Small Cap Value Report (Fri 28 Dec 2018) - IDEA, placeholder

Friday, Dec 28 2018 by
83

Good morning, it's Paul here!

We're in that strange time of year, when Mon-Sun days of the week lose their meaning completely, and instead each day has its own unique name. This is very confusing. Also, it usually takes until about Easter for me to get the new year correct too. Doubly confusing, reporting on 2018 figures in 2019.

I've got this strange, vivid, childhood memory of writing "1976" in the margin of a schoolbook, and thinking it was terribly modern. That was just before the teacher put the fear of God into the class, by telling us emphatically that the world's entire reserves of oil would run out by the year 2000. So we had better prepare for the worst. Growing up in the 1970s was such fun!

As regards dates then, please just assume that in early 2019, I'll get lots of them wrong, and work on the basis of what I probably meant, rather than what's actually written here.



Nobody likes to prepare for the new year with a backlog of work to finish off. Therefore, I've kicked myself up the proverbial, and completed the SCVR from 21 Dec 2018, which is now here. Sorry for the delay.

Craneware (LON:CRW) and Focusrite (LON:TUNE) were the main features, and I also wrote up my recent lunch with Ideagen (LON:IDEA) . I'll copy it here actually, so that everyone sees it, as follows;



Ideagen (LON:IDEA)

Share price: 126.5p
No. shares: 219.2m
Market cap: £277.3m

(disclosure: the company paid for our meal, over a working lunch)

Meeting with management

By way of background, Ideagen moved from Plus markets to AIM in 2012. It has been a successful buy & build software group - specialising in highly regulated sectors. The company is rightly proud of its successful track record in creating shareholder value - a >10-bagger on AIM, until the recent market sell-off, but still a great performance;


5c31a97e7b63cIDEA_chart_10yr.PNG


The former CEO, recently moved up to Exec Chairman (to focus on strategy & acquisitions), is David Hornsby ("DH"). David is highly regarded in the private investor community, for having created such excellent shareholder value, but also for being very…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Ideagen plc is engaged in the development and sale of information management software to businesses in various industries, and the provision of associated professional services and support. The Company is engaged in supplying governance, risk and compliance (GRC) solutions primarily to the healthcare, transport, aerospace and defense, manufacturing and financial services sectors. The Company’s portfolio products include Q-Pulse, Coruson, Pentana Audit, Pentana Performance and PleaseReview. Q-Pulse, which provides quality and safety management. Coruson,which provides cloud-based software solution. Pentana is an auditing software within its internal audit.It has operations in the United Kingdom, European Union, the United States, Middle East and Southeast Asia. more »

LSE Price
120p
Change
0.8%
Mkt Cap (£m)
260.9
P/E (fwd)
21.9
Yield (fwd)
0.3



  Is LON:IDEA fundamentally strong or weak? Find out More »


32 Comments on this Article show/hide all

ezlifeme 28th Dec '18 13 of 32
9

In reply to post #430748

Tips  Opinion

DYOR

Paul & Graham - Don't change a thing in your approach, invaluable as is

HNY


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PhilH 28th Dec '18 14 of 32
14

An external locus of evaluation is never good and in the investing field i think it acts as a defence to one's ego, e.g. i didn't pick a duffer, the tipster did.

So my advice would be this ... take responsibility for your own investments, formulate and articulate your approach to investing, stop buying stocks because others say it's a good idea and if you're going you read SCVR do it as an exercise to learn about gaps in your knowledge rather than as a source of investment opportunities.

Best of luck
Phil

Professional Services: Sunflower Counselling
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ACounsell 28th Dec '18 15 of 32
3

Rather than this debate on tips or not and the performance of shares covered by Paul & Graham I would rather see some comment/views on the trading update slipped out by Xaar (LON:XAR) this morning. Revenue for year to Dec 31st is expected to be c. £64m vs. Prior year of £100m. The share price has dived again (-10%) and the Stockopedia momentum rank is 1! Historically Xaar (LON:XAR) had a decent cash pile but even this must be eroding rapidly. Is this a business in terminal decline or is the technology worth something to someone?! I am an unfortunate holder sitting on a significant loss having bought @ £5.00!

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cholertonandrew 28th Dec '18 16 of 32
7

Re. stocks Paul has a positive opinion on

One of the things I really like about Paul’s writing is that he is very transparent/open about what he thinks and what he holds and I think he does it in a willingness to share information and try and help people. Personally I wouldn’t want that to change- it would be much drier without it! I think he always emphasises that he’s not making tips and he also emphasises the risks and that people should do their own work. It’s often very hard to predict what markets and stocks will do in a fairly short period and I suspect Paul does retain confidence in a lot of the stocks he owned at the last year-end. I own a couple in that list and have done a lot of research into them and retain confidence.

Regards
Andrew

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clarea 28th Dec '18 17 of 32
2

Whilst not wanting to get caught in the crossfire of the above comments I do feel it would be great if say once a month Graham or Paul could revisit some of the worst companies they highlighted way in afvance of the pack such as Quindell and Globo,and maybe do a recap and walk-through using the Stocko stats as to what red flags they spotted. Giving a man a fish and teaching him to fish chestnut hopefully one case study a month wouldn't detract from the quality of the daily blogs.

Regards

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peterg 28th Dec '18 18 of 32
1

In reply to post #430718

I tend to agree, Wimbledonsprinter.

A problem with moving over to using adjusted figures is that, while there are some valid arguments for doing so, is that you either reproduce whatever subjectivity the company has chosen to introduce to them, or you have to start making an assessment and adjustments to the adjustments. That sort of approach makes is fine for an individual making an assessment of a company, but how would it work for Stockpedia? In practice all they could do is reproduce whatever adjustments the company has chosen to make. That may be entirely fair for many of them - but not for all.

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barnetpeter 28th Dec '18 19 of 32
16

I must admit I bought two of Paul's ideas....Sos which I sold out at 100 per cent profit and Wey which has been a complete disaster. These were my choices to press the button: this has been a dire year for investment for many I realise.

My own view; I find this report particularly good on what stocks NOT to buy because of problem balance sheets and so on.

So I think this report is excellent; however I admit I thought sparkler's comments above were reasonable. The year to year results have been dire on the basket of stocks he highlights; that is a fact and his comments that many of the ideas put forward were very risky is also reasonable. Personally, I don't think this site needs to fall in to the trap of thinking they have to make New Year tips or similar. Always been tacky and usually a "sucker" idea as spreads are often increased on the most popular.

Paul and Graham make many excellent suggestions on a daily basis so that is enough for me. Thank you. But I don't mind other views (free speech) either good or challenging and the comments made by others after the main article are getting better and better (in my view).

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Howard Marx 28th Dec '18 20 of 32
6

In reply to post #430808

Paul's Fantasy Fund "Beam Me Up Scotty" has indeed had a challenging year, yet is well ahead on three years.

5c2629f940f80BMUS2.jpg

5c262905e3d84BMUS.jpg

No Portfolio Manager can be properly assessed on 12 months basis. Even Warren Buffet has poor years. Anyone thinking that SCVR is a short term share tipping Board is long overdue a surprise!

https://www.stockopedia.com/fa...

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Paul Scott 28th Dec '18 21 of 32
12

Guten Tag!

I'm rather glad that I typed up my IDEA meeting.

I'll let everyone have a big argument, as I fancy spending most of the day relaxing on a beautiful memory foam mattress.


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Beginner 28th Dec '18 22 of 32
12

In reply to post #430703

Best tip I ever received was from my dear old granny. 'After defecating use bog roll, not broken glass'. Researched it (momentarily) and found it to be a very sound tip. A happy and prosperous New Year to one and all.

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Paul Scott 28th Dec '18 23 of 32
4

In reply to post #430818

If people don't like it, well there we go!

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purpleski 28th Dec '18 24 of 32
1

In reply to post #430758

Frankyboy I don't understand your comment but I also don't understand why it is under review. Unless your saying that if Paul/Graham say "At this price this share looks worthy of further research" or "My largest holding is £SOS" is a tip then you are wrong and I think you should withdraw the comment.

Happy New Year and all the best for your investing in 2019.

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barnetpeter 28th Dec '18 25 of 32
3

First of many this year?

Music retailer HMV confirmed it has called in KPMG as administrators.

The move, the second in six years, involves 2,200 staff at 125 stores.

Owners Hilco, which took the company out of its first administration in 2013, blamed a "tsunami" of retail challenges, including business rate levels and the move to digital.

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herbie47 28th Dec '18 26 of 32

In reply to post #430848

Yes I saw that, it is advised if you have any HMV vouchers to spend them as soon as possible.

Yet vinyl sales are still rising so I don't understand the move to digital reason unless they mean streaming and downloads.

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aflash 28th Dec '18 27 of 32
2

I cannot change sparkler or Paul Scott but I can make money. It is hard and requires hours of study and asking myself about psychology. That is why my subscription is paid and I learn. 

The SCVR and SIF columns are about the investment Process. So why not invert the process and develop the 'InverseTipSparkler' screen? 

I took the four stocks he mentionned plus EPO (Earthport) which has just surprised us with a 200%+ + jump after Paul had consistently warned against it coming to market for more funds.

RBG Quality 49 Value 59

WEY Quality 13 Value 23

CALL Quality 13 Value 13

BOTB Quality 92 Value 26

EPO Quality 43 Value 07 Price to book 4,84 Price to tangible book 6,04

On that basis I shall buy RBG. Its value is confirmed by another data base I use.

It may go down further but it meets my criteria.

Others might buy BOTB for the quality.... and sell EPO because of the lousy numbers.

Incidentally the brokers have been tipping BATS (British American Tobacco) for some time now as undervalued. It is down 50%.


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doublelutz 28th Dec '18 28 of 32
1

In reply to post #430853

Yes, vinyl sales are increasing but I think they represent a tiny proportion of the former CD sales which have been decimated by internet downloads.

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barnetpeter 28th Dec '18 29 of 32
1

In reply to post #430853

Business rates are blamed as well. The increases in these are mind boggling in some instances; of course they apply even to loss making or just surviving companies.

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herbie47 28th Dec '18 30 of 32

In reply to post #430868

In another article they blame streaming. People say their stores were always busy. They did seem to go into vinyl in a big way after the last liquidation in 2013.

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gbjbaanb 28th Dec '18 31 of 32
3

In reply to post #430818

OMG Paul Scott tips Eve Sleep. BUY BUY BUY.

:-)

I appreciate the analysis, mainly so I can avoid some dogs (as I have bought enough of them already) but also to inform how to decide. I don't always agree with your views but that's a good thing as it allows me to challenge my own preconceptions. Retail shares are still my worst performers though, so there's a lot of challenge to do!

No matter what though, I appreciate the whole thing, please ignore the fools who are so wrapped up in themselves they think you are solely here to make them wealthy without any effort.

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Maddox 28th Dec '18 32 of 32
3

In reply to post #430718

Hi WimbledonSprinter,

I tend to disagree with you but for the very same reason you cite - comparability. If you screen on statutory metrics, without adjusting for say acquisition factors, then you will not pick up some very good 'buy and build' companies like IDEA. The whole point of adjustments is to re-create a comparable metric, so you do have apples with apples. But yes I see your point regarding 'puff' being added by adjustments going to far and putting lipstick on the donkey. However, adjustments need to be looked at a second stage to see whether they are reasonable or not - to weed out the by-catch of your trawl.

What would be ideal would be to cater to both views and be able to build screens on both statutory and adjusted metrics. The comparison of your various catches and quantum of the difference in the metrics would itself be very insightful.

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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