Small Cap Value Report (8 Nov) - GBO, TNI, BPI

Friday, Nov 08 2013 by

Good morning! It's Friday already, and my news feed is extremely quiet this morning for small caps. Plenty of news overnight, including a horrendous-sounding storm in the Phillipines with winds up to 195mph apparently. The US markets had their first significant wobble for a while, so as usual this feeds across to the UK, where the futures are indicating that the FTSE 100 will open down around 40 points at 6,654. At some point excitable investors in small caps are going to realise that share prices can go down as well as up! That's certainly true of story stocks on crazy valuations, where I'm expecting some major corrections at some point. However, a correction doesn't worry me with my portfolio of solid value & GARP shares - you just have to take the occasional 10% portfolio correction in your stride, and use it as a buying opportunity, selectively.

I was thinking back to what happened when the Tech, Media & Telecoms (TMT) bubble burst in Mar 2000. Despite the Indices crashing, it was actually a very good time for value investors - many great businesses were bombed out in price during the TMT boom, especially cash cows like retailers & house builders, as so much money was sucked into TMT stocks, that people indiscriminately sold down their holdings in much better companies, in order to raise cash to buy junk.

This time round we're not seeing that - in fact everything apart from resources stocks are going up - both trendy tech stocks, and value/GARP stocks - they're all going up. So it's harder to find bargains, but there are still some to be found - I'm not having any difficulty finding new, good value positions to open, but it's requiring more research, and generally they are at the sub-£25m market cap level.

In my core portfolio, which is £25-250m market caps, I'm not altering my strategy, and if there are no conviction buys available, then I'll sit and wait in cash. Opportunities can arise in the blink of an eye, so it's essential to be ready, with cash in hand in my opinion. Probably the most important aptitude for any investor to learn, is to be comfortable holding cash. Most people are permanently 100% invested, and that means you'll be hit hard by bear markets.

Whereas people who are disciplined enough to move gradually into cash as markets become…

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43 Comments on this Article show/hide all

lightningtiger 9th Nov '13 24 of 43

Backing up my hunch for Globo, I have now found from another source that a valuation is now undervalued & should be about 103p. To back this up consider looking at EXI energy@253p & valued @ 323p stop loss @205p.I obtained this from a £400 worth of software package. EXI is showing as a BUY.My opinion looks good momentum stock.
This is obviously much safer than Globo & you might like to take a look.
This is one of 70 stocks on my hit list to replace any failing stocks & EX Iis the best replacement one at this point in time.
Thanks Paul for all your good work.

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Paul Scott 9th Nov '13 25 of 43

Hi Chaps,

I'm fine about the comments here, in fact I was rolling around laughing at them late last night with some friends! But the moderators decided that a couple were below the required standards of civil discourse, so zapped them.

Just to clarify, opinions are welcomed here, providing they are based on facts, sensibly constructed, and presented in a reasonably civil way.

I've grown a thicker skin recently & it's like water off a duck's back now - after all, I dish it out - saying negative things about companies that I don't like - so one has to be able to take it when people disagree and chuck a few missiles back in my direction. Also, I'm a great believer that if you give people enough rope, they hang themselves!

Cheers, Paul ;-)

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Jam7 9th Nov '13 26 of 43

For clarity's sake Mr Scot,please can you change your profile so as not to give the false impression you are a qualified accountant.In your own words you "flunked " the exam.
It is highly misleading ,like many of your other statements.


Furthemore what qualifications do you possess to call yourself an analyst?

Are you licensed by the regulators?


Paul trained as a chartered accountant with Price Waterhouse. He then spent 8 years as FD for a clothing retail chain. "Retired" in 2002 to become an independent investor & analyst. 

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Paul Scott 9th Nov '13 27 of 43

In reply to post #79003


It does make me laugh when you try to use the information about me that I have given you, to attack me!!

So before we go any further, please do what I have done, and publish your details. namely;

1) Your full name

2) Your full career history, including all qualifications - especially exams passed & failed.

3) Your full investing career - every success and failure, and what you learned from them.

4) What qualifications you have to comment on shares?


Come back to me with that information, and I will be happy to discuss further.

Or, continue what you're doing, and be a coward who hides behind a pseudonym and a distant internet connection.


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Jam7 9th Nov '13 28 of 43

I have not claimed to be an accountant ,nor an analyst ,writing on a stock website.

You however have chosen to pad your CV and claim to be an analyst.

You credibility is falling to pieces fast.


You are taking positions and writing about those which clearly benefit yourself.Hardly objective analysis

You may be rolling around laughing ,but that does not hide the facts.

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mpat89 9th Nov '13 29 of 43

No one cares about Paul's CV. His posts speak for themselves. In any case PwC train over 1000 accountants a year, I'm sure many of them go on to become FD's. Being a chartered accountant isn't exactly "elite". That's not what makes Paul's posts valuable and his experience shines through clearly from his posts anyway.

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Jam7 9th Nov '13 30 of 43

That is not true ,go and read some non paul scott boards.


If he is happy to mislead people on his qualifications,what else is he happy to mislead people about?

Please don't come across as principled when you have failed at the first stop.

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Paul Scott 9th Nov '13 31 of 43

As regards my CV, I've always been truthful - that I trained as a chartered accountant, and then went on to be an FD for 8 years. Now you could (justifiably!) argue that this glosses over the fact that I didn't pass me PEII exams, but I never claimed to have done! It's irrelevant in any case because I'm classified as QBE (qualified by experience), and have never given any financial advice to anyone. The whole ethos of this site is DYOR - do your own research.

What amuses me is that I have volunteered this information! So it's hilarious to have some nameless muppet on a bulletin board questioning the qualifications that I've told them about!!!

You know what, I've had enough of this - I'm going to Short Globo (LON:GBO) on Monday morning - and will happily donate 50% of the profits from that short position to my favourite charity, Scope.

Cheers, Paul.

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Fangorn 10th Nov '13 32 of 43

I think you should donate 50% to a PI to track down Jam personally.

Clearly he's got no balls attacking as he does from behind an anonymous avatar.

Come on jam - Turn up to one of these Investor events that nearly everyone goes to and introduce yourself - we are all dying to hear your "experience" and why you seem to have an unexplainable issue with PP.

P.s Just passing the exams doesn't mean you're a competent accountant fyg. Being grand fathered into the "qualification" through extensive experience is a far more sound claim when determining whether PP is a qualified accountant or not. I passed both my SFA and IMRO IMC fund mangers exams but never used the latter.

Am I a qualified fund manager? Despite passing my IMC in 1995 I never having worked as an FM? I've worked in the City(of sorts if you include Hong Kong/Singapore) for 15 odd years however.

p.s I've never met Paulipilot fyg Jam, but have followed him(over on the Motley Fool pub since the mid 90's I think it was, perhaps a touch earlier - 1992/19933?) He's one of the most honest and able investors around who coincidentally is happy to share his knowledge with all and sundry. Not seeing much sharing coming from you other than pointless ad hominem attacks on his credibility and honesty

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djpreston 11th Nov '13 33 of 43

Ah yes, qualifications.... Give me someone who is QBE anyday.

So, in the FM business, the new regs came to pass and everyone had to be qualified - fortunately, having had my PCIAM from 20 years ago, I was pre qualified (subject to some gap fills); however, Id much rather hire someone with 20 years business experience than someone who has just passed some whiz bang new exam. There is no substitute for someone who has been handed their lumps over the years IMO.

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Paul Scott 11th Nov '13 34 of 43

Thanks chaps!

Also, just as a post-script, I've decided to study for & sit the IMC quallification (Investment Management Certificate), most of which is stuff I already know, but I'm sure there will be some gaps in my knowledge. So it will be a useful thing to have & is relevant to what I do, and will be good to get completely up-to-date.

Cheers, Paul.

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snaj 11th Nov '13 35 of 43

In reply to post #79039

Right, I'm going to blow my own trumpet to prove what a ridiculous position Jam7 finds itself in (by the way, why not admit as I'm sure most here have suspected & concluded, that you're heavily geared in a long position in Globo?): I was a trainee actuary once (with Coopers & Lybrand, now PwC!), am currently a CFA Charterholder, a Chartered Financial Planner and a Fellow of the Personal Finance Society (all by examination) and have worked in financial services for nearly 20 years and have been investing for over 20 years - NOT for one second would I pretend to know as much, let alone more, about small cap equity investing than Paul, and whether or not you think that that's down to my exam record vs. Paul's, I'd rather take my baby daughter's opinions on investing than yours, thank you very much.


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bsharman 11th Nov '13 36 of 43

Some people are pathetic - Don't let the b*****ds get you down Paul! You do a fantastic job and offer balanced ,topical and very readable (and funny) daily reports. You always make it clear that we should do our own research. Anyone who has any intelligence reading them should understand that they are your opinions - which are valuable BUT IT DOESN'T MEAN WE HAVE TO AGREE WITH YOU OR FOLLOW YOU BLINDLY! Anyone who doesn't understand this (and I suspect that this is the case with your new best mate, Jam) is foolish and should not be investing their own money. Either that or Jam has a secret crush on you! ha ha - you have to laugh at these people. Just remember that they are a tiny majority and probably have nothing better to do with their time. Keep up the good work.

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harryr 11th Nov '13 37 of 43

I find it very sad that Paul Scott seems to be leading a great many investors up the garden path..
Does Stockopedia pay this chap.??
Does he short stocks and then push his views on Stockopedia.

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k9tas 11th Nov '13 38 of 43

Hi harry
Its called skin in the game . for long enough Paul has given Globo the wide berth choosing not to take a position , which leads to the opportunity of being shot or criticised from both sides for lack of commitment. However I suspect Paul's decision to pin his cash to the mast is understandable as he has become a target for those who don't look at company accounts and instead haunt the BB's whose analysis is that of the crowd or herd .
I admire and envy his ability to analyse company accounts which he offers to this site and he always invites his readers to DYOR which allows the reader options i.e. Do you agree or disagree with that analysis?
If you don't you let it go and look for something else of worth in his report.
No offence Harry over time following Paul's analysis and example can be a lucrative journey.
His calls are easily checked over time and in the past he's big enough to eat humble pie if required , you will just have to wait and see if its a good call or not .
I know which opinion I favour.

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harryr 11th Nov '13 This post is under review

I myself think if this chap is or has, shorted stocks that he posts on this site, and if he is being paid by Stockopedia then he should be sacked at 8AM in the morning.

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dangersimpson 11th Nov '13 40 of 43

I personally find it hilarious that it's the posters who post continuously one sided views on their favourite stocks on threads that no one else bothers reading are the ones who are so quick to falsely accuse Paul of unethical behaviour. It reminds me of the psychology study that showed that the skills required to identify competency were the same as the skills required to be competent so that the truly incompetent we're doubly cursed not just with their incompetency but the inability to recognise their own incompetence! Unfortunately for the rest of us it means that arguing with them on the basis of rational logic is totally pointless since they lack the ability to understand the argument.

Book: Excellent Investing: How to Build a Winning Portfolio
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Fangorn 12th Nov '13 41 of 43

In reply to post #79052

Interesting comments Harryr.

This from the person who, on introducing themselves to the Stockopedia crowd,posted such in depth analysis as:

Thursday, May 12 2011 by harryr 49 comments 11,019 reads
"Westminster group has been a dog of a stock since listing. Todays stock price,11/05/11 reflects that view.[16p at the open]. Last years results[out within the next 3 weeks] will show yet another huge loss. The city puts it at around £2m.

The stockmarket is all about looking out, for growth and profit. A kid of 3 can tell you that if orders go through the roof,while at the same time fixed costs stay the same, investors are on to a winner.

This stock should do very well, priced to go bust today, could turn out to be a real star as the directors and staff are about to be rewarded for all their hard work."

5 reasons why you should sell you house.
Sunday, Jun 09 2013 by harryr 15 comments 3,334 reads

The first reason is that big profits can be booked,as we have far more buyers than sellers.
The second reason is it is cheap money that is lifting house prices [not higher wages.]
The third reason is low rates will not last for more than a few more months or years.
The fourth reason is when you want to sell the market will not want your shares.
The fifth reason is it will be the fear of rate rises that will start the slump in housebuilders shares..This could come out of the blue at any time.

The City thinks that these stocks are cheap as turnover and prices are going one way[up] helped by cheap land bought by the builders in the last 3 years.

I take the view that just as production steps up a gear, with higher wages,and material costs to boot, lending costs will jump."

When the cost of money doubles [from a very, very, low base], the fun stops dead.

And that's before one even takes into account the mostly one way dialogue (WITH YOURSELF) you have subsequently engaged in. No in depth analysis. No effort. Your posts all read like ramps and you have the cheek to criticise someone who takes time out to proffer in depth analysis that puts your effort into that of a five year old category.

"I find it very sad that Paul Scott seems to be leading a great many investors up the garden path..
Does Stockopedia pay this chap.??
Does he short stocks and then push his views on Stockopedia."

I find it unpleasant that someone like yourself is still allowed to post here given the absolute dross you scribble and the copious amounts of other people's time you waste with mindless discourse. I guess the multitude of red ticks you continually get is finally causing you distress.

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Ramridge 12th Nov '13 42 of 43

A note to Ed Croft, re. Harryr.
Can you not just ban this chap from Stockopedia permanently. We have all had a bit of fun and now he is becoming at best a pain in the proverbial, and at worst downright insulting. There is no value added in his tirades. Complete waste of time.

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Edward Croft 12th Nov '13 43 of 43

In reply to post #79080

Chaps, Harryr, to give him credit, has made a lot of money in microcaps over the last couple of years while the community has down-voted his posts on his selections - we should cut him some slack.  If you don't like his writing, please be aware that his stock selection has shown a certain instinct for a bargain.  I met him at a show once and he said that was his strategy, always had been and always will - there's a certain discipline there.

We try to be light on moderation at this site but we certainly won't tolerate abuse. Harryr does know that and knows the consequences if he crosses the line - I've warned him about this.  He should understand though that there's nothing wrong with shorting stocks - in fact short sellers in general are the best stock pickers of all and act as policemen. We'll be publishing short interest of all the top hedge funds within the next month which will be a very useful resource.

I've been disappointed in the heated nature of discussions in recent weeks that have spilled over onto our boards here.  We should all cut each other some slack. 

I'm closing this board now. 

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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