Good afternoon!
As usual on Fridays, I'll update this article throughout the afternoon - it's good to take things at a more relaxed pace at the end of the week, when there's not usually much news.
The meeting I attended with Gear4Music (G4M) (in which I hold a long position) management yesterday was excellent. They're very much the type of management I like best - hands on entrepreneurs, with the founder still owning 39% of the business, and clearly a very shrewd manager.
It's been a remarkable re-rating in recent months, going from about 100p to almost 400p. People tend to anchor to the original price, and assume that it's now expensive. That's wrong, it's actually good value compared with other similar growth stocks, on about 30 times next year's earnings forecast. The forecast looks too low to me, so I think the actual PER might turn out to be nearer 20 than 30, but that's just my personal opinion.
With only 1% of the estimated European market, and taking market share from larger competitors with apparent ease, I think this share looks very exciting. I think the starting price was completely wrong (far too low), so this was a lucky find. The valuation is now simply reflecting the stellar growth being achieved.
I think the 400p level is probably about the right valuation for G4M. Although as we've seen with other online retailers, the valuation can soar way above what seems reasonable. A friend chastised me recently for relying on the greater fool theory. However, I simply observe what happens in the market, and try to replicate successful investments. BOO worked brilliantly for us, hence why I'm focusing on selecting other mispriced and overlooked online retailers. There are so few to pick from unfortunately, and even fewer decent ones.
I was out & about yesterday, and my broker mentioned that Vislink (LON:VLK) had pulled a rabbit out of the hat - it's agreed a sale of its core business for $16m, which will clear most of its bank debt. If the sale completes (expected by year end), then the company will be out of the woods. That would leave Vislink as a much smaller, software company. The share price has almost doubled in 2 days, which looks a good opportunity to exit from what has been a horror story for investors - which I blame…
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