Small Cap Value Report (19 May 2015) - ZYT, ACSO, SOM, IDOX, TNG, BMY, SNX, PMP, WTM

19th May '15 by Paul Scott

21 comments 30296 reads

Good morning!

NB. There won't be a SCVR tomorrow I'm afraid, as I will be attending the London Value Investing Conference. I will however report back (at a later date) on the LVIC, with one or two articles here on the talks which I find most interesting.

I've been glued to my screen this morning again, watching all the excitement going on with Plus500 (LON:PLUS) following their regulatory problems (inadequate client identity checks, it seems). I seem to have confused some of the gentlefolk on bulletin boards, by writing a blog here yesterday afternoon saying that I didn't like PLUS, never had done, and wouldn't go near it, but then posting on Twitter about half an hour later that I'd gone long!

The explanation is very simple - this blog is me with my sensible hat on. So this is about value investing, and longer term views of companies. However, I also like to do a bit of short term punting on the markets too - partly for fun (it's exciting), but also overall I make money at it too. The two things are very distinct activities. A lot of people do the same thing - shorter term trading gives us something to do, whilst we wait for our long term positions to either succeed or go wrong.

As this is a value-orientated report, I don't tend to mention my short term trades here, as that's not what these reports are about, although I will always disclose whether I hold a particular share or not, when mentioning it.

There are loads of results I want to cover today, so will probably spend all afternoon writing this article. I have a call with CEO/FD of Zytronic shortly, then a Synety AGM to "attend" by webinar. So busy, busy!

Zytronic (LON:ZYT)

Share price: 287p
No. shares: 15.3m
Market Cap: £43.9m

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

Interim results - this is one of my favourite companies. Zytronic manufactures bespoke touch-screen displays, with superior performance characteristics, in N.E. England, primarily for export.

Interim results to 31 Mar 2015 are out today, and look good in my view. The share price dipped early on, as I think some people failed to notice that a £0.4m forex cost is buried in admin costs, so the underlying result is better than it…

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19th May '15

http://www.drchristinahibbert.com/dealing-with-grief/5-stages-of-grief/

Paul Scott

I'm not going to dignify that comment with an answer.

P.

kenobi

Re assesso / LO Q, it's nice to see one of these future blue sky type opportunites turn out so well, often they get a momentum of their own price wise and then end up collapsing when the sky high expectations are not met, congrats to the management for capitalising on the high shareprice and congrats to holders for calling this one correctly,

K

MGinvestor

Hi Paul / website developer

Just a suggestion:

It would be great to be able to click on the heading for individual shares so that you can go straight to the relevant post for that company. Especially useful when viewing your report on a smartphone. E.g.

Todays report: Small Cap Value Report (19 May 2015) - ZYT, ACSO, SOM - We should be able to click on SOM and go straight to the SOM section that Paul has written.

Thank you for your great report Paul.

Regards,

Musti

Rusty2

Yes I saw Simon Thompson report but I don't follow him much now after his many poor tips, he also wrote a bullish Globo report recently.

Paul, Any thoughts on Bioquell valuation, I think you have covered this share recently.

LittonOwl

As a fellow Zytronic investor, just want to thank you for your detailed update, Paul, especially for sharing your thoughts on your conversation with Management, very re-assuring.

Monty9

Are you suggesting anyone writing bullish comment on Globo is generally to be disregarded as incapable?

No it was just an example of the difference between Simon and Paul's assessment of companies. I can list a whole load of companies he has tipped that have gone wrong if you want, like Polo. I prefer Paul's methods, he really looks into the balance sheets. Many companies that have got into trouble he has warned about like Quindell.

Hi Herbie47,

I usually read Simon Thompson's articles, and think he writes some excellent stuff. It's just a pity that the IC format is that he has to "tip" or give recommendations. I think that's a fundamental flaw. Because then people follow him blindly, and get annoyed when he (inevitably) makes mistakes, as everyone does.

I think our approach here is much better, where we just present one person's opinion, backed up by facts, encourage debate, and hand over to the readers to make up their own minds, and take responsibility for their own investing decisions.

Also, I think whilst Thompson does some excellent analysis, he's not very street-wise. So he just assumes that all the figures he looks at are genuine. It doesn't seem to even enter his head to question whether the numbers are real or not, even when it's glaringly obvious that something is badly wrong, e.g. with the AIM Chinese fiascos like Naibu & Camkids (and others).

That may be partly a result of the IC's policy of not letting its writers trade in shares. How are they going to learn, if they don't make the painful mistakes that the rest of us make?

Anyway he wrote a nice bullish piece about Somero today, so he's in my good books lol!

Regards, Paul.

Hi Paul,
You are no doubt correct, he does pick some good shares as well tyo be fair. I probably mistimed my entrance to the share buying and my subscription to IC all wrong at the end of 2013, everything was fine for about 4 months, then the market in small companies turned. Anyway I think Simon tips are generally fine, apart from a few very dodgy ones like Chinese cos and Polo which I avoided and he does well in a bear market. But he does not seem to look into the balance sheets that deeply, not that concerned about high debt, see Greenko. Pensions defiects never mentioned until more recently. The other problem with IC is when a share does go bad they often still keep tipping it as a buy, won't admit they are wrong? Until the price has gone right down then they say sell. Or they don't say anything like Mar City, no update since Sept 2014. There is nothing worse when a share is faliing and you don't know what is going on. I think ST now tips far more companies than he used to which I think is part of the problem.

20th May '15

Hi Herbie47,

Yes, fair points.

My view is that all articles are just sources of ideas. So I read Shares, IC, and numerous other sources of information all the time, but their usefulness to me is simply to provide me with leads to then go off and investigate for myself. I never rely entirely on someone else's judgement or opinions, but will take them into account in the decision-making process.

All sources of info will get some ideas right, and some wrong, often in roughly the same proportion, over the long term.

I think the real skill, which we all aspire to, is to be able to generally select more winners than losers, and hang on to the winners long enough to make lots of money, sell them right at the top, and avoid all the big market falls. If only!!!

Everyone gets plenty of stock ideas wrong. People who make out they don't are liars, or just enjoying a lucky patch and/or a bull market, when we all look like geniuses. The best investors I know tend to load up heavily into the stocks they are really certain about, after doing lots of research. So when they do win, they win big. Their losses tend to be relatively small. So even if they only achieve 50:50 in terms of stock ideas working, they make lots of money overall.

It's all a fascinating, lifelong pursuit, where we strive to constantly learn & improve, long may it continue!

Regards, Paul.

Glaws2

Paul - thanks for sharing the feedback from Zytronic management.

With respect to the comment on "Board's Expectations" versus "Market Expectations" (disclaimer : I am not a city person) when I questioned the FD of RNWH on this point he said that they used Board expectations to describe their Interim statement because there was no broker forecast for the interims - they used market expectations for the full year where there is a broker forecast.

Good! I certainly agree about QPP despite loosing money shorting it.... Possibly price action in 2015 indicates a turnaround but its not for me as Paul would say.

Funnymoney

Paul,
Bloomsbury: " I don't want to invest in any book publisher, unless they are really dirt cheap (i.e. PER of 6 or below), due to the uncertainty over what will happen to the industry longer term."

You could have made ther same sort of argument about the Daily Mirror publisher. I wouldn't believe all the Amazon hype about books being dead. I think the Stock Rank rating alone would be cause to give it a very good once over.

Regards

janebolacha

The CEO of Bloomsbury Publishing (LON:BMY) said on Sky yesterday evening that about half of their revenues now come from academic and professional access to their owned databases (largely built up from acquisitions). He gave one example of a university paying up to £50,000 to do this. It now seems to be "Harry Potter plus...." and an owner and publisher of professional and technical content, besides a book publisher.

Thanks Paul,
Yes I quite agree its all information, more you know the better usually. I just use IC for companies that I don't know about and then do more research. Its good to have 2 or 3 opinions before making decisions to buy or sell shares. I quite agree also about buying heavily in certain companies. Yes its very fascinating, different methods which seem to work. Re Stockopedia rankings they are based on the figures as presented? That seems to be the only problem, some do slip through the net.

cig

Perhaps not particularly reassuring given the trend towards open access in academia...

Beware of survival bias looking at "heavy buyers" types. You can fill a room with lottery winners, but you may not want to rush and buy tickets because of that...

Yes I agree I subscribe to a basket of plenty of different shares, I get worried when I read people say they have all their money invested in just 3 companies. I would probably not put more than 10% in a single company. At the moment Im probably spread too thinly but its early days.

Small Cap Value Report (19 May 2015) - ZYT, ACSO, SOM, IDOX, TNG, BMY, SNX, PMP, WTM

Zytronic (LON:ZYT)

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Paul Scott

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