology to ensure quality inventory. The Company works with advertisers, publishers and content providers to offer integrated, cross-screen advertising solutions. more »

LSE Price
169.5p
Change
 
Mkt Cap (£m)
133.3
P/E (fwd)
4.5
Yield (fwd)
n/a



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


20 Comments on this Article show/hide all

james1n 14th Jan '16 1 of 20

Paul,

Its interesting how results and updates are coming in. I have now had 3 shares that were on the end of several months declines that have posted very strong trading updates, namely; Alternative Networks (LON:AN.), Somero Enterprises Inc (LON:SOM), and now Lavendon (LON:LVD). Whilst the first two have recovered those declines, with Alternative Networks more so (and which has even formed a part of Ed's 2016 NAPS portfolio - http://www.stockopedia.com/content/new-year-naps-top-stocks-for-2016-and-a-few-revelations-116820/), I am now hopeful that Lavendon (LON:LVD) will also recover the declines of the past few months.

On some of these its really a case of re-reviewing carefully the reasons for buying and making careful decisions on which stocks to stick with (I stuck with all 3 mentioned). I have a few more shares which have had similar patterns, but the market movements seem strange, even with high stockopedia scoring stocks, where good stocks can decline by 20% or more between news updates. Do you think its jittery markets, the gaps between positive news-feed updates or other factors?

| Link | Share | 2 replies
fanmail 14th Jan '16 2 of 20

Thanks for this Paul - as ever. I thought the MGR trading statement this am was very positive. Is this one that you look at from time to time?

| Link | Share | 1 reply
Paul Scott 14th Jan '16 3 of 20
1

In reply to post #117995

Hi fanmail,

No, I don't follow Miton (LON:MGR) although I do have a lot of time for Gervais Williams - a smart small caps investor, and all round good bloke.

I try to avoid investing in brokers or fund managers. They're too susceptible the ebb & flow of investment performance, and the business hinges on a handful of key people usually, who might walk away at any point, thus destroying shareholder value.

These businesses tend to be run for the benefit of the Directors & staff, not shareholders, in my view.

Hence why I don't usually report on them. I dabbled with Panmure Gordon & Co (LON:PMR) and Cenkos Securities (LON:CNKS) shares, but both proved disappointing.

You've also got regulatory issues, etc. Can of worms, the whole sector.

Regards, Paul.

| Link | Share
herbie47 14th Jan '16 4 of 20
1

Morning Paul,
Yes good news from Lavendon. I was interested in your views on Home Retail (LON:HOME), with the likelyhood of it being taken over that you have sold 90% of your shares, would it not be an idea to use a stop loss say at 140p then you have limited risk and maybe much reward? If they do get 200p then your profit would go from 50% to 100% if you bought in around 100p.

| Link | Share | 1 reply
Paul Scott 14th Jan '16 5 of 20
4

In reply to post #118001

Hi Herbie,

That would be one way of doing it, although a Stop Loss might only work if it was Guaranteed, because remember the price can gap straight through a stop loss & they include a slippage factor, so you can end up being closed out at a very bad price. I just prefer to manage the risk myself, through weighing up risk:reward in advance, and sizing my positions correctly.

Stop Losses can be good for some people, and in certain situations. Generally speaking though, people who watch their positions closely all day, as I do, can manage the risk fine without them. I've had issues where a freak trade can take out a stop loss, thus crystallising a large loss, for no genuine reason. They're not a good thing for me personally, but may work for some other people.

I generally think, if you need a stop loss, then it means the position size is too big, and/or that you haven't done your research properly.

Regards, Paul.

| Link | Share | 1 reply
herbie47 14th Jan '16 6 of 20
2

In reply to post #117992

It does seem to be quite common recently a decline before the results or trading updates come out then if good a rebound, its as if investors don't want to take the risk of a fall from poor results so they sell before then buy back if good. Shoe Zone (LON:SHOE) was another. I think it pays to read the results before the market opens think you can make some money, recently Debenhams (LON:DEB), Boohoo.Com (LON:BOO) and Xaar (LON:XAR) would have been good trades.

| Link | Share | 1 reply
rhomboid1 14th Jan '16 7 of 20
2

In reply to post #117992

Re Lavendon , which I hold a fair slug of, I suspect a lot of recent weakness is driven by investors shunning stocks with Middle East exposure, I also hold Lamprell and Capital Drilling that exhibit similar weakness but are also trading well. I'm happy to hold as the scope for significant re rating makes them a very attractive long term proposition. The divis from CPD & LVD help to keep me happy.

| Link | Share
herbie47 14th Jan '16 8 of 20

In reply to post #118004

Hi Paul,
Yes that is a very good point about stop losses, I also don't tend to use them but they can be useful, especially when I'm away in remote places with no or slow internet. Some trades now which are similar to Naked Trader ones I'm using stop losses on, John Wood (LON:WG.) and Trakm8 Holdings (LON:TRAK) are 2 recent ones. My positions are not large but I'm not that experienced, I think it depends on the trade and company, I would say 85% of mine don't have stop losses. Yes freak trades and market makers tree shakes are a problem I know.

| Link | Share
mikelevie 14th Jan '16 9 of 20
1

Hi Paul, interesting to compare Rosslyn Rosslyn Data Technologies (LON:RDT) with Proactis Proactis Holdings (LON:PHD). Both in the same space (procurement/spend management software), but at opposite ends of the scale in terms of financial performance.

| Link | Share | 1 reply
james1n 14th Jan '16 10 of 20

In reply to post #118007

Hi Herbie,

I think you are right in part in that with a number of profit warnings in the past 6 months, investors have become much more cautious. It also seems as if drift occurs where there is little or no news-flow as if investors then fear for the worst or interest and positive sentiment from prior result updates then ebb away. I think Shoe Zone (LON:SHOE) is a good example to add to my three as this rose substantially after previous results and then the share pice came back down, although I struggle with this share as I cannot see growth or where the company can go. Short term, it may be able to take cost out of the business via lease renegotiations, but like McBride (LON:MCB), unless there is a strategy to grow, there is a limit to this sort of action. In contrast, Boohoo.Com (LON:BOO) seems to have been on an upward trend most of the past year since the drop a year ago.

| Link | Share
it_trader 14th Jan '16 11 of 20

In reply to post #118025

Hi Mike,

Just to comment that the 2 companies mentioned are not in the same space.

Proactis are indeed in procurement whilst Rosslyn sell a cloud based data analytic service and a much smaller market obviously.

| Link | Share
goldbug 14th Jan '16 12 of 20

Hi Paul,

I noted your comments on position sizing. I think that lots of investors don't know about this or think about it. Maybe a topic for you or another stockopedia guru perhaps?

I've only heard about it recently myself, so now on every trade I use a spreadsheet and enter buy price, stop-loss price (manual stop-loss, not set in broker's system), and get the spreadsheet to calculate the number of shares for a range of Risk. Currently I'm using max £300 risk on every trade, which is <0.5% of my portfolio, so that any one trade can blow up the portfolio.

One exception: I bought some Home Retail (LON:HOME) after the bid announcement and set a higher Risk for that one. But as the price went up, I was able to increase the stop-loss level and de-risk it.

| Link | Share | 1 reply
goldbug 14th Jan '16 13 of 20

In above post, there was a typo:
"so that any one trade can blow up the portfolio"
should read:
"so that any one trade CAN'T blow up the portfolio"

| Link | Share
dangersimpson 14th Jan '16 14 of 20
4

In reply to post #118040

Goldbug,

As Paul points out in his earlier post your stop loss only works if it is guaranteed. Brokers won't offer this since they are simply accepting an automatic trading instruction not taking the other side of the trade and spreadbet providers are wise to the takeover failure potential so will only allow the guaranteed stop far away from the current price. E.g. IG will only allow it 50% away from the opening price on Home Retail (LON:HOME).

If J Sainsbury (LON:SBRY) pull out of the bid then the price could fall back to c.£1 on the opening auction. It doesn't matter if your stop loss is set at say £1.30 it will be executed at £1 that's how these things work.

In these sort of situations what a stop loss tends to do is guarantee the worst possible price execution rather than protect the downside.

The only strategy that would really work for limiting the downside would be buying options but you usually have to overpay to avoid downside risk.

If you want to limit your downside to 0.5% of portfolio the only realistic way is to reduce your position so that you would be a buyer at the price that would represent 0.5% portfolio loss not a seller.

Mark

| Link | Share | 2 replies
goldbug 14th Jan '16 15 of 20

In reply to post #118049

Thanks Mark.
I don't use broker stop loss and don't have a spread bet account, its all manual for me. I keep an eye on markets, but yes, there's a chance that the market moves quicker and I'll lose out.
My point was that I'm now a fan of risk management, trying to limit loss on any one trade to £300 or as near to £300 as I can get. I try to set sensible stop loss levels so that I'm not caught out by a normal move, eg i look for a previous support level being breached.
Hopefully that prevents a losing share that goes down, down and down, until you realise that you're 50% down and need a 100% rise to get back to break even. Been there, done that ;)

| Link | Share
gus 1065 14th Jan '16 16 of 20
1

In reply to post #118049

Hi dangerS.

Re. your comment about spreadbet providers' willingness to allow stops, I note that Grindertrader on his recent "Shorting the Christmas Retailers" thread was able to put a stop loss on his short for Home Retail (LON:HOME) at 109.25p (about 10% out of the money at the time) that saved him from about a £3k loss when the J Sainsbury (LON:SBRY) approach was announced and pushed the Home Retail (LON:HOME) price out to about 140p. I believe this was done automatically - perhaps GT can confirm if he picks up this thread? Not sure if he was able to cut a deal as frequent trader, but certainly saved his bacon on this one.

Here is the link to the thread.

http://www.stockopedia.com/content/shorting-the-christmas-retailers-115893/?comment=22#22

Personally, I prefer to monitor my own positions and not get stopped out in the "tree shakes". In the past week, the MM's have taken a share I've been following quite closely - Pantheon Resources (LON:PANR) - down by 20-30% over the space of a couple of hours trading on three occasions only for it to spike back up again almost immediately. Given the wide bid/offer spread and speed of the bounce, several investors have been bemoaning how they've been stopped out and then found it costly to buy back in again.

If I need to be away for any period of time, I reduce any positions that I deem risky down to my "sleep easy threshold level".

All the best,

Gus.

| Link | Share | 3 replies
herbie47 14th Jan '16 17 of 20

In reply to post #118058

I think it depends on the company, smaller companies are generally more volatile than large ones, it would be very unusual for a large company to have 20-30% movement. If a share is going down and up that much then if the spread is not too wide you could pick some up cheap with an auto bid and then sell when they go up for a very quick profit? According to my broker the spread is only 0.4% and on Stockopedia. As I said it depends on the company whether I would use a stop loss. On Pantheon Resources (LON:PANR), I may be using an auto bid and a sell limit.

| Link | Share | 1 reply
billytk 14th Jan '16 18 of 20
2

In reply to post #118058

Re: Shorting the retailers after Christmas Ian got lucky on Home Retail (LON:HOME) as I'm sure he would admit. News leaked ahead of the announcement, so while the rest of the market was trending down (especially retailers) Home Retail (LON:HOME) was up 4, 5, 6% which took his stop loss out. Had there not been insider dealing it would have gapped to the upside and there would have been a slippage factor to say 126p which would have been far more painful.

I pretty much agree with Pauls view on stop losses. It tends to work better holding actual shares rather than spread betting though. As mentioned above, guaranteed stop losses are expensive due to the extra spread and then usually require 25-50% of a position size to guarantee. It does however work better on Forex or Indices trading.

| Link | Share
gus 1065 14th Jan '16 19 of 20

In reply to post #118064

Hi Herbie47. I agree that it depends on the company. For Pantheon Resources (LON:PANR), volumes are well up on this particular stock over the past few weeks and it's apparent that day traders are coming in to play the high levels of volatility in increasing numbers.

Re. spread, although the Stocko page is stating the closing price as 120.0p -120.5p during the trading day a quoted 2p or even 3p spread is more usual. Likewise, when the tree shake is on there have been times when there is no offer made during the bounce until a much higher offer level has been established. (I suspect bids have been pretty thin on the way down too, although I have not been looking to sell at these levels). Prices also tend to move in pretty wide steps on relatively small changes in volume.

Here's a small extract from today's trades (mine is the 10.56 purchase @ 115.40, i.e. this was the offer at that time).

Price Vol Value £
10:57:06 123.00 10,000 12,300
10:56:24 116.00 5,000 5,800
10:56:02 115.40 4,324 4,990
10:55:57 115.40 4,500 5,193
10:54:14 115.12 701 807
10:53:52 115.06 2,163 2,489
10:53:49 116.06 4,435 5,147
10:53:46 117.00 2,564 3,000
10:53:08 117.03 1,200 1,404
10:51:29 117.98 3,000 3,539
10:51:13 118.00 4,232 4,994

Gus.

| Link | Share
dangersimpson 14th Jan '16 20 of 20
1

In reply to post #118058

Gus,

I note that Grindertrader on his recent "Shorting the Christmas Retailers" thread was able to put a stop loss on his short for Home Retail (LON:HOME) at 109.25p (about 10% out of the money at the time)

That was before Home Retail (LON:HOME) announced it was in takeover talks. I'm not saying spreadbetting companies won't allow guaranteed stops just that they are not mugs and they are not going to allow you to protect the downside against talks failing and the share price gapping downwards while they take all the risk for a few points extra spread. Hence they move where they will allow guaranteed stops in Home Retail (LON:HOME) 's case IG went from 10% to 50%.

It is academic really though since the OP doesn't really have a stop in place just an idea of where he might sell if the SP drops. If the SP gaps down he will likely lose more than his 0.5% unless he's reduced his position but hey a 1-2% loss isn't much. Most people probably have similar daily volatility this year.

HTH,

Mark

| Link | Share

Please subscribe to submit a comment



 Are LON:HOME's fundamentals sound as an investment? Find out More »



About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

Follow



Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis