Small Cap Value Report (3 May 2016) - PLA, SDM, DPP, CRAW

3rd May '16 by Paul Scott

36 comments 19809 reads

Good morning!

UK Investor Show

What an enjoyable day Saturday was! I cycled from Islington down to Westminster for the show, on a Boris Bike, but unfortunately arrived late, and I missed the talks from Mark Slater & Nigel Wray.

However, the next session, from our own Ed, was just brilliant (and I'm not just saying that because he's my boss here!). Ed focused on investor psychology, and used some clever software to make it interactive. So he asked us a series of trick questions, we had a few seconds to respond on our smartphones, then he revealed how stupid we all were!! I got nearly every question wrong. Oh dear!

The key point was that Ed was highlighting how the quick, impulsive section of our brain (the old monkey brain which we share with animals) leads to us making terrible investing mistakes. Whereas the more we engage our higher level, slower, but more rational brain, then the better our performance should be.

Fascinating stuff. Also apparently it has been proven that women make better investors than men. I can quite believe that actually, as the female investors that I know seem much more level-headed than most male investors. We males are far too prone to make impulsive & reckless decisions - I could write a book about that for my own mistakes, and one day I will!

Isn't it strange therefore that it's nearly always the men who manage portfolios, despite being the wrong gender to do it well!? (Sweeping generalisation of the day no.1!)

I was delighted to meet literally dozens of my readers from here at the investor show. It was continuous all day actually, so in the end (well at lunchtime) I bowed to the inevitable and allowed my readers to start buying me pints of lager, and crisps at the Westminster Arms.

Peter quipped that he's going to wear safety goggles next time he buys me a pint & crisps, as I pebble-dashed him with small particles of salt & vinegar crisps, due to being unable to stop talking for long enough to swallow them!

I had to peel off back to the investor show at 2pm, in time to give a 20 minute talk to the audience in the Analyst Room. My stock picks from last year (WTM, something else, and AVS were up 17%, 17%, and 67%). So buoyed by this good luck, I decided to offer up some stock ideas for…

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james1n

3rd May '16

Paul,
I missed you at the Investor Show, but I echo your comments on Ed's presentation - it was very good. It was also revealing to see Ed's bubble chart of the companies attending with stands (!) and I managed to say hello to him at the end of the day. I also found Mark Slater worthwhile and a several of the others. It was also interesting to spot some of the other attendees looking up companies on Stockopedia as they presented in the Dragons Den's and were mentioned in other presentations!
Thanks for the great analysis and insights and keep up the good work!

JohnEustace

Paul,
When you say: "For this reason, I personally won't touch any overseas AIM-listed companies, apart from SKIL Ports & Logistics (LON:SPL) which is a rare exception to my self-imposed rule."
I think you are forgetting about Somero Enterprises Inc (LON:SOM) ?

Julianh

Paul
Brighton isn't on my doorstep but it is much easier than London. And I am long on AVAP so happy to get an update. Unfortunately Tuesdays are impossible for me, otherwise I would come just to share thoughts and a nice meal with other investors.
So if there are any other Sussex investors out there, please go to this event. So that we have a next one.
Julian

Paul Scott

Hi John,

Ah yes, I forgot about Somero Enterprises Inc (LON:SOM) . I've very relaxed about SOM, as it's American (which tends to have pretty good corporate governance), and a long-standing member of AIM. It also pays divis, and has a sound balance sheet. So there are no issues with that one to worry about, in my view.

I think you have to be very careful about particular continents when they bring companies to AIM - Africa & Asia as the ones I'd be extremely wary about, as so many have been frauds or semi-frauds.

Mr Stuttard 's lax governship of AIM has effectively closed the market to decent companies from Asia & Africa, because many investors, like me, simply wouldn't even consider touching any companies from those regions which come to AIM. Once bitten, twice shy, basically.

Regards, Paul.

Steves cups

I know this off topic, in fact all topics but what does amp mean when Paul says .....amp

I don't know the detail on ASOS, but there is a strong incentive for some companies to remain if they have shareholders who want to take advantage of the potential IHT relief.
http://www.londonstockexchange.com/companies-and-advisors/aim/publications/a-guide-to-aim-tax-benefits.pdf

Paul,
The sharesoc event in Brighton may be being held back because of the possibility of a train strike that day. I for one have registered for it on the basis that they will tell me if it is on or off. Other may gave just not booked because of this
Hope if goes ahead because I want to meet and hear the guy from Avation (LON:AVAP) as I am an investor

Sorry I missed the investor show but business came first

Steve

I'm thinking it's a "&" sign getting mangled between Paul and the website systems.

pobby

Hi Paul and all

As a relatively new investor I really enjoyed the networking opportunities provided by the likes of the UK Investor Show and no doubt the Mello event in Brighton could be the same (though a little too far away for me, but I'm a holder of AVAP after meeting Richard at a previous event). All thoroughly recommended!

Speaking to the likes of Neil CFO at Boohoo.Com (LON:BOO) (LON:BOO) was illuminating and hopefully profitable - he confirmed that they were looking into the opportunities for the baby/young child market which fits pretty well with their current demographic offerings!

Also it was a pleasure to meet with fellow investors and chew the fat, despite the hazards of projectile food! Paul, I can vouch, is a most humble individual and was extremely gracious in spending some quality time with me. Top guy!

Cheers!

cig

A better regulated AIM may be a mixed blessing: the junk means that good companies often trade at a discount, with the value usually realised some way or other if you're patient, and it's pretty fun to look for them. The odd Globo-style saga is quite fun to follow as well. In a perfectly fair market Paul would probably be reporting "all stocks reporting today priced to perfection, going back to bed" most days.

jonesj

UK Investor Show ?
I must pay more attention. I went along to the MasterInvestor show the week before to hear Jim Mellon and completely missed this other event, which also looks like it is worth attending.

Thanks for the nice piece of field research on DPP. The business doesn't work there and you found out why ! I suppose we could extrapolate that to some other price sensitive markets.

carmensfella

4th May '16

There will be good and poorly run companies with good and poor management and probably products and services that with the right management would have performed far better.

The fact is all companies are the wrong price until we know which way round they are all facing and performing in the AIM pack...However it is the fraudulent management, dodgy companies and out and out crooks that have managed to get on the market where prices are totally wrong because investors should never be able to invest in them and unwittingly line the pockets of those extracting the valuable investment funds out of the UK economy. Those funds are stolen away and preventing genuine early stage companies having the opportunity to grow and build future employment for our children and that is a total disaster for UK Plc.

Do we see any legal trials for these frauds ?, Any censures by the AIM team or even a mention of an investigation into all the Chinese scandals ? Not a whimper or whisper...All parties from LSE to AIM team to brokers to nomads to legal advisers all the way through to auditors and even the PR teams are so busy counting their fees they have no appetite to see justice for the wronged investors.

David

rhomboid1

Well said David

I can't think of another arena where those who commit/assist Fraud can walk away scot free , if it was 10 grand nicked from a school trip fund we'd see jail time, this is different and in some ways worse as it purports to be a regulated market.

As you say it also ignores the scandalous waste of funds that could otherwise be funding worthwhile enterprises and those burnt will not be back.

The thing is, would the money currently lost to AIM scams get reinvested in good companies if AIM was shut down and the good companies moved to main market standards? or would it move away to random other off-exchange scams? This sort of hot money is chasing wild dreams, that a carefully regulated market cannot provide.

It does not have to be shut down....just regulated properly and with a few serious investigations to catch the fraudsters whilst also netting all the supposed promoters and advisers living off these scams. It would not take long to decide if it was working and a few high profile cases would set the standard.

gus 1065

5th May '16

I agree that better regulation is the way to go, although as ever the combination of a lack of resources and the slow judicial process in this country compared to, for example, the US will make prosecuting white collar crime like this a low priority for the politicians.

Perhaps, in the meantime, investors could try and provide their own regulation by sanctioning the UK professional counter parties such as the lawyers, accountants, PR firms and NOMADs who sponsor fraudulent scams. We already have a few "rules of thumb" derived from bitter past experience, like don't touch AIM listed Chinese investments, but how about a central list of the various advisers to companies that have "gone bad" for reasons that competent advisers should have picked up on? These are presumably matters of fact - as opposed to opinion that might fall foul of libel laws etc. - and would hopefully choke off the fraudsters by blocking their access to the market. Over time, those persistently poor sponsoring firms with their hands in the cookie jar might become a bit more diligent if their reputation suffers and impacts their bottom line. Waiting for the regulators to catch up with the games being played doesn't have an especially good record in the UK, just look at the relatively few successes that the SFO has had.

gus 1065.....An excellent project and ShareSoc has considered this but the problem is that some of the process is linked to assessing whether the parties have been complicit or plain dumb ? ShareSoc can only show the facts and there would be legal threats if we suggested avoiding stocks with X as Nomad/broker or Y as the PR company as you can imagine. We need an investor with little to lose to take on the role and as many have seen only someone like Tom Winnifrith is generally prepared to put his neck on the line and battle against all the legal threats.

xcity

A simple list of all companies with the advisers would be enough. Then up to investors to do their own research. Quite a struggle for people to put the list together individually.

Fegger

Yes I think a list of all Chinese companies for example who listed in the last 5 years together with list of advisors and list of what is current situation for the company would be very illuminating. And above board.

Thanks David.

In a way, whether they are "dumb" or "complicit" doesn't really matter. In both cases, as a PI I would be inclined to avoid these intermediaries and the companies they sponsor since they don't seem to be up to the job. It's a bit like a director of a company being held to account for negligence. The test is either that they know and do nothing about the scam, or they don't know and are negligent because as a competent professional, they should put themselves in a position to be able to know.

As the two subsequent posters point out, it should be sufficient to have a factual list of who advised AIM companies that subsequently went bust without trying to apportion blame/responsibility. Perhaps this is a resource that Stockopedia could host?

Thanks again.

Gus.

Small Cap Value Report (3 May 2016) - PLA, SDM, DPP, CRAW

UK Investor Show

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Paul Scott

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