Small Cap Value Report (27 Jan 2016) - CRE

27th Jan '16 by Paul Scott

16 comments 11655 reads

Good morning!

What an interesting day yesterday! I was privileged to be given a guided tour of the new Bloomberg building under construction - it's going to be spectacular when finished - a statement new building right in the heart of the City, costing allegedly something like £1bn! I've never been on a building site before, apart from trying to hot-wire dumper trucks on a building site next to my parent's house when I was about 10 lol! It didn't work, as of course they were diesel.

After that, I rushed up to the Old Street technology area on my brompton, for a fascinating visit to a new social media company, that is hoping to eat Facebook's lunch - or the starter anyway, if not the main course.

After that, I met a new friend in a pub in Victoria, to discuss ideas for jointly writing an investment book - exciting! The lure of the devil's urine was too much I'm afraid, and Dry January shuddered to a halt last night, with freely flowing pints of Becks. Oh well, 4 weeks complete abstinence wasn't a bad effort.

As regards the markets generally, the only truthful thing I can say is that actually I have no idea which general direction we are heading. The tendency is to get nervous on down days, and get excited on up days, which of course is the complete opposite of what we should be doing!

I'm finding many wonderful trading opportunities right now - bear markets are fantastic, as people behave irrationally, and sell things based on sentiment instead of fundamentals, so (selectively) there are rich pickings to be had, from foolish sellers. My long-term portfolio is down slightly YTD, but if I told you the % gain on my trading account this YTD, you wouldn't believe me. It's been a ridiculously good year for me so far, with the HOME bid interest, plus good updates from BOO, and profits from US large cap shorts & longs - timing is everything.

It's dawning on me that I'm actually quite good at short to medium-term trading, and maybe not as good as I thought I was at long-term investing? As my mentor always says to me - "Just do more of whatever works, and stop doing things that consistently fail".

Thinking about critical comments directed at me in backwaters of the internet, I would just like to confirm that I do indeed get…

Unlock with Email

Unlock with Google

Already have an account?
Login here

rhomboid1

27th Jan '16

Hi Paul , re Creston I think they were just reaching for a handy excuse, eg next fifteen reported today ;

"Next 15, the digital communications group, is pleased to report that it continues to trade in line with management expectations for the current financial year ending 31 January 2016. Momentum remains strong in the US and the UK in particular, thanks to the increased proportion of revenues now derived from digital products and services.
Revenues for the eleven months to 31 December 2015 were £118m, an increase of 19% year on year. Overall organic revenue growth was 8%, largely driven by the US.
In December 2015 the Group completed the acquisition of ODD Communications, a digital agency that specialises in the fashion and lifestyle markets. The Group also undertook a share placing which raised £7.8m net of costs, leaving the Group with a strong balance sheet as it approaches the year end. The Group expects to make further acquisitions in the first half of 2016 as it continues to strengthen its digital capabilities. The Group will also invest in the expansion of some of its UK businesses as they look to enter the US market. The results for the financial year ending on 31 January 2016 are due to be announced on 12 April 2016."

I think Creston is more a turkey than a canary..

andrea34

I think I put a reply up the last time Creston was mentioned saying that they are a perpetual disappointer and once bitten I will avoid them... and so will continue to do so :-/

SingSing

Great intro.
Read 'beat the crowd' by ken fisher and the above comments echo his.
The bit about being more right than wrong and 70:30 is pretty damn good and what he calls the great humiliator (TGH) which is how the markets will try make you look like a fool especially when you get cocky.

Agree on the comments about a slowdown but hopefully it gets priced in and some more.. massive outflow in funds on just bad news .. but what bad news ? UK doing well, US doing great and China is only growing at 3% ? That's still bigger than when it was growing at 10% a few years ago..adding the economy the size of something like Oz or South Korea every year...This bear market could be great if one had the cojones to invest or better still leave the cojones out of it and invest rationally..

Will Marsh

well, I thought this would be an ok shout with a good stock rank and reasonable fundamentals with a half decent div...shows what I know!. I thought about buying more after the last set of discussions on Stockopedia when the shareprice fell and thank heavens i didn't.

Unfortunately, I think the lesson for long term investors in these uncertain times is that the slightest bad news gets punished severely and any red flags should be acted upon early. I

Marcbrotherton

I was always told that when a company starts building opulent buildings for themselves, buying private jets, etc, it was time to head for the exit. If I owned shares in Bloomberg, which I don't, I would maybe taking that advice.

Following on from the post above,
This is a great read from a proven investor and author of "the most important thing".
Latest letter to his investors dated 19th Jan 2016 ..
https://www.oaktreecapital.com/docs/default-source/memos/what-does-the-market-know.pdf

James RH

'After that, I met a new friend in a pub in Victoria, to discuss ideas for jointly writing an investment book - exciting!'

I for one will be looking forward to that as I'm sure many others will!

Ramridge

Bottom fishing in most conditions is fraught with risk. But in today's market when it appears that we are at the start of a bear cycle, bottom fishing is for the very, very brave. Today's bargain could quickly become tomorrow's millstone.

cig

I'm a fan of bargain hunting, but I don't see much at the moment. In my UK small caps portfolio and watch list, hardly anything seems to have moved materially (e.g. halving) this month. You see things that have gone up a bit in Q4 2015 going back to Q3 prices and the like, but that's nothing to write home about. There's a little bit more volatility, but that's not very useful if things keep oscillating in place. I doubt this is at all a bear market.

Funderstruck

Especially if Bloomberg Himself decides to stand for Independent Mayor of London; Arrogance fully topped up.

dscollard

I am much more of a trader than an investor these days : spent 5 years learning the dark arts and some of it makes sense. A lot of it is utter BS mind you . Trading really helps in timing investing with more precision on price entry and stake building

The opportunity to buy RDSB below £13 was a gift: a trading investment where I have no plans for selling any time soon : not often ya make 10% on a mega cap in a week.

Sometimes I love Mr Market when he goes mental

JohnEustace

London would do well to take him with grateful arms given the current candidates.

ganthorpe

I like Paul's point about being a short/medium term investor. He has worked it out a lot quicker than I did.
It sounds more respectable to be a long term investor but if you can't keep your finger off the sell button or get bored with the dinosaurs of the FTSE100 , you should stick to what you're good at.
I finally said goodbye to big borers and now stick to medium sized companies and an average holding period of a few weeks/months and it suits me.
Many thanks for your insights

danielbird193

I sold out of Creston when it was at 143p at the tail end of last year. More luck than judgment if I'm honest, but boy do I feel glad now!

I'm still sitting on a fair amount of cash in my portfolio, and agree with others here that there aren't that many bargains out there at the moment. I've had more success with selectively topping up my holdings in investment trusts. Very hard to be a stock picker right now with such a lot of volatility and uncertainty about where the economy is heading this year.

Mechanical Bull

28th Jan '16

Paul, I hope you did not open your short on Facebook. It is up 15% today!

17th Nov '16

Creston

Shares up 30ish% this morning on takeover news, a nice profit after all with a 5% div to cover holding costs. a bit of luck rather than judgement probably.

Small Cap Value Report (27 Jan 2016) - CRE

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

16 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...