Small Cap Value Report (21 Jun 2016) - CIR, BOTB, PVCS

21st Jun '16 by Paul Scott

44 comments 21079 reads

Good morning!

In my rush to get into the City yesterday afternoon, I omitted to comment on Circassia Pharmaceuticals (LON:CIR) - some sort of drug development company. Roughly £500m was wiped off its market cap yesterday (two thirds).

I have no idea why people feel the compulsion to gamble on this kind of thing. It's not investing, it's pure gambling. All too often this type of share is set up by very shrewd promoters, who make a lot of money en route, then eventually the story collapses. Risk:reward is terrible - they nearly always fail! So why on earth would we want to back it? I just don't touch anything like this. Story stocks are hopeless - they nearly always go wrong - I'm speaking from experience here, having backed hundreds of them over the last 20 years. What we need is profits & divis, at a low valuation, and bombed-out investor sentiment. Or just growth in a vanilla sector, at a reasonable price.

People like stories, because it removes the need to do proper analysis of the figures. They nearly always fail. It's hard enough to make money on proper companies, so why delve into the undergrowth into heavily promoted story stocks? I'll never forget the lessons I learned from the TMT boom & bust in 1998-2000. Utter madness. You see the same thing happening over & over again now too. There are loads of over-priced story stocks out there. Buyer beware.

If someone butters you up, and tells you a great story, for a nil turnover company on a stratospheric valuation, then you're probably being conned. The sensible thing is to smile, be generally affable, but quietly walk away, funds intact.

Best Of The Best (LON:BOTB) update

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

I enjoyed meeting William and Rupert from BOTB yesterday. I'm not keen on the company name though. "BOTB" means nothing to me. Why not rebrand it WinALovelyCar.com ? (or similar).

A small group of us had about 90 minutes of quality time with management. Overall, no surprises. It's exactly as I thought - a lovely, unique business, making solid progress - with 70%+ of business now online. Capital-free, and a cash machine (note the 2 big special divis). Also, management are like limpets on…

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Paul Scott

21st Jun '16

Punting is awful.

I've made mistakes with other peoples' money, but I think throwing other peoples money around like confetti is awful. Irresponsible. Arrogant. Dreadful.

It's OK to be wrong. It's NOT OK to just irresponsibly punt with other peoples' money.

PP.

Let's be honest - he doesn't know what he's doing.

Marketing over substance.

Investing in total rubbish. More fool you! I wouldn't go near it.

Marketing over substance. Usual rubbish.

If you're average (as I am - I hate managing other peoples money) - then don't shout about it. Just say - I'm mediocre - so DON'T give me your money! I don't want it actually! Keep it! I know lots of brilliant people who can do A MUCH better job than me¬

PP.

yes i saw your question about Dan Wagner yesterday.

I've not met him, so I won't give a view.

Regards, PP./

On a more serious note though./

If you're good at something, then stick to it.

Woodford seems to have raised loads of money, on a good reputation, and is now busy destroying that reputation with a lukewarm, pebbledash approach, irresponsibly throwing other peoples' money at moon shots/

I think the guy's an idiot.

I'd rather protect 90% of client money, and say sorry we got it wrong, than his mad approach.

You asked for a view, and I gave one.

Regards, Paul.

What DD are Woodford's team doing?! None! A team of about 3 people. All of whom are clueless! No expertise whatsoever. More fool you, is my view. Total charlatan.

smatthews1

Hi Paul

I will look forward to your post on Photo-me, I have had this on my watch list for some time waiting for a decent price.

Today they released what I thought was a very good statement, increasing revenues, and profits, loads of cash in the bank, which they seem happy to distribute a fair chunk of to shareholders, and very little debt.

Excellent operating margins which have having steadily been increasing over the past 5 years. Britain and Ireland revenues could be better but the generally outlook looks very good, especially with France wanting to increase security through 3D Photographic Identity.

I guess there is a lot of concern over the brexit, but I cant work out why it dropped around 17% today, my main concern would be how their foreign earnings are affected once this is all out the way.

Would welcome all thoughts on this stock, seems a good price to me, however I don't want to be to hasty yet, as we might be in a quick drop in the markets on Thursday.

Thanks
Sean

jonesj

I thought Anthony Bolton didn't do well over 1 year at FCSS, which is much too short a time for performance measurement anyway. I do believe he had usefully outperformed the benchmark at the end of the 3 years or so he was at FCSS.

herbie47

Seems a lot of people have missed this in the results for Photo-Me International (LON:PHTM)

"Owing to technical and administrative problems at local government level, the implementation of this plan to date has not gone as smoothly as planned, after a strong start, but the Japanese government is committed to the programme and is increasing financial resource to ensure swifter issuance.'

...'due to the uncertainty over timing, we have not included any profits related to My Number in our forecast for the current year. '

Err,

Excuse me! I am a very keen BOTB player!

How very dare you call me stupid! What a cheek!!

I would say STFU quite frankly!

Cheese, PP./

-1

Herbie

Hi

What happened to the PHTM analysis? Maybe you are as baffled by the market reaction as I am?

rhomboid1

Isn't it just the case that the Japanese nirvana is postponed and currency is a bit of a minefield?

cafcash49

Having spent many years in the Pharma Industry I tend to steer clear when it comes to investing. It is too volatile and a clinical trial not producing the right results can be devastating. I have just opened my first Spreadbetting Account (getting ambitious :-) ) so maybe some Biotechs will make some good shorts!
I will be glad when the current madness has passed on Friday then we can get back to some sort of investment normality, hopefully. Charles

Yes I tend to agree, however the large boost in profits was coming from Japan, so with that taken out of the forecast it does not look so good. I think the 3Q statement has mislead investors, they did seem to indicate profits would be well ahead of forecasts which has not really materilised. I agree Japan should happen and I have bought some shares today, has been on my watchlist ever since the Mello video but at that time I felt the share price could fall which it has done. Baring a brexit vote I think its a good investment now.

The laundry roll out seems to be going well and they have none in England and only 1 in Scotland so far so there is plenty of room to grow in the UK.

Andrew L

Paul, I wasn't calling you stupid... no offence meant. But people who gamble at terrible odds aren't being rational. I wasn't me who made up the quote it was Boris Johnson. He called the National Lottery a tax on stupidity. I can understand why people do it and I do it sometimes do it myself. But it isn't exactly a rational thing to do. But then human beings aren't rational.

back2value

22nd Jun '16

I made a related point on a TMF thread a while ago - Japanese citizens are NOT currently obliged to get a My Number photo ID card, it's completely optional at this stage. Even if this becomes compulsory, it will be introduced over a long period and I doubt that it would substantially increase use of their photo booths in Japan, as people would presumably use an extra photo from a visit for other reasons (e.g. driving licence renewal). That is not to say that there aren't other good reasons to invest in Photo-Me, of course, just that they were over-egging the likely impact that their Japanese subsidiary was flagging up. It's prudent that they have not included this potential source of extra revenue until it is properly evaluated.

B2V

Thanks for that info. I had not seen it before. I'm only just getting to know the management. So Japan could be misleading, but it was really taking off earlier this year thats where the boost in profits came from. So there has been substantial increase in demand there?

Excel35

Hi Paul,

I would still be interested on your opinion of Photo Me. Are you still intending to post about it?

Michael Billingham

I wonder how the market will cope on Friday morning. There must be a lot of cash waiting to be invested and if the result confirms a 'remain' win, much of this will be flooding onto the 'market. I visualize prices going up rapidly and 'spreads' widening. Any tips for those who hope to be investing?

dangersimpson

All these high-risk cash-burning companies must have seen Woodford coming a mile off. He seems to have been a sucker for all the story stocks out there. With Allied Minds (LON:ALM) he was putting money in at high prices into both the listed equity and their unlisted subsidiaries thus justifying the high prices of the unlisted companies and the NAV of the parent. He was then buying the listed equity at a significant premium to NAV.

The problem is that he is left holding all these illiquid positions in listed and unlisted companies where valuation is mainly determined by the willingness of himself to put fresh capital in.

The only thing he's got right is that it is a Closed End Fund so investors who start to question what running a large cap income fund qualifies you to be a tech & biotech investing expert can't demand their money back and cause a liquidity squeeze on the illiquid positions.

biloseli

You're right, of course. My reasons for exiting at the time were influenced by my own loss of around 10%, but also by a growing feeling that Bolton was struggling to apply his formula in China. I think he's got real talent, but I felt he was lacking the energy to stick it out. I wasn't surprised to see him (re)retire.

Small Cap Value Report (21 Jun 2016) - CIR, BOTB, PVCS

Best Of The Best (LON:BOTB) update

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Paul Scott

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