Small Cap Value Report (Fri 19 March 2021) - IDOX, TENG, BOOM, CML, ZANE - charity update
Good morning! It's Paul & Jack here with the SCVR for Friday.
Timing - I have to down tools now, to get my first covid vaccine jab. So I'll sign off for the day, today's report is now finished.
Agenda -
Paul -
Idox (LON:IDOX) - Bid talks fall through. Announces a small disposal. Prepare for a bumpy day, as the bid premium unwinds.
Ten Lifestyle (LON:TENG) - Lacklustre update, obviously impacted by covid, since it provides a concierge service. Doesn't appeal to me at all.
Audioboom (LON:BOOM) - signs of life, but still loss-making. I review the FY 12/2020 results. Good outlook for 2021.
ZANE - update on my favourite charity's annual (online) conference, which I attended this week. Thank you to all the Stockopedia readers who support this wonderful little charity that saves the lives of the most vulnerable people in Zimbabwe.
Jack -
Cml Microsystems (LON:CML) - semiconductor developer with mixed historical results, disposal of non-core division and investment in core products.
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Paul's Section
Idox (LON:IDOX)
71.8p (pre market open) - mkt cap £319m
Disposal - IDOX has agreed to sell a Dutch consultancy subsidiary for up to a maximum of 8.14m Euros. That’s insignificant to the market cap, so let’s move on.
Bid falls through - a statement was issued last night by Dye & Durham, saying that it does not intend to make an offer for IDOX. The problem with these situations, I find, is that the news is issued by the potential bidder, hence often doesn’t come up on the newsfeed for the target company.
The Stockopedia newsfeed for companies does however pick up third party summaries of news, which is really useful, and at 18:45 last night, a news item cropped up on IDOX, saying;
* DYE & DURHAM LTD - AFTER CAREFUL CONSIDERATION, IT DOES NOT INTEND TO MAKE AN OFFER FOR IDOX PLC
* DYE & DURHAM LTD - CONCLUDED THAT IT CANNOT SUPPORT ACQUISITION OF IDOX AT PRICE CONSISTENT WITH THOSE ORIGINALLY CONTEMPLATED
To my mind that sounds bad for the share price today. It sounds like the bidder has gone through the books, and decided it's too expensive. There was clearly a bid premium baked into the share price, as you can see from the chart below. The vertical move in Feb 2021 was triggered by bid interest being announced.
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IDOX Statement - this morning, re Dye & Durham’s withdrawal.
This also makes it sound like they couldn’t agree on price -
On 19 February 2021, Idox plc ("Idox" or the "Company") confirmed that it had received a non-binding indicative proposal from Dye & Durham Limited ("Dye & Durham") regarding a possible offer for Idox.
Idox notes the Rule 2.8 announcement now published by Dye & Durham stating that it does not intend to make an offer for Idox.
The Board has engaged constructively with Dye & Durham, maintaining a very clear view of the potential value of the business to its current owners. These discussions have come to an end. Idox remains confident in its future as an independent company and its potential to create further shareholder value.
Current trading - this is a mini trading update, and sounds positive -
We have now completed the intended reshaping of our Group with the recent disposals of all remaining parts of our Idox Content division, and will look to scale our Group further through carefully selected bolt-on acquisitions. These disposals, together with positive momentum from current trading, have significantly strengthened the group's balance sheet, which in turn offers greater strategic optionality for shareholder value creation."
My opinion - if a bidder doesn’t think it’s worth the current share price, or at least isn’t prepared to pay a price that management find acceptable, then the share price is likely to fall.
The frustrating thing is that shareholders are in the dark about what price was offered, if there was an offer at all. It really should be a requirement for more details to be disclosed, especially where management have small shareholdings. How do we know they’re making decisions that are in the shareholders best interests, or protecting their own jobs, and remuneration, if the bid price discussions aren’t disclosed? Sure there is a confidentiality consideration, but does it really matter now, given that the deal has fallen through?
Maybe there were confidential discussions with the biggest institutional shareholders, again we don’t know, but that's highly likely.
CORRECTION: I've crossed out the above, because a friend has kindly emailed me to say that the potential bidder stated it had mooted bids at 67, 70, and 75p. Sorry about that, and I'm happy to correct the article. Here's the RNS from Dye & Durham. End of correction.
On fundamentals, I had a quick look at IDOX’s FY 10/2020 results here on 2 Feb 2021. I wasn’t impressed. The main problem is erratic historic performance, and a very weak balance sheet. Also the valuation looks far too high on a PER basis. No wonder a bidder walked away.
Shares look far too expensive, for a not very good business, in my opinion. So I expect the market to throw a cold bucket of water over shareholders today.
It’s very difficult with bid situations. Do we hold in the expectation of a bid coming through at a premium? The best scenario is where several bidders fight to gain control of a company. Or, if the price soars, as in this case, is it better to sell in the market in case the bid falls through? Or sell half to hedge your bets? That's a great advantage private shareholders have over institutions. We can sell any time we like in the market, they can't. Every situation is unique, so I don’t think there is a one size fits all rule.
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Ten Lifestyle (LON:TENG)
93p (down c.7% at 09:09) - mkt cap £76m
Ten Lifestyle Group plc (AIM: TENG), a leading technology-enabled, global concierge platform for the world's wealthy and mass affluent, announces a trading update for the six months ended 28 February 2021 ahead of its half year results, which will be announced on Thursday 13 May 2021.
Checking my previous notes, this company’s trading updates can be waffle, without key numbers I need, on profitability.
Today it says -
· Net Revenue1 in H1 of c. £17.4m; with demand subdued for core dining, travel and live entertainment services throughout the period.
· Adjusted EBITDA2 in H1 broadly in line with the Board's expectations.
· Net cash at the end of H1 of £8.2m (FY 2020: £10.0m).
I don’t know what the Board’s expectations are, so am in the dark here about profitability (or rather, losses).
Revenues were £23.8m in H1 LY (prior to covid), so it strikes me that achieving £17.4m this year in H1, isn’t too bad, given that lockdowns must have greatly reduced demand for a concierge service.
Outlook - not great -
The Group's future performance is closely linked with the nature of the global COVID-19 recovery, by region. Whilst demand is beginning to return in some countries, the continuing effects of COVID-19 globally, combined with the recent strengthening of Sterling, is expected to delay the recovery of Net Revenue and Adjusted EBITDA in the second half of the financial year.
· The Group continues to agree contract renewals with existing corporate clients and develop a strong pipeline of new business.
My opinion - I’ve looked back at previous results, and it just doesn’t look like a good business. It seems to be permanently loss-making. The investment case seems to hinge on it winning more contracts, and thus generating more income once it scales up, and thereby reaching profitability. Jam tomorrow, in other words.
Personally I prefer to mainly invest in businesses that are already profitable, and can scale up further. This doesn’t appeal to me at all.
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ZANE Update
As it's a quiet day for news, here's a quick update on my favourite charity, ZANE, which delivers humanitarian aid to destitute pensioners (including many that fought for the UK in long-forgotten wars) in Zimbabwe. ZANE was founded by Tom Benyon, who reads these reports sometimes, hence how we met. He invited me to do my own "due diligence" on ZANE, on the ground in Zimbabwe, which I did in an unforgettable trip to Harare and Bulawayo, in early 2019.
I think about the many people I met in Zimbabwe, and the dire circumstances they are living in, with no healthcare, desperate shortages of basic food & medicine, and a whole economic structure that has more-or-less collapsed. There's not even reliable running water, and electricity only comes on for a few hours each day. The roads haven't been repaired in years, and even main roads are full of potholes. Smaller roads are often in such a poor state of repair that vehicles can travel barely above walking pace. That's if they can get hold of any fuel at all.
The currency has collapsed 4 times now, since majority rule began about 40 years ago. Anyone who thinks money-printing and Modern Monetary Theory are a brave new world of unlimited public spending and wonderful public services (Stephanie Kelton, for example) should visit Zimbabwe, to see for herself what hyper-inflation does, when too much money is printed. The trouble is, once a Govt is addicted to money-printing, it can't stop, even if it wants to. So the MMT suggestion that Govts should print money freely until inflation starts, then stop printing money once inflation kicks in, seems incredibly naive.
ZANE held its annual conference online this week, which I attended. The situation is truly awful, but there are a few glimmers of hope - e.g. inflation has reduced considerably, from 800% p.a. to 350% p.a.. Previously, Zimbabwe operated its economy using US dollars. These were confiscated without warning, and exchanged for new Zimbabwe dollars at 1:1. When I visited in 2019, the unofficial rate had already fallen to between 4-5 Zim dollars to $1, but people I spoke to said they don't trust the new currency. They were right. It has since (in 2 years) fallen to 80Z$ to $1US. and the unofficial rate is 120. That's, once again, wiped out everyone's savings. Pensions are now practically worthless, and people can't afford food or medicine.
The glimmers of hope are: the rainy season went well, hence the dams are full again (increasing the hydro-electric power generation), and the harvest will be good. Poor people plant maize anywhere they can, for the staple diet of mielie-meal - a tastless white goo, like semolina. They make it palatable with the most amazing tasting gravy I've ever had - with onions, bones, herbs & spices. Two thirds of the population are in food poverty, so a good harvest this year has staved off mass starvation thankfully. One quarter of all children have stunted growth. ZANE supports a club foot programme, which rectifies this widespread birth defect, for about $1,000 per baby, giving a full, normal life, to deformed babies that otherwise would have previously been crippled for life.
Over 1 million people are HIV positive, and many have previously died, leaving lots of orphans. Thankfully, with international help, HIV is now under control, with over 90% of people receiving treatment which renders it undetectable. The covid vaccine has been donated by China, but so far the roll-out has been so slow, it has made no difference. They tell me that covid is the least of their worries in Zimbabwe, other basic problems like avoiding starvation matter more.
It's all so vivid to me, because I met hundreds of ZANE's clients in Zimbabwe, all types of people, but every single one was polite, dignified, and so grateful to the UK donors who enable ZANE to support about 4,000 of them, with basic food & medicines, literally keeping many alive. I also met almost all of ZANE's workers & associates. They are truly remarkable people, giving hands-on help, care, and love, to destitute people who have no other support available.
This short audio recording below is really worth listening to, as it vividly gives an example of the work ZANE does, and the intense pressure that ZANE's team are under, you can hear it in Margaret's voice. Again, I can vouch for this, it's not PR spin, it's real - I recognise Margaret's voice, as I spent several days with her, visiting care homes & meeting the residents that ZANE assists with food & medicine that they would otherwise not get.
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Anything you can do to help would make a real difference, and save someone's life. If you can afford £15 per month, that's enough to provide one of ZANE's pensioners with essential pills for diabetes, blood pressure, etc. If you can afford a bit more each month, then that would provide a food parcel for someone who would otherwise starve. All the charity's overheads are covered, so incremental donations go directly to these incredibly needy, and deserving cases.
Thank you to the significant number of Stockopedia readers who have already signed up to help ZANE with donations, and more importantly, regular payments. Here's the link if you would like to help. I know many readers are incredibly generous to charities you already support, and there are many great causes. This one is just my personal favourite, as I saw the need, and what ZANE does to help, in person, an experience I will never forget.
One final positive point. The care homes in Zimbabwe were in massive crisis, insolvent basically. Several care home managers explained to me how dire it was for them - not being able to pay, or feed their staff, let alone the residents. ZANE delivers free food to many care homes already. More recently, Tom Benyon (founder of ZANE, and a retired Tory MP!) lobbied the UK Govt to provide some assistance to the Zimbabwe care homes, and was successful. He's also successfully lobbied for the UK Govt to help support veterans who fought for the British Crown, but had been abandoned by us. So he's doing great things, on top of the work that ZANE does. Let's get back to shares now. I only mention ZANE occasionally, as I appreciate people come here to read my thoughts about shares, not charities.
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Audioboom (LON:BOOM)
440p - mkt cap £69m
Audioboom (AIM: BOOM), the leading global podcast company, is pleased to announce its final audited results for the year ended 31 December 2020.
Yet another share that has risen a lot lately. As we’ve established, that doesn’t mean a thing about long-term performance, because we’re seeing indiscriminate buying of practically everything. I do feel we need to be very careful at the moment, banking some profits seems very sensible to me, especially where valuations are getting stretched. Sentiment can turn quickly, and it seems to already be doing so for some popular shares.
Back to BOOM. Note it reports in US dollars.
- Revenue up 20% to $26.8m
- Gross profit is modest, at $6.2m - that’s only a 23% margin, so not much operational gearing
- Still loss-making, with a loss before tax of £(3.3)m, although that’s improved from 2019’s loss of £(7.5)m. Still not really a viable business is it? After many years trying.
- Share based payments of £715k in 2020, and £1,429k in 2019, really grate with me. As mentioned yesterday, I don’t believe loss-making companies should be lobbing out freebies to management. Reward them from profits in future.
Balance sheet - has it got enough cash to survive is always the key question with loss-making companies? There’s $3.26m in cash, and a healthy surplus of current assets over current liabilities, the current ratio being 1.99.
However, I am concerned about the large $8.03m in receivables. That looks too high relative to revenues of $26.8m, which calls into question whether those receivables are going to turn into cash, or might include disputed amounts? That’s an amber flag.
Cashflow statement - not great, this continues to be a cash burning business. It’s being propped up with equity fundraisings, $5.5m in 2019, and $4.6m in 2020. Can it ever get to a point where it’s self-funding?
Going concern statement - says they can reduce costs if needs be, and have access to borrowings from SPV Investments Ltd. Proven resilient in 2020 pandemic. Says it will not need additional funding for the foreseeable future - hmmm, I’m not so sure about that, time will tell.
Outlook - there is one bit that has caught my eye, and sounds impressive -
I am pleased to provide an update on our recent progress, highlighting an impressive start to the year, with the Company already signing advertising bookings representing more than 80% of the current market expectations as to revenue for the full year.
My opinion - I’m not interested in reading all the commentary, because AudioBoom has published super-bullish commentary for years now, and it never gets anywhere near breakeven, let alone profits. I’ll believe the upside case when I see it in the numbers.
That said, the outlook excerpt I’ve copy/pasted above does sound good. Already having 80% of FY 12/2021 revenues as signed bookings, suggests there’s a good chance it could beat market expectations on revenues, I don’t know about profitability though.
Overall, it still looks speculative, but isn’t a complete basket case. If it does break through into profitability, then there could be further upside perhaps?
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Jack's section
CML Microsystems (LON:CML)
Share price: 339p (+4.3%)
Shares in issue: 16,562,652
Market cap: £56.1m
Cml Microsystems (LON:CML) develops mixed-signal, RF and Microwave semiconductors for global communications markets. It enables customers to transmit and receive data more quickly and reliably - potentially a good spot to be in, by the sounds of it.
That said, progress appears to have been frustrating over recent years, with minimal top line growth.
The group was founded in 1968 and has grown steadily with an increasing focus on industrial applications within its end markets. Today, it is divided into three divisions:
- CML Microcircuits - engaged in the design, manufacture and marketing of integrated circuits for the semiconductor communications industry. Headquartered in Essex, England and with sales, marketing, and technical support in California and Singapore.
- Sicomm Technologies - focusing on the development of RF Power Amplifier (PA), RF transceiver and baseband System on Chip (SoC) solutions for narrowband wireless communications. Products are used in mid-tier and professional radios alike, providing a reduction in cost and power consumption over competing solutions.
- PRFI - UK-based third party design house for a number of leading compound semiconductor foundries including Wolfspeed (Cree), GCS, Qorvo and WIN Semiconductors. Designs are used in a wide range of applications from test instrumentation to infrastructure equipment and mmWave 5G systems.
Chris Gurry is the group managing director and we can see the Gurry name come up in Major Shareholders a couple of times.
Skin in the game is always good but what immediately jumps out from the StockReport is valuation - CML looks expensive with a forecast PE ratio of 49x. Earnings per share have also been coming down over the past few years.
That’s a negative trend, but If the group can reverse it then the shares could grow into today’s valuation.
CML generates a lot of cash but also spends a lot of cash, so free cash flow is volatile and was negative in 2019 and 2020.
It depends what the capital expenditure is. On the one hand, this could be a capital intensive business that will struggle to consistently generate high returns. On the other, it might be a company with a long-term culture that invests heavily in future growth. Obviously you would hope it’s the latter in this case.
The profitability metrics are mixed and volatile, and the trend has been worsening over the past couple of years.
But there’s no evidence of shareholder dilution and the company maintains a net cash position. So there’s always the chance CML will settle on the right strategy and transform its results.
Trading update for the period 1 October 2020 to 18 March 2021
Not many figures here the tone is positive.
CML has been impacted by Covid (already discussed in the half-year results) but now the board is pleased to confirm that the order intake improvement seen during the final weeks of the first half period continued through the second half.
On a constant currency basis, revenues slightly improved over the first half (H1 FY21: £6.17m), with new order intake markedly better.
Market intelligence suggests that conditions for voice applications should improve through the first half of the new financial year so there’s cause for cautious optimism.
CML observes a lengthening of lead times from raw material suppliers and third-party manufacturing service companies across the semiconductor industry but is benefitting from its prior decision to maintain higher levels of raw material inventory.
This bit sounds promising, but it’s early days:
Our recent strategy has been to significantly enhance the product portfolio including entry into microwave and millimetre-wave market applications. This has been achieved through a combination of resource blend and new customer engagements. Progress has been swift with the first products emanating from this improved capability on track to be launched in the early part of H1 FY22. Early sampling of selected lead customers has generated positive feedback.
One other point in the update: the disposal of the group’s storage business and proposed capital return.
CML announced on 5 February 2021 that it had successfully completed the sale of Hyperstone, its storage division, for $49m. Net cash inflow from the sale, after transaction expenses, was just over £33m.
This enables a proposed capital return of approximately £8.3m to shareholders.
Subsequent to the return of capital, CML will start the new financial year on 1 April 2021 with a very strong balance sheet, including net cash in excess of £30m, and a singular focus on the industrial global communications market, which represents a large and high growth market opportunity for the Company.
CML's significant cash balance now stands it in good stead and we can expect more detailed results for the period to 31 March 2021 on Tuesday 15 June.
Conclusion
Now could be a good time to look at the semiconductor industry and CML presents a couple of intriguing angles worth investigating.
It is investing in its products and has just disposed of a non-core division, allowing it to focus more completely on its core global communications market - a ‘large and high growth market opportunity’. Plus, after the disposal, CML has a £30m net cash position with a market cap of around £60m.
It’s not all been plain sailing here, so it’s worth going over the management commentary in recent annual reports and trading updates in order to get up to speed with events. Why the volatility? What’s changed, what is the catalyst, and what’s the scale of the opportunity?
The PE ratio looks expensive but, the market cap and net cash positions help, and you can put today’s relative valuation to one side if CML stands to become a materially larger company in time. One question is why that hasn’t already happened given the relatively rangebound 10Y revenue chart.
It’s worth doing some further work on, in my view. The company is clearly in transition so that’s both an opportunity and a risk depending on how management executes with its expanded net cash position.
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107 comments
Ref Tesla TSLA
Ark investments have released their latest research note and updated price targets for 2025 for Tesla - bit of a doozy here - they are definitely in the fan boy camp that’s for sure. They have a bear case target of $1500 and bull case target of $4000 that’s a 4$ trillion market cap give or take!!
https://ark-invest.com/articles/analyst-research/tesla-price-target-2/
Some may think there may be an element of jackanory in the numbers - but ark I am presuming are a company that at least deserve the respect for what they have returned for clients to date - perhaps their attitude may be seen by others to be akin to a lucky Texas Holdem player on tilt - fair play to them though for giving us some real numbers to critique when the Tesla bears tend to completely close their eyes to any good news that exists.
I am not sure the Tesla bears who are short and have been mostly wrong so far (that could change obviously) will ever be quick to change their tune but if ark are even half right with regard to their assumptions the clues are here that Tesla are unlikely to completely implode. I would say from what I have seen from the latest beta self drive mode being tested (available to be watched on you tube) the full autonomous driving ability point has already been fully reached given an empty road - it’s simply the hard job of working out how the cars need to react to other vehicles - the edge cases that still need improving and the lack of necessary standardised road markings and signage that would need to be updated to assist the transition to full autonomy - I would say that last 5% of the journey is the hardest part unless the powers that be decide to push the journey forwards by encouraging the transition to full autonomy.
As ever with my own investments I sold out way to early on tesla a couple of years back when they ran into tariff issues and musk was acting a bit of a idiot at the time. Hey ho at the time I sold I banked a nice gain and the shareprice did subsequently half in price before rising tenfold or whatever - I am like the Murphys in that regard
The greatest showman on earth needs the greatest circus ringmaster.
Ark are interesting and novel in their approach but that doesn’t mean they are right or good.
Look up Amerindo. They too were novel and ‘right’ when so many others were behind the times and dumb. They too had a new ways to rationalise much higher valuations.
Cathie comes from Alliance Bernstein. AB were Sanford Bernstein before the dot-com bubble an old and illustrious value shop. Then during the mania they decided to buy super successful mega cap growth investors Alliance Capital. Of course, worse timing ever as Alliance Capital tanked. AB also managed to introduce a 'quality value' element to their work just at the wrong time to dilute their 'crude' cyclical value approach.
Do you know that Cathie also states that Ark are channelling God's creation/innovation?
Yes, the evangelism is off-putting for those of an empirical bent - that’s not to say the two can’t be married, just they often aren’t!
there’s a Barron’s podcast from March 5th where Jack Hough interviews Cathie Wood on these forecasts. It’s a good listen :) https://podcasts.apple.com/gb/...
P.S. I thought the Tesla autonomous vehicle pilots had proven disastrous compared to Waymo etc? I’m just a passive observer so perhaps wrong but isn’t the precise problem the fact they didn’t adopt LiDAR technology, and hence cannot detect mobile vehicles/ people around them with any very much accuracy? I thought the driver manual intervention requirements they had were much more frequent than other AVs.
no dog in this ‘fight’ here just interested in underlying tech.
P.S. I I’m just a passive observer so perhaps wrong but isn’t the precise problem the fact they didn’t adopt LiDAR technology, and hence cannot detect mobile vehicles/ people around them with any very much accuracy?
go and watch some of the you tube videos and see for yourself - the product is very much working in the real world now. You are right that lidar has some advantages over cameras - I think the Tesla’s do have forward facing radar of some description though - overall though the package seems to be getting to a very high standard - albeit that last 5% of the journey was always going to be the hardest to perfect. Comparing what the cameras see compared to a human driver it seems that the Tesla system is as good as if not better than a human most of the time.
Tesla cars do seem to have a nasty habit of driving into stationary police vehicles though, e.g.
Being blunt it’s a work in progress ref accidents - that may seem worrisome but the system is meant to be supervised when used - the linked article mentions one case where an individual was driving with suspended licence and the other mentioned incident it seems autopilot was not involved. I don’t deny though that there will be situations where the autopilot messes up big style here.
The one thing is with Tesla’s they will definitely be learning from these incidents and improvements will be made - if nothing else the authorities should have excellent data to work from here to establish facts.
If we look forward 2-3 years with the advances in processing power and camera capabilities and the improvements that will continue with the main neural net I would expect the worst case scenario accidents will hopefully decrease on a per mile travelled.
There is a fairly balanced Forbes article here that summarises how safe autopilot is overall - I would say the jury is still out but to me as this is all new tech I wouldn’t really expect the results to be anything different.
https://www.forbes.com/sites/bradtempleton/2020/10/28/new-tesla-autopilot-statistics-show-its-almost-as-safe-driving-with-it-as-without/?sh=4b505ae81794
Audioboom - the key development for investors, beyond the encouraging trading update on 2021 to date is that an investor has taken a 10% in February at 450p and has subsequently purchased an additional 1%. That would seem to underwrite the current share price.
Hi Ukjrb57,
Audioboom - the key development for investors, beyond the encouraging trading update on 2021 to date is that an investor has taken a 10% in February at 450p and has subsequently purchased an additional 1%. That would seem to underwrite the current share price.
I'd be careful with that idea. There are lots of celebrity investors who put money into cash burning companies, and they often fail. The Candy Brothers spring to mind, but there are many others.
Bono from U2 seems to be the one to follow - apparently he made more money from investing in Facebook, than from singing! ;-)
Overall, the numbers & outlook suggest that Audioboom (LON:BOOM) stands a fighting chance of succeeding. Nice to see it getting better (relatively speaking) over the years. I remember vaguely having a pint with a broker at Allenby I think, who was really bullish on Audioboom a long time ago. He genuinely thought it would succeed, and I think we agreed a £10 bet (him for, me against). So if things continue improving at BOOM, I might have to reach out to him & dig into my wallet!
Regards, Paul.
The RoCEs have been pretty awful for what looks like a reasonably advanced tech hardware company in a niche business. I wonder if this could be transformed by the sale of a steady but low return storage business? This might be transformational. I expected the shareholders register to be dire but there are one or two smart institutions in here though the market cap is really small. Indeed that sounds like a load of cash to have at their disposal against the current valuation....
The RoCEs have been pretty awful for what looks like a reasonably advanced tech hardware company in a niche business. I wonder if this could be transformed by the sale of a steady but low return storage business? This might be transformational. I expected the shareholders register to be dire but there are one or two smart institutions in here though the market cap is really small. Indeed that sounds like a load of cash to have at their disposal against the current valuation....
I assume you're referring to CML Microsystems (LON:CML) ? The gross margins are what you'd expect from a fabless semiconductor company (60-70%) but the operating expenses are ridiculously high and so you end up with a ridiculously low EBIT margin. If you look at the big US fabless semiconductor companies they all have EBIT margins > 20% and ROCE > 15%. Why anyone would bother holding CML Microsystems (LON:CML) when you can buy quality large US listed semi's like Broadcom or Qualcomm on forward PER's < 18 I have absolutely no idea, particularly given the current chip shortage that could last for a significant time. And that means only one thing for chip prices and profits of these companies...
All the best, Si
Hi Si
What I don't understand is why Qualcomm is so cheap. Is it because they can't actually get semiconductor supply?
timarr
What I don't understand is why Qualcomm is so cheap. Is it because they can't actually get semiconductor supply?
My understanding is that there are a number of issues. Firstly, the latest Snapdragon chip intended for the top of the range Samsung Galaxies etc. are in short supply, hence the recent announcement by Samsung of delayed phone launches - they just can't produce the volume. The latest Snapdragon is manufactured on a state-of-the-art 5nm process which is still coming on stream and so fab yield could also be a problem, as well as demand outstripping supply more generally. You then have the power disruptions in Texas causing a lack of supply of RF transceivers used in smartphones and a lack of the complex Power IC's needed to generate the various voltages required for CPUs like Snapdragon. Qualcomm also have increased demand for Snapdragon CPUs in Android phones due to the US sanctions against Huawei.
It's a complex situation and real information is hard to come by because as always at times like this, people hold their cards very close to their chest. No doubt Qualcomm has been hit on several fronts, but from an investment perspective, the demand has not gone away, which means only one thing for prices. The best article I've read recently about the situation is:
https://www.reuters.com/articl...
However, all I really need to know is that Qualcomm looks pretty cheap on most measures. It may stay cheap for a while because it may have problems hitting Q2 sales estimates. However, my investment timescale is a bit longer than that :-)
All the best, Si
Qualcomm is under investigation again by the EU for potential anti-competitve practices in the RF chip space. This seems to be almost an annual thing now. They were fined $1.2 bn in 2018 and $270m in 2019. Qualcomm seem to regard paying EU fines as a cost of doing business.
https://techcrunch.com/2020/02...
Qualcomm is under investigation again by the EU for potential anti-competitve practices in the RF chip space. This seems to be almost an annual thing now. They were fined $1.2 bn in 2018 and $270m in 2019. Qualcomm seem to regard paying EU fines as a cost of doing business.
https://techcrunch.com/2020/02...
The article is a year old, but yes, run-ins with the EU and legal challenges from competitors (e.g. the Apple patent settlement in 2019) is just a part of the cost of doing business for a dominant technology company with a must-have patent portfolio. It's not done much harm to the share price of Microsoft, Intel or Google in the past though. A $1bn fine is inconvenient but still less than 20% post tax profit.
All the best, Si
Hi Si,
I think until the chip supply gets back in order the companies will all take a hit. As I'm sure you well know it can take hundreds of components to make a circuit board assembly and you need all of them. While one is not available it doesn't matter how strong the customer demand is, you can't use any of the rest of the components.
Medium term I agree but for now I'm sticking to the semiconductor equipment makers - they must be seeing strong demand from the people wanting to set up non China based fabs on top of the short term supply issues.
I think until the chip supply gets back in order the companies will all take a hit. As I'm sure you well know it can take hundreds of components to make a circuit board assembly and you need all of them.
True, but the thing to remember is that most of those components are not single source. Many can be replaced with alternatives but it's very difficult to make an Android phone without a Snapdragon CPU. Even harder now Huawei is out the game. And the chips that are available will be ramping up in price, so it's possible revenue targets could still be hit whilst shipping less product. And the demand won't go away. There is talk of panic buying and Broadcom have said they have already sold 90% of their volume for 2021.
It's like a perfect storm, and things will look a lot different by the end of the year. If you have an investment timescale longer than your nose, I see no problem buying Qualcomm on it's current rating, particularly if you want a play on 5G technology patents for the longer term. I also like the recent acquisition of Nuvia - you should check out their technology and the background of the founders who are now Qualcomm employees.
All the best, Si
Thanks Si, I'll take a look at that over the weekend.
I am hearing even the jelly bean passive components are showing as out of stock at distributors until 2022. Probably a loo roll effect at play and the more experienced customers have probably got their orders locked in unlike the car companies.
Overall I'm just thankful I'm not having to manage a supply chain through this. I've been there and done that but this situation looks to be shaping up as one for people to remember for the rest of their careers.
Sorry my comments were in response to the notes on CML
I see we still got covid chats going on. A book I was reading yesterday had a great chart in it. The author finished writing in March 2020 so very early in it. He's a geopolitical strategist and he was using covid as a discussion aid regarding using a constraints based approach to forecasting rather than the emotive and ideological approach people tend to use (often without realising). His constraint perspective re covid is based on wealth and how that influences you to assess the covid risks. Enjoy:
We are on our third lockdown which means the last two unlocks didn't work.
Lockdowns are a last resort temporary fix necessary until science finds a solution, to prevent the NHS being overloaded. What is so difficult about the concept of necessary reiterations of lockdowns.? It is really not a difficult concept, unless you like unnecessarily excessive suffering for the vulnerable just so you can have your pint in the pub?
I'm not disputing the need for repeated lockdowns, I'm disputing the calls for early unlocking.
Hi Paul, good update on ZANE (I contribute). I came back from lunch today and saw the new "highest riser" was a share called SANNE. Could it be that your more ardent followers are hanging on your every word?
I have known and supported ZANE for quite a few years now and can endorse everything Paul says. They do an incredible job in such difficult circumstances.
Mark
Does anyone know why Quiz (LON:QUIZ) is up. I hold and can't see any news the last few days and yet the sp is up from 9p to over 12p! I'm not complaining just trying to understand!
Thanks Paul and Jack and thanks for sharing the section on ZANE- I was interested to read about it.
Regards
Andrew
I am a small shareholder in Path Investment (PATH.L) and this posting is just let you know that the company has undergone a transformation in the last months and is now a "cash cow". As a loyal shareholder for many years who has seen much dilution I thought I would just alert fellow readers on this posting are twofold: 1) the board has on it Nicholas Tulloch of Zoetic fame and 2) from what I can gather all legacy positions are resolved and there is talk of the board having some new plans for the future.
Please do your own research (DYOR) but once the FSA sign off on its prospectus it might become an interesting ride. However, it may well be the case that a massive fund raise arrives and further dilution to us existing shareholders take place. I don't have an answer but thought I would flag it up to fellow readers.
Pleased to see Path Investments (LON:PATH) have all their troubles behind them. I don’t think I have ever seen Z-Score / Bankruptcy risk of -1,910.37 before!
That Z-score Black Arrow is almost off the left-hand side of the page!!!!
Another red-flag would be having anyone involved with Zoetic anywhere near this company.
Good luck. I'll keep hold of my money thanks.
Hi Paul, your comments about ZANE caught my eye. I’m Zimbabwean and have family in care homes in Zimbabwe, and have volunteered in them - not sure if you know BS Leon. I also support the leadership of a charity in Bulawayo. It’d be great to talk to you more about these if you get a moment
Parsley Box #MEAL is IPOing on AIM on 31st March. Here Kevin Dorren, CEO outlines the business. It provides ready meals to Baby Boomer+ demographic, basically 60's+. They've grown 248% since FY18. They have a capital light model and are looking to exploit the shift to online shopping and the aging population. There's a retail offering on Primary Bid, otherwise finnCap are handling the IPO. Video.
Paul
“ The currency has collapsed 4 times now, since majority rule began about 40 years ago. Anyone who thinks money-printing and Modern Monetary Theory are a brave new world of unlimited public spending and wonderful public services (Stephanie Kelton, for example) should visit Zimbabwe, to see for herself what hyper-inflation does, when too much money is printed. The trouble is, once a Govt is addicted to money-printing, it can't stop, even if it wants to. So the MMT suggestion that Govts should print money freely until inflation starts, then stop printing money once inflation kicks in, seems incredibly naive.”
Thank you so much for posting this. There seems to be a huge amount of complacency creeping in even to the point that the mainstream media, that the left detest so much, are now starting to treat the massive QE/money printing as a guaranteed free ticket to have the public services that we are unable or unwilling to pay for through taxation. It seems that barely fettered MMT has become the accepted ‘wisdom’.
Would they be so certain that this magic money tree is a good thing if they had been and witnessed the tragedy of economic failure in Zimbabwe like you have? I suspect that they would say that it’s not failure of MMT, rather it’s down to corruption and failure to raise taxes to control inflation. But, as you say, it’s far from clear that, once so much of the government spending is magic money, it’s going to be possible for anyone to stop it spiralling out of control.
I just don’t buy the arguments that say you can print all this money ad infinitum without any negative consequences.
If ALL countries are printing money at approximately the same rate, then does it matter?
I’ve no idea if ALL governments printing money at the same rate means the magic money tree has no downside.
Are ALL governments doing this at the same rate? Or are there big differences? I think it may well be the later.
I think you'll find it find it's a tory government print money and collecting little tax. It must be a right of center policy also.
Zimbabwe - money printing and hyperinflation seems more like another symptom rather than the cause of Zimbabwe's problems. A country so rich in natural resources should be able to fund many social programs to improve the lives of its people. INSTEAD, wealth leaves the country at an alarming rate. Most concerning are the corrupt people in power who hide their wealth in offshore safe heavens and pay no tax.
The UK suffers the same problem. Far too easy to pay no tax and hides ones wealth, hence the government resorts to printing money. If we want to end all this money print just make wealth more transparent and close DOWN all these tax heavens. More tax would be collect and no need to print money.
It would do wonders for the UK economy and people.
BSV
"...far to easy to pay no tax..."
my P60 begs to differ
I think as a constituent of Rishi that I have to accept that I pay tax...
But that I also know the benefits available to those who can afford to pay an accountant...
“ I think you'll find it find it's a tory government print money and collecting little tax. It must be a right of center policy also.”
Sorry BSV, you missed the point. The point I was making was that the magic money tree was at one time something mostly promoted by left leaning economists and politicians. At the same time, a vocal part of the commentary from the left was that the main stream media was biased against the left. By contrast, now even the MSM are unfazed by the magic money tree. This illustrates that there is a general lack of concern that the magic money tree could have some negative consequences, which was not the case a few years ago. You could even call it the MMMT. The mainstream magic money tree.
The point I was making was that the magic money tree was at one time something mostly promoted by left leaning economists and politicians
Perhaps the left leaning economists and politicians were right all along?
timarr
All the discussions about printing money and money trees miss the point.
The important issue is inflation (conventionally believed to be optimal at 2% - but optimum will vary from society to society; might be lower in Germany and higher in Italy). Other things being equal increasing money supply, of which money printing is but one component, will increase inflation. So, since it hasn't, other things can't be equal. One is higher banking reserves reducing the banking multiplier. Another has been an apparently unlimited supply of labour and goods at constant prices.
The issue isn't really left or right politically. The US has been much happier to print money than Europe - Republicans or Democrats; the differences between them being mostly in the how and distribution. Austerity is very German and largely assumed historic equations still held. Not true in Germany over the last decade. Unknowns higher in the UK. Our interest rates came down slower and less far. Bigger loss in the financial crisis; we did print more money than the Eurogroup and maybe it could have been a but more. But probably not a lot 7 or 9 years ago because loss of confidence triggers a flight of money in less than a heartbeat. Currently the international money hoarders don't care, leaving impact on inflation as the only big target. And no-one genuinely knows how to work out the present relationship between the two.
The only thing I believe to be certain is that the way money has been printed (and not printed in the EU) has created gross distortions in the economy which will bite us all in the end.
Just read this on Nike's 3Q update "Posts Q3 revenue of $10.36 bln, missing estimates, hurt
by 11% decline in North America sales due to container shortages and U.S. port congestion"
So it is not just the UK that is having these issues.
Trident Royalties (LON:TRR) is a small "mining royalty and streaming company". Never heard of it before but I liked the look of it now fully funded. This morning it raised around £20 million including via the Primary Bid app only. Once upon a time a placing took weeks. Now it can just take minutes it appears. Plenty of cash around looking for a home or so it seems. Loads of IPO and placing offers coming through this week. You can register for the Deliveroo IPO via the Primary Bid site. Max investment in that is £1000 but I reckon it could be a screamer and easily pay for your stocko subs for a couple of years.
How is Deliveroo ever going to make a profit? Especially in light of the Supreme Court ruling on the status of Uber drivers?
I had exactly the same thought yesterday when the ‘worker’ status ruling was announced wrt £UBER.
One school of thought suggests that the delivery/taxi industry will be equitably impacted but whilst this may be true for Uber/taxis I’m not sure the delivery driver industry is quite so regulated.
Terrible timing for Deliveroo and their impending IPO .
M
So I am not a lawyer but..
Reading the Supreme Court press summary of their ruling they say that Uber have to pay their drivers for all the time they are logged on to the app and available to work, not just while driving. From what I can see Uber's announcement trying to convince people they are complying with the ruling doesn't include compliance with this, which I can't see them getting away with. I don't think the Supreme Court regard their decisions as being open to negotiation. I also would have thought there was a fairly clear read across to Deliveroo. But as I say I am not a lawyer.
I personally think Uber's only remaining chance is to get the legislation "modernised".
The Supreme Court also holds that the employment tribunal was entitled to find that time spent by the claimants working for Uber was not limited (as Uber argued) to periods when they were actually driving passengers to their destinations, but included any period when the driver was logged into the Uber app within the territory in which the driver was licensed to operate and was ready and willing to accept trips
Both Uber and Deliveroo have stated (according to news articles I have read, so might not be true) that they don't believe the Supreme Court ruling applies to food delivery, only minicab/taxi services.
More work for lawyers then I think. Again from the ruling with my emphasis:
The definition of a “worker” in section 230(3) of the Employment Rights Act 1996 and other relevant legislation includes anyone employed under a contract of employment but also extends to some individuals who are self-employed. In particular, the definition includes an individual who works under a contract “whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.
I’ve found some more detail on the Deliveroo position.
The Deliveroo riders tried to gain union recognition. Deliveroo denied that on the grounds they were not workers. The union appealed to the Central Arbitration Committee which rules on these things. Just before the hearing Deliveroo changed their contracts and that was sufficient for the CAC to rule that the riders were not workers and could not therefore form a recognised trade union.
That ruling was appealed at the Court of Appeals in the first week of February and their judgement is still awaited. Maybe the Appeal Court was waiting for the Supreme Court Uber ruling?
https://www.union-news.co.uk/i...
barnetpeter, Metal Tiger (LON:MTR) announced this afternoon that it has conditionally subscribed for 474,043 new ordinary shares in Trident Royalties (LON:TRR) and as a Metal Tiger (LON:MTR) shareholder I found your comment interesting.
Can I just say the update tiny summaries at the very top are a brilliant idea. Very useful.
Hi rizler007,
Can I just say the update tiny summaries at the very top are a brilliant idea. Very useful.
Great, thanks for the feedback! We'll keep doing them in that case. We're constantly tinkering with the format, trying things out, and seeing what works, etc.
As you've probably gathered, I'm happiest doing about 3 companies that are of most interest each day, in depth, rather than doing superficial comments on lots of companies.
Best wishes, Paul.
Great to hear about the update from ZANE, sometimes I think we all need a bit of a reality check away from the day to day markets... to recognise how lucky we are.
ZANE - thanks Paul, I enjoy reading the updates about charity. I almost missed seeing it today - perhaps mention it in the header ?
Good idea Martin, I've done that! Thanks, Paul.
great charity indeed. Close to my heart as I was married in Rhodesia and children born there. Have posted the link to the charity on a couple of Facebook groups made up of ex Zimbabwean/Rhodesians living in the U.K.
Here are my SCVR heat maps for today (prices as at ~10:55am).
I share these heatmaps with the intention of giving a visual indication of what is going on in the SCVR world: who’s reporting (and it's impact on the share price); and what’s moving more than 'normal'. There are no associated recommendations, implied or otherwise, just information. How, or indeed if, you choose to use that information is up to you.
Please read my [heat map thread] for keys to the heat maps contents, more (non-SCVR specific) heat maps, and an explanation of how I use heatmaps to guide me with my research.
Small / Micro Caps reporting today:
Big movers today in the SCVR world (moving more than a 20d EMA of the ATR against either yesterdays close, or today's open):
Warm regards, stay safe, and best of luck!
greensiax
Hi Paul,
I am looking to max out my ISA contribution before the 5th April but I’m struggling to find attractive investments.
I think it was mentioned on Monday or Tuesday that a few members would be interested to hear an update on your 20 biggest holdings. I would certainly be interested to hear and research some of your investments to see if they float my boat. Do you plan on sharing in the near future?
Kind regards
Andrew
I don't understand your struggle to "max out my ISA contribution before the 5th April " - with a stocks and shares ISA you don't have to buy anything before April 5th - just get the cash in with the intention of buying at some point.
(and don't forget 1st April is the last trading day this tax year if you want to use up CGT allowance outside ISAs).
Have a look at some of the SCVRs over Xmas - sure that Paul updated on his Top 10/20 somewhere then.
HI Andrew
Are you investing through funds, so basically have to give Terry Smith or someone equivalent the cash before the day?
Or I think that the other comments are those of us who invest through Halifax Shares, or IG, II or any of the other companies, so you can deposit £20,000 cash and invest when you want how you want?
I am assuming the first hence the struggle. I would note I have about 25% cash, but that is me being nervous and having too many other things on my mind, like waiting to hear from the neurologist has my mother in law got dementia so just wanting to sleep at night.
If you cannot make a choice, I would say just put it into a cash ISA with a building society before the deadline, once you are comfortable (and can sleep at night) you an then transfer it into shares and do what needs to be done.
Tommy
ps. I hold both Cash and Shares ISAs
shout out to the NHS vaccine booking sytem - i haven't been to see a doctor in 39 years and was off grid ref doctors and nhs numbers till yesterday (im in the just over 50 club so became eligible wednesday) when i took in form to my local gp to get back on grid - had text today offering vaccince local to me sunday - which i have now booked :) - i do seem to have somehow jumped the queue here with my normal friends being offered places 15-50 miles away at a later date - its luck of the draw i guess that my stupidness has worked in my favour. Note anyone who is off grid like i was will need to get back on grid to get their vaccince booking slot unless they change the rules :)
David Linton @ Updata produces a short (7 - 8 mins) daily video for those interested in charts as to movements in the major markets.
He's started including charts on Covid cases, hospitalisations and deaths broken down into countries. Pretty sobering update today on situation in Europe, particularly Eastern European countries.
If you're interested, but only for the Covid stuff then that part starts at 5 mins 20 secs.
https://updata.us14.list-manage.com/track/click?u=7b819d22130a6f314e93b55f1&id=4474c1804e&e=2c1b6ac18a
It's free to sign up to. I have no association with David Linton or Updata and am not even a paid up subscriber (I just like free stuff).
There are two systems working, the mass vaccination centres booked via the NHS website, and the local GP systems that seem to work via invitations. You just need to know your NHS number to book online for the mass vaccination centres.
It is not just mass vaccination centres online, but also some pharmacies and doctors surgeries. I think these ones have a constant supply and therefore can book appointment dates well in advance unlike my local surgery which has only had about 2 days supply per week for the last few weeks, until this week, when they have 4 days. The local ones can be earlier than booking online but you have wait for them to contact you.
Just by way of a public service announcement; if you don't know your NHS number (who does?) you can quickly find it out via this link https://www.nhs.uk/nhs-services/online-services/find-nhs-number/ .
You just need you Name, Date of Birth and Post Code (hopefully most of us can remember those!) and you'll get a text, email or snail mail letter. Anyone that has truly fallen off the grid probably can't do this, even if you remember the last Post Code you provided to the NHS, they'll send your letter to someone else!
What a moving piece on Zane. I would urge any readers whose portfolio has been enhanced by Pauls thought to support this charity..Its time to give something back.
Hi Paul , Could you cover Beximco Pharmaceuticals (LON:BXP) in one of your sessions. I hold . Been on the up, with loads of expansion. Good dividend return and rights issue through Covid,
re CML Microsystems (LON:CML), the trouble with this business is that capex running at around 8 million a year, against revenues flat-lining at around 25 million odd, just doesn't add up. Selling the storage business will halve revenues, but capex will not fall. However, it gives them the money to continue funding it. So the sale is transformative - otherwise there would have been a big placing or the whole company sold. Prospects for the Sicomm and PRFI businesses are very good, but from a small base. I hold, and in fact added on the sale announcement, but what do I know?
Another hilarious diatribe from Tim Martin in J D Wetherspoon (LON:JDW) half-year results. Could this be the first time (since the last time, Tim Martin did so) that the term 'cobblers' has been used in a Chairman's statement? His evisceration of a Bloomberg article should serve as a reminder that we do well to question the nonsense that all journalists write, not excepting financial ones.
Another hilarious diatribe from Tim Martin in J D Wetherspoon (LON:JDW) half-year results.
It is an absolute chuckle-fest. Particularly the bit where he cherrypicks some not very scientific opinion that claims that 'hospitality' (i.e. getting drunk in a 'Spoons) isn't a major driver of CV-19 infection, before claiming that the government and SAGE are cherrypicking their data to keep his pubs shut.
As always, it's a mixture of the surreal and the practical.
On journalists, as anyone who's ever been involved in a story knows, what gets published bears little relation to reality and the slant is usually predetermined. If you can, it's best to ignore, if you can't, triangulate with other sources. Don't take your opinions from the press.
timarr
"Don't take your opinions from the press."
Quote of the year
Yes, you would think that hospitality where people may be mixing for a couple of hours would be more risky than going in a non-essential shop for 5 minutes. However, he says that only 3.3% of his staff have had the virus which is pretty much like the national average. Bearing in mind that they are in the pub for many hours it doesn't make a visit sound very risky. It is a very strange pandemic in that I act for a food producer who utilise around 400 staff. They take a lot of precautions and everybody's temperature is checked before they are allowed in and occasionally someone gets sent home but they have generally been back within a couple of weeks. They are not really aware of any cases where staff have actually been in hospital with Covid. I suspect it is mainly people my age (76) who need to avoid large groupings whether in work or "Spoons".
However, he says that only 3.3% of his staff have had the virus which is pretty much like the national average. Bearing in mind that they are in the pub for many hours it doesn't make a visit sound very risky.
Well, 'Spoons are probably the best of the bunch. My local had people fighting to get to the bar before closing time the last time it was open.
But anyway, he doesn't get (or doesn't want to get) the fact that it's the cumulative impact of lots of small holes in the system that leads to the problems.
For instance - we know that reopening schools will lead to an increase in cases. The judgement is that that won't tip us over the R0=1 number. But every additional thing that reopens adds to the R number - and eventually you go over the top and the law of exponential growth kicks in again.
But yes, it's mainly over 60's and especially over 70's that are badly affected. Going forward we'll need to be careful for a while, because if everyone goes out to party then there will be more infections in the community. Not only are the vaccines not 100% effective (so some of us may not be protected) but the Oxford vaccine appears not to protect against mild infection from the South African variant. Whether it protects against severe illness is yet to be determined.
timarr
Also true that Pub staff have quite a high degree of control over their infection risk; staying behind their barriers, distancing when making table deliveries, etc.
Punters less so.
I totally get the frustration that some have over the slow unlock; I personally don't want revisit the science vs liberty arguments, but the reality IMHO still points towards the current unlock model holding,
I totally get the frustration that some have over the slow unlock; I personally don't want revisit the science vs liberty arguments, but the reality IMHO still points towards the current unlock model holding,
Maybe. Latest research on effectiveness of Astrazeneca vaccine on South African variant:
Rollout of the Oxford-AstraZeneca covid-19 vaccine in South Africa has been paused after a study in 2000 healthy and young volunteers reported that it did not protect against mild and moderate disease caused by the new variant (501Y.V2) that emerged there.
https://www.bmj.com/content/37...This is not over, not yet.
timarr
I constantly find mmyself shaking my head in dismay at the poor way some of these findings are being reported, including by the experts.
You do NOT contract mild or severe Covid-19; you contract Covid-19 which may progress to be only mild (before your immune system squashes it) or it may progress to become severe (before your immune system can gain control, or worst case it never does).
IF we have a vaccine that gives your immune system a sufficient head-start such that rather that dieing; you feel like you have a bad cold or perhaps even 'the flu' that is still a result in my book. (The bmj article doe not cite evidence either way on this point to be fair);.
For sure, we would all like a vaccine that accelerates the immune response so much that transmission is eradicated, but we do not need that to overcome this virus.
I am frankly baffled by some of the public health decisions being made - some of them seem to me like banning all contraceptive treatments, because they have no 100% guarantee.
Hi Gromley
I'm not sure what point you're making, but it appears to be a different one from that the study showed. To deconstruct that study ...
The AZ vaccine was given to a bunch of young volunteers. The vaccine has been shown to be highly effective at preventing any level of infection in that group. It was not effective at preventing mild infection from the South African variant to the point of being labelled "ineffective". The other vaccines showed reduced effiacy, but did protect some of the participants.
Because the trial cohort was young it would not be expected that any of them would have gone on to develop severe symptoms anyway. However, the fact that the vaccine doesn't stop people becoming infected is alarming, the concern being that if doesn't stop elderly people becoming infected then it's likely some of them will go on to become extremely ill and many will die, even though they've been vaccinated.
This, of course, is why any incident of the South African variant being detected in the UK leads to surge testing in the area. There is genuine concern that this mutation could set the UK's recovery back many months, at least until the autumn, when modified vaccines are available, and perhaps until next year, given wider supply issues.
Being worried about this is different from the ridiculous confusion being exhibited by European regulators who've got themselves tied in knots over the precautionary principle. That says, roughly, do no harm - which is being interpreted in a way that means that possibly saving a handful of people from suffering a deadly thrombosis is being prioritised over definitely saving thousands of people who will die of CV-19 because of vaccination delays.
These two points ultimately coalesce - because between 5% and 10% of all CV-19 cases in France are of the South African variant. Europe's slow vaccination process puts the UK at risk. But this, unfortunately, is the reality of a pandemic, it doesn't respect borders.
timarr
Quite true Timarr, indeed reportedly in the trial being referred too no-one out of either the vaccinated cadre or those that received the placebo, develop severe Covid. So what has been leaked from the study so far tell us nothing on that point. (It's not clear whether there was any attempt to measure the degree and timing of immune response, although I suspect there wasn't).
However there was also a Janssen study also in South Africa (also not yet published I believe) seems to indicate that protection against severe disease is still present when Janssen takes on the SA variant. As Janssen and AZ are so similar in nature there is reason to hope (and I wouldn't put it more strongly than that yet) that the same is true for AZ.
I do agree though that we cannot afford to be complacent about the SA (& potentially other) variant. I also agree that the European stance has been puzzling and troubling.
The Stockopedia newsfeed for companies does however pick up third party summaries of news, which is really useful, and at 18:45 last night, a news item cropped up on IDOX, saying;
Paul, thanks very much for your daily insights which I highly value - Please note this is not a criticism of you.
I have had this sort of thing happen before so would be great if you/we could maybe see if Stockopedia Team could get these other news feeds into folio news.
As an example - today Taylor Wimpey (LON:TW.) (I hold) RNS came out 7.12am but if I look at my portfolio and select news there was a Reuters Brief at 7.09. Would be a great if that was in my folio news window.
Thanks
Alb
The retirement of James Anderson at SMT.L was a very sudden announcement and he is not hanging around either. While he may have mentored other fund managers within BG his loss will probably do some damage to the brand and funds going forward. Good health to him in his retirement.
Re Scottish Mortgage Investment Trust (LON:SMT) "The retirement of James Anderson at SMT.L was a very sudden announcement and he is not hanging around either"
Not sure that's right - he has given over 1 year's notice. Hardly "not hanging about" is it?
Whilst that is true. He is handing over to his Deputy and a second Partner in BG coming on board the fund. It is a £17Billion fund so he will be missed in regard to strategic decisions otherwise it just cramps the approach of the new manager taking over. He will be missed for his strategic thinking at BG over 20 years.
Anderson was not the sole lead manager. Tom Slater, co manager and equal thinker behind the trust remains fully committed to SMT. He is also considerably younger so plenty of continuity remains. I don’t see James Anderson’s retirement as a huge negative. Given his age, it’s been on the cards for quite some time and Tom Slaters co managements and the strength and existing contributions from the newly appointed deputies, I see it more as more of the same please.
Hi Paul and Jack.
I am sure I am not alone wondering what to do in this market. I sold some of my Shopify, Apple and Games Workshop shares a few weeks ago. I would like to think this was good timing. The real reason was I needed cash to pay for my 6 grandchildrens' JISA's due in April! I greatly appreciate your articles and humour, particularly in Bournemouth. At present I would not touch gilts as the only way is yields to go up. USA shares are expensive. That leaves UK and ? Far East. My problem is the inflation rate could rocket with all this Q.E. causing the money supply to expand with no limit. I don't trust bit coins either. I wonder if it is possible, say once a month, to have an article on the bigger economy and advice where we should be looking to avoid loosing are cash. Keeping it in a bank is little use with no interest and it could be wiped out by inflation. I think a general wider discussion would be appreciated by many of us. I am rather like a rabbit stuck in headlights which is not a good place to be!
Buy land....as Mark Twain famously said "They don't make it anymore"
But they will tax it
They do in Hong Kong :) When I first arrived there in 1967 the distance between Hong Kong island and Kowloon was about a mile. Today it’s more like half of that with land reclamation work
Yet not far from me it is falling into the sea, has been for many years..
Hi goronwy,
There's a article published roughly every week call market musings I think, that touches on the strongest sectors and economy. Worth a read.
I am sure I am not alone wondering what to do in this market. I sold some of my Shopify, Apple and Games Workshop shares a few weeks ago. I would like to think this was good timing. The real reason was I needed cash to pay for my 6 grandchildrens' JISA's due in April! I greatly appreciate your articles and humour, particularly in Bournemouth. At present I would not touch gilts as the only way is yields to go up. USA shares are expensive. That leaves UK and ? Far East. My problem is the inflation rate could rocket with all this Q.E. causing the money supply to expand with no limit. I don't trust bit coins either. I wonder if it is possible, say once a month, to have an article on the bigger economy and advice where we should be looking to avoid loosing are cash. Keeping it in a bank is little use with no interest and it could be wiped out by inflation. I think a general wider discussion would be appreciated by many of us. I am rather like a rabbit stuck in headlights which is not a good place to be!
I'm sorry to hear you feel like this. Although macro stuff is ever present you shouldn't let it drive your whole investment process. You talk about good timing in selling some shares down and yet in a few weeks time it could easily look a very poor decision, particularly if you're worried about inflation because the companies you listed are exactly the type of equities you'd want to hold in an inflationary environment i.e. with really strong pricing power.
I don't buy this "US shares are expensive" nonsense to be honest - I'm sorry but it's just a lazy cliche I keep hearing. I thought this blog was about finding good companies trading below some notion of intrinsic value, not talking about a market with thousands of shares being overpriced? I've recently been buying one of the best chip companies on the planet on a forward PER of 18 which blows out of the water tiny, over-priced, UK listed junk like CML Microsystems (LON:CML) that Paul has discussed today.
Personally, I always find reading the memo's from Howard Marks helpful as he freely admits he doesn't know what will happen, he lists bullish and bearish points, and then discusses whether it is a time to be defensive or aggressive, and by how much. His latest memo is a good example of this: https://www.oaktreecapital.com...
I wish you well with whatever approach you decide to take. I would ignore macro discussions generally (it's good exercise for your right index finger when using a mouse) and concentrate on finding good value companies with strong balance sheets and growth prospects that will see you through good times and bad.
All the best, Si
Hi Goronwy
I think that some are more confident than others, we all have the moments of what should I be doing, I know last week it was Wynnstay (LON:WYN) for me, sell, hold or buy more? In the end I did nothing and at the one week level why did I not sell it??? But then looking back a couple of months and exiting Ig Group (LON:IGG) and Solid State (LON:SOLI) were "with the wonder of my hindsight glasses" not the best decisions I made in my life.
I know there has been a lot of discussion on here already about it, but if you can find the time I would suggest reading 100-Baggers by Christopher Mayer. I have just finished reading it last night, and realize that if I had read it a year earlier, then I would be a lot better off than I am now. Well my mum would be anyway! But it talks a lot about investing on fundamentals, e.g. find and hold good companies and let them do what they do and over the long term you will do a lot better than dipping in and out.
Obviously there is a part around you have to do what is right for you. So there is nothing wrong actually with going to cash, either a percentage or even whole, if that is the right thing to do to sleep at night for you. Yes you might go what the beep did I do that for, I would have been XYZ% better off if I had not, but then I can still look back at selling Bt (LON:BT.A) for a hefty loss last year, and they are still 20+p down from my selling price even allowing for two large rises in the last few months and what would I have felt like sitting on larger loss for longer going maybe they will come back. Obviously some like Reach (LON:RCH) have dropped and smashed past the sell and original purchase but I could sleep at night and also tell mum you are ok too which given everything else going on in the last 12 months was the right thing.
We learn every day, and we are optimistic that the next trade is going to be the £££ one :)
All a bit random.
Tommy
ps. I hold, sold and suffer a lot of FOMO!
Hi goronwy.
I’d echo simoan’s well expressed sentiments about the difficulties faced during times of turbulent markets. It’s one thing to pick a phantom portfolio of stocks and follow their fortunes in the abstract but once there is real money involved it all becomes a lot harder.
Often, investing is as much about getting your own psychology in order as being good at reading a Stock Report or the general macroeconomic runes. With this in mind, I would strongly recommend picking up a copy of Daniel Crosby’s “The Laws of Wealth”. It’s a practical application of academic behavioural finance theory in an easily digestible format; basically how to identify good and bad investing habits and give yourself a framework to let your rational brain overcome your emotional heart. It’s one of the few finance books that I periodically revisit when I find myself straying.
Gus.
With regard to your comment on US shares being expensive, I was listening to a talk by an American accounting professor a few weeks ago and he was saying that it is pointless to take any notice of the PE ratio. He said that this was useful in comparing companies in years gone by but nowadays the main asset of many US companies is not recognised in the accounts. That is their intellectual property which is written off to P&L A/C as opposed to often being capitalised in the UK. He was saying that to find true profit you often need to search the reports to find the R&D expenditure written off and add this to the profit along with in some cases, up to one-third of the general expenses which can be incurred on R&D.
This is what I have, in part of my portfolio, to protect against this.
Two general ways: companies with revenues linked to inflation, and companies that will benefit from higher risk-free rate (i.e. gilt yields).
Begbies Traynor (LON:BEG) - more insolvencies if risk free rate rises, as then corporate debt interest rates will rise too
Medica (LON:MGP) - Defensive as all revenues linked to diagnostic scans from hospitals. Volumes will be high, whatever happens. However, will sell if inflation gets out of hand as main cost is wages.
Residential Secure Income (LON:RESI) - rents it receives from shared ownership is indexed to RPI/CPI, house prices will increase with inflation (in theory), increasing NAV
Spectra Systems (LON:SPSY) - in a hyper-inflation environment, more bank notes will be printed, because money supply will increase, but also because people will start hoarding cash fearing safety of bank deposits.
Centamin (LON:CEY) - at some point gold price will increase, if inflation gets too uncomfortable. But have to weigh up risk of Egypt going into political unrest.
H & T (LON:HAT) - pawnbrokers will benefit. Gold play, and also higher pawnbroking activities.
Morning Paul. Another quiet day on the news front. A company called Futura Medical (FUM) has released some interesting news, and could be quite transformational. Here's a snippet
EU Notified Body has successfully completed its review of the Company's Technical Dossier for MED3000 with a recommendation to certificate MED3000 as a Class 2B approved medical device. Once the certificate is received, Futura's breakthrough, topical gel formulation MED3000, will become the first pan-European topical treatment for erectile dysfunction ("ED") available without the need of a doctor's prescription.
The share price is definitely on the rise (no pun intended. Or maybe there was)
I haven't looked at the numbers for this company yet but will do shortly. I like to hear other peoples views as us investors can be a little bias towards our own opinions. So if you get time to take a look it will be much appreciated.
£FUM Some of us have been invested in Futura Medical (LON:FUM) for quite a while. In the past they have had a lot of false dawns and I think as a result the market has underestimated them . This has been a punt for me and is my only holding that is not based on the fundamentals and the stockopedia ranks. My take is that the results of their 2019 trial of their erectile dysfunction product were not well understood. it promised to offer an over the counter treatment and the global market for such products is massive. A couple of weeks ago they finally announced a licensing deal for China and other parts of Asia. Today they got the EU approval and the shares have doubled this morning. They are waiting for minutes from a fourth meeting with the US FDA and need a small six month confirmatory trial over there to get US approval. This would be my Coffee Can stock. I have kept it whilst a lot were predicting that the company would go bust and the shares dipped to 10p. I can see this being at least a ten bagger long term and potentially much more.
Except we’ve been here before with the condoms.
They have form for taking a potential game changing product and making poor commercial decisions which sees it flop, droop, whatever your favourite term is for flaccid.
Maybe this time it will be different.
Joules (LON:JOUL) Joules to open stores within Centre Parc villages: www.retailgazette.co.uk
Down 30.36% so far on open.
What is?
Idox (LON:IDOX) is
Sorry, I am new to the site and now realise that I should include the name of the security, as the latest comment takes precedence.
A recording of the Grit Real Estate Income (LON:GR1T) webinar is now available here and there is a write up is available on the discussion section of the GRIT stockopedia page. GRIT is a £165m market cap pan-African real estate company focussed on investing in and actively managing a diversified portfolio of assets in carefully selected African countries (excluding South Africa). Coivd had an impact last year but their properties proved to be very resilient and rent collections only fell to 90% of contracted revenues in 2020. They have already resumed dividend payments and they aim to get back to the 12c paid in 2019 in due course. There current share price is around 52p against NAV of c88p, a 40% discount.
My morning smallcap tweet:
Heiq (LON:HEIQ) Futura Medical (LON:FUM) £B90 CML Microsystems (LON:CML) Powerhouse Energy (LON:PHE) Idox (LON:IDOX) Ten Lifestyle (LON:TENG) Marlowe (LON:MRL)
HeiQ (HEIQ) wins 5 year contract for Viroblock worth $8m over first 2 years. Eexpects total $30m of royalty revenue for coatings for printing processes. [SP=201 Cap=255m]. I hold.
Futura Medical (FUM) EU body gives recommendation to certificate MED3000 erectile dysfunction treatment. "Once EU certification and the resultant CE mark is granted, this paves the way for rapid approval in many countries." [SP=18 Cap=44m]
B90 (B90) knows no reason for recent SP rise. [SP=33 Cap=32m]
CML Microsystems (CML) order intake improvement continues into H2. [SP=388 Cap=64m]
Powerhouse Energy (PHE) shares issued to buy Waste2Tricity placed at 4.8p, co thinks this removes a potential share sale overhang. [SP=6.3 Cap=247m]
IDOX (IDOX) sells Netherlands based Grants Consultancy and databases business for up to €8.14m. €4.25m now, €1m earn out and a loan note of €1.39m and a further earn-out of up to €1.5m "both contingent upon return thresholds being met." How can a loan be contingent? Also last night big talks ended. [SP=55 Cap=244m]
Ten Lifestyle Group (TENG) guides H1(Feb) net rev c. £17.4m down 27% and adj EBITDA broadly in line with the Board's expectations. COvid expected to delay recovery of rev and adj EBITDA in H2. [SP=101 Cap=82m]
Marlowe (MRL) £100m placing at par = 690p. [SP=689 Cap=430m]
I have a 10 minute slot in Mello Monday to talk about what I look for in RNSs. https://melloevents.com/mellom...
Morning MrContrarian - If you are on Mello Monday with your usual dry wit the ticket will be excellent value for money!