Small Cap Value Report (4 Sep 2015) - BVXP, ISL, SSY

4th Sep '15 by Paul Scott

26 comments 21788 reads

Good morning!

I'm trying to type this standing up, as I read an article saying that it's unhealthy to work at a desk sitting down all day. Seeing as that is how I've spent most of my waking hours over the last 25 years, then maybe it's time for a change. So I've bought a VariDesk, and it's really very good - you can alternate between standing & sitting, by raising or lowering a platform that sits on your desk & carries your screen(s) and keyboard. Although after an hour standing up, I've already got aching feet & back!

CNBC noted this morning that "the market only seems to be able to focus on one issue at a time" - i.e. Greece/Euro, China, Fed tightening, etc. I think the reality is that commentators are only able to focus on one issue at a time! The market takes everything into account, which is why moves are so unpredictable.

It's non-farm payrolls day in the US apparently, so that might drive volatility this afternoon possibly, as a widely-followed economic indicator. Although I'm paying less attention to short term volatility now - it seems to be something we just have to live with - and instead concentrating my attention on forthcoming trading updates and interim results in Sept.

With small caps, it's too expensive to be dipping in and out, as the spreads are too wide. That's why I focus more on large caps, if I want to actively trade things, especially when gearing is involved. With small caps I think it's best to do your research properly, take a position, and then stick with it, providing the long-term fundamentals remain sound.

Even when things go wrong, which they frequently do with small caps, good companies with sound Balance Sheets tend to recover from profit warnings. Two of my best performing shares this year (SAL and FLYB) were my worst last year. By sitting tight, and ignoring all the doom & gloom, and instead focusing on the fundamentals, losses have been largely recouped. I am hopeful that ENTU might pan out in much the same way, as it looks like a similar baby & bathwater situation at the moment, but time will tell on that.

Bioventix (LON:BVXP)

Share price: 1090p (up 17% this morning)
No. shares: 5.05m
Market cap: £55.0m

Trading update - well done to holders here. It's…

Unlock with Facebook

Unlock with Google

or Unlock with your email

Already have an account?
Login here

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

danyou

4th Sep '15

I like your observation about so called superstocks that look too expensive but yet seem to just grow and grow. I put Tracsis in this bracket. It looked too expensive but keeps beating expectations and I have a nice paper return so far. This is an interesting topic. What have you been reading on this?

iwright7

Gosteve - I considered top slicing Bioventix, but at the moment its a conviction share for me (one of only a handful) so I will hold and take the risk of a downturn. Once a share has risen significantly the downside is prephaps -35%, so a paper loss at worst. I also think Bioventix has a relatively stable and loyal following who are unlikely to sell on a whim. Thanks to Leon too for the heads up and I was was impressed by the business model outlined by CEO Peter Harrison at Mello 14. Onward and upward. Ian

FREng

SCISYS (LON:SSY) are a software services company and it's an industry I know well. I went to an investor's lunch with the directors a couple of months ago and asked direct questions about the troubled project and their control over other fixed price contracts. I was convinced that they have good control generally.

mr_spock

Paul, think you could be missing a trick here. Couple of weeks of standing up and you'll be ready to jog on the spot while filing your reports, and get a workout at the same time.

Hecato

Hi Paul - also interested in the book you are reading on superstocks - what is it? maybe mention it on the Monday write up since i'll forget to go back and check if you do respond here.

lightningtiger

Bioventix has still got a high bid and offer spread of over 5% which had put me off buying earlier last year. However with a hike up today of over 16% that is taken care of for those that have bought earlier. It is also trading at low volumes which as Paul said can make it illiquid as a tiny company. The positive side is consistant growth which must be helped with £350K revinue coming in each year. It is that consistancy that pays off in the end to make it a successful company.
This sector has got some excellent returns over the last year with good profits from the likes of OXB & OXP, both have gone from about 4p to 12p & the stop loss has incurred a sell. Also VRP from about 1P to 4.88p now going sideways.

Camtab

After much consideration I bought a speculative amount of Avacta recently. The company has developed a protein called an Affimer which "appears" to be superior for a number of reasons to Antibodies. I wondered if anyone has a view from the point of view of a Bioventix holder as to whether this is a threat or not?

bsharman

Paul - you should invest in a running machine desk: https://www.youtube.com/watch?v=fqSH9ffjmg8

I'm with you on Spaceandpeople (LON:SAL) and Flybe (LON:FLYB) and they have been great performers this year with hopefully more to come in the next 6-12 months as their respective recoveries gain traction.

I've been thinking since yesterday's Spaceandpeople (LON:SAL) statement (that was a long 10 days...) In a free market, all market participants are supposed to have access to all relevant and publicly available information. Surely then it's not fair on those market participants that do not have access to broker notes because these are in effect the company giving out information by proxy. I bet Neil Woodford has a the mobile numbers of all the CEO's whose companies he invests in and can call them pretty much anytime he wants! There were two freely available broker notes out today on Spaceandpeople (LON:SAL) - Edison and Equity Development, both made it very clear that there will be upfront costs involved in the Network Rail contract and that revenues will come through in 2016 and 2017. It's reassuring that the company and consequently the brokers are being extremely conservative in their forecasts and only including contracts actually won. What were your thoughts on these notes? Spaceandpeople (LON:SAL) and Flybe (LON:FLYB) are investments i really like - buy when everything is doom and gloom and they are almost priced to go bust, look for management willing and able to change things dramatically, look for signs that things are improving and drip some money in. Turnaround situations are not everyone's cup of tea but i love them (when they go well!!)
Ben

tads

The exciting area of research for Avacta is in therapeutics. Bioventix is not involved in this area. When a test kit which uses sheep monoclonal antibodies is licensed the manufacturer must continue to use those antibodies unless they want to go through the licensing process again.

jonesj

I presume the health concern with sitting all day is the lack of movement and excercise, therefore does standing at the desk help? Going for a 5 mile walk might be better.

Would you mind telling us which book you are reading Paul?

Paul Scott

5th Sep '15

I'm reluctant to mention the book that I'm reading, as it sounds so awful, but it's actually quite a good read.
It's called "Trade like a stock market wizard", by Mark Minervini.

I'm not recommending it, as I've only read the first 5 chapters, but it's a good insight into the mindset of successful growth investors in bull markets. Also, he claims to have cashed out ahead of 8 bear markets.

I spot quite a few superstocks early, but don't realise they are superstocks, e.g. I bought 500,000 ASOS shares near the all-time low, of about 5p. But instead of holding onto them and running them up to £70 a share, I sold them at 9p, as it looked expensive on value metrics LOL!!

Also, David Stredder tried to persuade me to buy Lo-Q for years, at pence, but instead of seeing the potential, and being prepared to take a punt, I quibbled over the short term valuation. Same with Crawshaws too. And lots of other multibaggers actually, I've sold most top performing shares way too early, as they were only warming up.

So Minervini's book is a good read for me, to help me relax and hold my best stocks, and not twitch over the valuation just as they are warming up for a big move upwards.

This is what's so great about investing/trading - you never stop learning!

Regards, Paul.

Funny that...I was going to comment that I though Bioventix and Crawshaws were very similar.

Cheers

Mike

hayashi22

I admire your honesty PP. If I had bt 500,000 ASOS at 5p and sold them at 9p I don't believe a day would pass without me thinking about it! I think we all hope for the next big one which is why having a punt is sometimes no bad thing as it keeps you keen. By punt I don't mean some blue sky no revenues job but a company which clearly has potential to multi-bag.I think if you had run your ASOS you might not be doing the job(s) you do now-probably lying on the beach somewhere but bored!

I think if you had run your ASOS you might not be doing the job(s) you do now-probably lying on the beach somewhere but bored!

Definitely not - I can't think of anything more boring than a life of idleness, lying on beaches or by the pool! I do this job because I enjoy it, not for the money. Although it's handy to have a basic income to cover the bills, then you can manage your portfolio more intelligently, not chasing returns.

These days I like to keep my living costs nice and low, and the trappings of wealth don't interest me in the slightest - I have no desire to have a big house, or flash cars. Been there, done that, and it's good to get all that nonsense out of your system.

If I have surplus money, I'm more likely to give it away, or treat friends & family to nice things, than to spend it on myself. After all, you can't take it with you, so what's the point in trying to accumulate more money than you need? All a bit selfish & ridiculous, if you ask me.

Regards, Paul.

janebolacha

6th Sep '15

Paul, very sensible remarks.
I couldn't agree more.

Best wishes,
Jane.

JollyBiologist

Humour, humility, wisdom, ethics, perspective...and peerless investment analysis and insight. Thanks, Paul!

jags

Paul, how come you say you are not athletic?... Aren't you anymore busy running marathons for charity as you used to?

sbotting

7th Sep '15

Hi Paul,

Thanks for your analysis, regards LON:ISL I note that their Non Executive Deputy Charman is Peter Simmonds who also happens to be a Non Exec for Synety a company you have previously mentioned in some other posts. Synety has come off quite a bit but has supposedly brushed itself down a bit and has refocussed on trying to get to be cash flow positive within the next year.

Have you any further insight into Synety or have you had any contact with Peter Simmonds, certainly from his linkedin he seems fairly capable, I'm wondering if there may be a halo effect on Synety who's results are out in a couple weeks.

What are you thoughts?

Cheers

Simon

Thank you Paul. I agree completely on the never stop learning part.
My current reading is "Misbehaving, The Making of Behavioural Ecomomics" by Richard H Thaler.
The first 25% is very good.

Hi Simon,

I am hopeful of Synety (LON:SNTY) recovering strongly in the next year. Management got the message loud & clear from shareholders that they have GOT TO reach breakeven without any more fundraising, and so that's what they are trying to do.

The revised strategy as outlined by the Chairman in the last webcast makes a lot of sense to me - i.e. chasing larger customers, and charging significant set-up fees, so that they burn less cash, and reach breakeven more quickly.

So now it's just a question of waiting to see how well they execute. The new NED, Peter Simmonds, has apparently already had a significant & positive impact on the company, and they have adopted a lot of his ideas, from his experience of SaaS at dotDigital (LON:DOTD) and elsewhere.

I appreciate it's been a crap investment so far, but personally I think there is a good chance it will recover, IF they manage to demonstrate good sales growth, and narrowing losses. It's an excellent product.

Regards, Paul.

Small Cap Value Report (4 Sep 2015) - BVXP, ISL, SSY

Bioventix (LON:BVXP)

Unlock this Article with a 14 day free trial

About the Author

Paul Scott

26 comments

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

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