Small Cap Value Report (Fri 15 Feb 2019) - placeholder

Friday, Feb 15 2019 by

Good morning!

Here's Friday's placeholder.

I'm going on strike today, so there won't be a SCVR from me. The reader comments have been too much this week. I can do without all that crap.


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148 Comments on this Article show/hide all

TheShareWhisperer 16th Feb 129 of 148

In reply to post #448943


In my experience when I read reactions like yours, on bulletin boards, it is usually because of two things a) the company is not performing as suggested by those ramping the stock b) the investor is over invested in the share and becomes hyper sensitive to comment.

Anyway 500K revenue with an 72 million Market Cap for Opti. I pity the investors who got spiked at 130p. They won't be seeing that price again anytime soon.

Paul's assessment was pretty fair.

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jonesj 16th Feb 130 of 148

I'm all for moderating out hostile and disruptive comments, to this doesn't end up like some of the ##### boards. Keeping it civilised is very important.

Incidentally, whilst the Gromley comment isn't going to win any diplomacy prizes, I don't see any major problems with that one and Gromley makes some very astute comments on other issues.
Some of the less constructive comments by others have no place here.

I am happy to pay for Stockopedia at present and only signed up after reading Paul's reports. Currently I have made more from SCVR ideas than using the fancy Stockopedia tools.

As for other sources, well it would be too easy to sign up to about 6 or more different paid memberships, but I have no plans to do so. Cost and the time required to digest the information need to be considered.

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gus 1065 16th Feb 131 of 148

In reply to post #448918

Hi cic.

The figures may not be too out of kilter depending on the underlying instrument and the basis on which they’re being calculated. For example, if a punter has a £10 per point spread bet on the FTSE 250 at an opening strike level of 19,000 then the notional value of that bet could be viewed as £190,000 even though the likely value of the bet before it’s closed is likely to be a small fraction of that. Likewise, no idea how you value the notional value of bets on something like an FX position but presumably also prone to some marketing inflation. Plenty of scope to be creative in bigging up how much the notional value of their business is. (Although does beg the question given the customer attrition rates how they manage to find 370,000 mugs stupid enough to trade with them actively at any given time).


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PeterC1969 16th Feb 132 of 148

As a subscriber to Stockopedia, my first read of the day is the small caps report. It's a shame that we didn't get one on Friday - clearly someone has overstepped the mark, but please remember that whatever comment was made, it should not get in the way of regular readers getting the report.

Keep up the good work - I've made some good purchases on the back of it, but only after doing my own research, and then understanding what level of risk I'm prepared to take.

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mortimer 16th Feb 133 of 148

In reply to post #448688

nicolas is or was leo de jong related to you

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Toyin 16th Feb 135 of 148

In reply to post #448948


Totally gripped. Not worried in the slightest.

Have a good weekend.

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Orangetree 16th Feb 136 of 148

As a shareholder of Optibiotix, Paul Scott should be entitled to his opinions. I disagree with Tom on this occasion. The business needs to print revenue to justify its current valuation.
For me, the purchase is made on the basis of SOH's reputation and past business acumen.

There will always be a risk of any investment, just recently Patisserie was found for reporting bogus numbers and sold off for 2% of its previous market value.

Blog: Walbrock Research
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melody9999 16th Feb 137 of 148

Paul - great podcast this week that I listened to this morning. You have a good rapport with Graham and have struck a good balance between providing information and making the podcast entertaining.

I'm not bothering to see what all the fuss is about - but I do know I value your contirbutions in the SCVR - if others don't then they shouldn't bother checking in every day.

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skinner66 16th Feb 138 of 148

wasnt gunna post again on this as to much negative,, but yes there are many websites /newspapers etc offer share advice some are begging you to subscribe and make you retire in 2 years.many here give good advice ,but prob not do the research paul and graham do, ok they may get paid to do, but free here, i subscribe as i believe ed and his team are well deserved for the fee, for what they do then you can buy a magazine for £5 per week plus many get tips at same time so market makers price up the share before hand so no advantage, as i have seen this, also if they get forecast correct.. that is same price as subscription for stockopedia per year and get all the SCVR. also stockslam is free and held in london. have been to 2 so far, great time many do 3 min talk on a share they believe do well, plus its good fun and networking with other stocko peeps.

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clarea 16th Feb 139 of 148

In reply to post #448728

Hi Timarr,

There are some awesome posters on this site yourself being someone I have learned a lot from.

I was just wondering if you would be good enough to do list of the top three stats you check when considering a stock you would go long of and if theres three red flag stats you could list that would deem the stock to be wary of.

Many thanks Andy

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willwilb 17th Feb 140 of 148

Hey guys, if you are still here having trudged through all this stuff, my message is brief.

Life is too short, please kiss and make up.

Hopefully we can get back to what we are all here for - making "Loads a' dosh". And I am one of the very many who very much appreciate all of you who are so generously trying to help, goodness knows I certainly need it!

(Disclosure - Stocko subscriber, avid reader of SCVR, and so far a shite inverstor.)
Best wishes to all.

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timarr 17th Feb 141 of 148

In reply to post #449133

Hi Andy

Thank you, I’m not sure I’m worthy.

I’d argue strongly that most of us aren’t great at picking winners. Experts are often slightly worse than novices because they’re biased by their public pronouncements – commitment bias is a real issue, which is one reason I don’t talk very much about specific stocks I hold. That being true then the real trick is holding winners and dropping losers – so I don’t think stock picking is the critical thing for most investors, even though it’s virtually the only thing that gets discussed a lot of the time. 

On buying I don’t have any very special ideas – never buy blue sky stocks, only buy companies with excellent cashflow relative to share price, avoid companies with lots of debt, avoid companies with a heavy reliance on government contracts. Specifically, I almost never buy retailers or mining companies – I seem to have a blind spot in those areas. Know thyself is probably the most important lesson for any investor. 

On selling – well profit warnings obviously, the Stockopedia research convinced me of the need to sell on the first one, and I’ve saved a lot of money by doing so. Anything that suggests management lacks integrity is a massive red flag – particularly with smaller companies. Declining free cash flow is a big warning sign – it isn’t definite of course, there may be valid reasons especially if the company is investing in its future, but it’s always a reason to look closer. Generally it all becomes easier to figure out when to sell if you don’t buy stocks on hope to start with. 

But ascribing a method to this rambling monologue would be overly generous. Really, I’ve just developed a long list of things I won’t do again ... 


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dscollard 17th Feb 142 of 148

In reply to post #449163

Well put , reminds me of the Art of Execution, super book by Lee Freeman-Shor which makes for compelling reading. He segments investors into behavioural types which he labels Rabbits, Assains, Hunters, Raiders and Connoisseurs.. central tenent is it's not what you buy, hold or sell its how you do it that makes for success or failure

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Mike888 17th Feb 143 of 148

I'm very pleased that the commentary has moved on to what this site, and conversations, should be about.

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mammyoko 17th Feb 144 of 148

My final word on Plus500 (LON:PLUS) (posted elsewhere also). I feel strongly about this because I was foolish enough to ignore the smell about Plus500 (LON:PLUS) and so have only myself to blame.

The big issue here is whether the accounts can be believed. The market seems to doubt that they can by ascribing a low valuation to the company. My concern is whether the cash is what is stated in the accounts. Until CAKE happened that would be a laughable suggestion because cash is regarded as the easiest asset to value. Since CAKE I believe it is reasonable to question this assumption.

Comparisons with other companies that have accounting scandals are not necessarily valid. I would be interested to know how many people on this board who actually have a PLUS 500 account. My guess is that no-one does. Most people I know use IGG. Doesn't that tell us something about the company - that if we aren't using them perhaps many of their stated customers are fictitious?

The risk with this share is that it is discovered to have been a fraud all along. Given the fact it is located in Israel there will be absolutely no sanctions for management if it does turn out to be a fraud (not that that is any consolation to shareholders anyway). The Directors have already cashed in large amount of shares. Red flag. PTEC walked away and we never discovered why. Red flag. The market doesn't believe the accounts. Red flag. They have just admitted that their supposedly risk-free model is no more risk-free than their competitors. Red flag. Their auditors failed to notice a significant error in the 2017 Directors Report. Red flag. The RNS admitting that they had lied in 2017 accounts is an insult to shareholders. Red flag. Their style is opaque and arrogant in contrast to their competitors. Red flag. They have been fined for on-boarding procedures more than once in the past. Red flag. Their business is being threatened by regulation. Red flag.

How many red flags do investors need? Are the potential returns from this share so good that they justify all the risk from the red flags? Why am I writing this? Not because I am short, I can assure you. Until Friday I was long and, like some other posters here, thought that the smell from the accounts might disappear given time. And well it might. Perhaps this is the only thing lurking in the accounts and this was a lie that seemed reasonable a few years ago but one that they could never ditch. But what if there are some bigger lies in the accounts like whether the cash actually exists or whether the accounts are a complete fiction? This fear has been what has been keeping PLUS's valuation low. Until this admission, there was nothing tangible to back up the belief that the accounts contained lies. Now there is. There are enough companies out there with genuinely differentiated products and (more) honest management that are audited using UK standards of testing not to risk capital on this share. I have learned not to regret the ones that I wrote off as too risky if they increase in value. C'est la vie. For every one of those there are the CAKEs the YUs the UTWs the STAFs of this world where the stench was proven to be well-founded.

If investors like this space and think that it has a good future there are other companies out there to invest in. What exactly does PLUS 500 have that is special that means that this too-good-to-be-true story is true and means that they will eat IGG's and CMCX's lunch? Is it the interface? Is it the spreads? Is it the client service? I don't hear anybody making the case for PLUS putting the competitors out of business. I don't think they will. I met Wheeler once in the 1980s. He was a smart and astute player. I think IGG will be around long after PLUS goes pop.

This may very well recover if they can get rid of the smell. But it will never trade at a premium to its peers. Odey may well be right (he has been right more often than he has been wrong). But he may also be ruing getting involved here. His best tactic is to bluff it out. Woodford has tried that on several howlers and it hasn't stopped him being horribly wrong.

To address the cash returns. Ponzi schemes always pay out great returns in the early days and many people cash out without being affected. It's the people holding when the music stops that suffer the losses. A ponzi scheme need high growth rate to keep on paying out. Sound familiar?

Perhaps this is all genuine. But do you want to be the one left holding the shares if it isn't? Sometimes we learn things from share-trading that we just couldn't have foreseen. Then we can shrug and walk away. This doesn't appear to me to be one of those occasions. That's why I am out and will stay out unless I get proof that the smell is red herring!

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Gromley 17th Feb 145 of 148

In reply to post #449163

timarr :

But ascribing a method to this rambling monologue would be overly generous. Really, I’ve just developed a long list of things I won’t do again ...

I love that phrase timarr. I often use the more bland "learn from my mistakes", but there is a genius of simplicity and directness to the way you have phrased that.

I think I have commented before that during the last couple of years whilst I have had the (probably temporary) opportunity to spend more time on improving my investing, that the biggest improvements I have observed has been from reducing the number of mistakes / bad investments.

In part it is the nature of the downward market we saw, but I can safely say that the very best investment decisions last year were pretty much exclusively decisions not to buy or to sell out.

And yet, I still spend a disproportionate amount of time looking for better opportunities as opposed to kicking the tyres on those investments I do make and weeding out less likely prospects.

It's of course true that not investing in some circumstances can also be a mistake, but as we are generally predisposed to be positive above the market, I would wager that I'm not alone in probably making more 'bad' buys than 'bad' abstentions or sells. We almost certainly have more first hand knowledge of what has happened to the stocks we bought than for the stocks we decided not to (although there is something to be said for actively tracking those stocks one actively decides not to buy).

A useful reminder to me to ensure that I'm focusing my efforts to "learn from my mistakes" in the areas most likely to improve future performance, so thanks for that.

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AnonymousUser252054 17th Feb 146 of 148

In reply to post #449193

'Given the fact it is located in Israel there will be absolutely no sanctions for management if it does turn out to be a fraud '

On the rare occasion a buisness leader in this country gets sent down for serious fraud they seem to invariably develop Alzheimers and are soon released, only to then make a miraculous recovery and be back in a boardroom again in three months, earning £100K with a shed-load of dirt-cheap options.

'PTEC walked away and we never discovered why.'

 From memory, they tried to buy on the cheap and got kicked into touch?

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clarea 17th Feb 147 of 148

In reply to post #449163

Thanks Timarr,

A few wise pearls, out of interest is there anyway of checking if free cash flow is going up or down over the years on Stocko or would I get that info from the free cash flow per share stat ?

Also would you have any objection if I posted your ramble on the Mike Walters site theres a good community on there but the average member I would have down as semi pro investor where after hanging round Stocko for a bit I get the impression theres a lot of full time traders here.

Thanks Andy

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timarr 18th Feb 148 of 148

In reply to post #449258

Is there anyway of checking if free cash flow is going up or down over the years on Stocko or would I get that info from the free cash flow per share stat ?

I'd start by looking at the FCF line on the Stock report, assuming you're a subscriber. Occasionally the Stocko numbers are wrong, but I usually scan annual reports just to check. But even if the numbers decline it isn't always a surefire warning sign - H & T (LON:HAT) for instance has seen a precipitous FCF fall, but that's because of a growth in lending rather than a collapse in real earnings. Which itself brings new risks, but free lunches are rare, even in inefficient markets.

The underlying point is that real earnings convert into cash and companies that have cash always have options. Most serious problems occur with companies where earnings don't convert into cash, that's always something to look into, although it's not a red flag per se.

Go ahead and post wherever. You have a mixture of investors here, including a few who are much more hands on than I'd ever want to be. Patience is one of the few advantages the private investor has over the market.


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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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