Good evening!
I'm finally back in the UK, after a very pleasant 3-hour Easyjet flight back from Corfu to Gatwick today. I always feel exhausted after flying - apparently it's due to the lower oxygen content of the air on planes. A notable difference was a flight earlier this year on a 787 Dreamliner plane - which the cabin crew told me was due to it having much better air supply.
Yesterday was fairly chaotic for various reasons, and there was so much going on in my personal portfolio, that I found it impossible to concentrate properly during the day. So I wrote most of yesterday's report in the evening - adding new sections on;
Interquest (LON:ITQ) - not so good H1 results, but had already warned on profits. Could be a potential recovery share, maybe?
Kainos (LON:KNOS) - looks a very good company, with a terrific track record of organic growth.
G4M - this one has really caught my eye, and I've increased my existing long position in it. The reason is a very strong H1 trading update - with sales growth (all organic) at a remarkable +73%.
It's an online retailer of musical equipment, and is growing rapidly (from a low base) into new markets in Europe. It's low margin though, but the rapid growth is likely to attract a premium rating in my view. So I see considerable upside in this share, if the market remains so bullish on rapid growth online retailers. It's difficult to trade in though, as 79% of shares are owned by >3% holders, mainly management.
Here is the link to my full report yesterday.
Clarification on Fundamantal Asset Management Ltd
I accidentally caused a furore this week, by referring to my activities where I have worked with FAM in the last 3 years on a small, experimental project which we called the Small Cap Value Portfolio service. This had nothing to do with their core activities, where the firm is a specialist IHT planning portfolio service provider - and very good at it too, with an excellent long-term track record.
I have no hesitation in recommending FAM to readers - indeed, I think that the IHT exemption for some AIM shares held over 2 years is a remarkable tax break, that more people should take advantage of. What better way of doing that than delegating it to a very experienced team, who are walking encyclopedias on AIM shares.
Anyway, the specific service that I worked on with FAM didn't reach critical mass, so wasn't viable. We gave it a good shot, but it was hampered by a series of profit warnings in companies that I researched and recommended to the fund manager. So we struggled to recoup losses incurred in 2014. It happens sometimes - you just get a bad patch where things go wrong. That obviously made it impossible to consider recruiting new accounts, as the track record was only in line with, or slightly below our benchmark - not good enough.
I hadn't realised how much work would be involved too, and found it sapped my energy, for little to no reward. So in the end we mutually & amicably decided to wind down my little project. I'm delighted to say that several of my stock picks have gone through the roof recently (esp. Boohoo.Com (LON:BOO) ), so we're actually closing client accounts now at a profit, and at a high, which is pleasing.
However, just to emphasise once again that my little portfolio service with them was a tiny offshoot, and nothing at all to do with FAM's main, and very successful IHT portfolio business.
I'm really sorry for the mix-up, as apparently several FAM clients read these reports, and were alarmed, thinking that the whole firm was closing down, which of course it isn't! Ooops. My mistake, very sorry.
Trakm8 Holdings (LON:TRAK)
Share price: 213p (down 6.6% today)
No. shares: 32.5m
Market cap: £69.2m
(for the avoidance of doubt, I do not currently hold a position in this company)
AGM trading update - a mixed update from this telematics company. I like the company, and management, but decided to bank my profits in a general portfolio trim in the build up to the Brexit vote.
Today's update probably isn't strong enough to make me want to buy back in right now, but it remains on my watch list.
I think you can see today's update as either glass half full, or half empty. The key message seems to be that the company expects to meet full year expectations;
"Trakm8 is pleased to report that trading in the first five months of the current financial year commencing 1 April 2016 has started satisfactorily and is consistent with its expectations for the year as a whole.
Group new orders booked have been received at a rate of 37% greater than the same period last year, of which 27% is organic growth. This continues the trend of strong growth of recent years.
The period included the Scottish Power contract award announced in May and the bulk of these units are now installed.
Valuation - figures out from FinnCap today suggest adjusted EPS (fully diluted) of 15.7p this year. So the PER is 13.6, which looks attractive to me, for a growing technology company in a sector that tends to be on PERs in the 20s.
The fly in the ointment is that the figures are expected to be H2-weighted, and as we know that increases the risk of something going wrong.
In line with previous years, the weighting of Group revenue, profits and cash flow is expected to be in favour of the second half. This is due to the fact that reporting units tend to accumulate as the year progresses as well as the timing of deployment of orders won in the first half.
Half year profitability is expected to be less than the first half of last year, with a stronger second half anticipated fulfilling the growing orders received in the financial year to date.
That H1 profit is actually going to be lower than H1 last year has spooked me somewhat. Surely the additional units from last year would contribute to better profit in H1 this year?
Exchange rate movements are expected to increase input costs by about £0.5m, although the company reckons it can partially mitigate this.
My opinion - I'm on the fence at the moment. I like the company & management, and might possibly go back in at some point. However, the disclosure that H1 profit this year will be down on last year has spooked me.
McBride (LON:MCB) - good figures out today for y/e 30 Jun 2016. This has been a very impressive turnaround.
With quite a lot of debt, and a pension deficit requiring increased overpayments, I think the valuation looks about right for now. There could be a bit more upside, but not enough to tempt me in at this stage.
Nothing else caught my eye today, apart from CMC Markets (LON:CMCX) saying in their trading update that reduced market volatility has hurt their profit! What are they on about?! It's been a highly volatile period in recent months, what with all the Brexit chaos. So that doesn't ring true to me at all. Spread betting companies should have been doing a roaring trade in the last few months, as punters pulled out, then came back in again, and sentiment swung all over the place.
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