Small Cap Value Report (Fri 30 Dec 2022) - BARK, IES, NEXS

30th Dec '22 by Paul Scott

58 comments 6406 reads

This week's podcast is now up here (recorded on 31 Dec). The mystery share is Rotala (LON:ROL)

Good morning from Paul.

Welcome to the last SCVR for 2022. This has been a dreadful year for small caps. However, things are now so cheap that I foresee tremendous investment profits in the future, once the economy and earnings start returning to normal. The only question is timing of the next multi-year bull market.

In the meantime I think we've got to be very careful, trying to avoid profit warnings, and heavy dilution or even insolvency for companies with problem levels of debt, and/or cash burn. So we certainly can't start getting complacent, there remain major obstacles ahead. I'll write in more detail over the next few days, about my reflections on 2022, and the things I'm focusing on for 2023. Depending on time, I'm also planning on listing everything on my watchlist, plucking out the most interesting share ideas that we've covered in 2022.

Today sees shortened hours on the UK stock market, which closes at 12:30 - it usually takes me until about 13:00 before I realise that the prices have stopped moving, and I can turn off the computer! I'll be working here until a similar time, and will both review today's news (if there is any), and do a few more backlog items from the reader requests earlier this week.

I should add that, despite it being one of the worst investment years ever for me, it's been a great pleasure (most of the time!) writing these reports here on Stockopedia, and interacting with the terrific community we have here.

The glass is always half full for me, so I'm confident that those of us with thumping great losses recorded for 2022 will learn from our mistakes, and we'll make the money back in the next bull market. In the meantime life goes on, and there's plenty of enjoyment to be had in many other ways, so try not to dwell too much on a disappointing investment year. We have to take the rough with the smooth with investing, and bad years are a good opportunity to refresh strategy, and sharpen our skills for the next bull market.

Agenda

Barkby (LON:BARK) - (8.5p - mkt cap £14m) [quick comment] -

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Caduceus

30th Dec '22

Hi Paul.

As the year draws to its finale, and along with that, my 24 month subscription to the Stockopedia adventure draws to a close ( i simply cant afford it anymore as i need to allocate the subscription money elsewhere), I just wanted to take the opportunity to say thank you so much for being my daily voice of reasoning/mentoring regarding the stock market during these times. Your (and the teams) daily insights have taught me so much and the volitility of emotion expressed, both highs and lows, have been both insightful and amusing at times. You are all doing truly great work in this forum and i will indeed miss it. I will continue to listen to your podcast so please dont give that up and I truly wish you, the team plus all members of this community a greatly improved 2023 and beyond. Genuinely, thank you for all you have done and continue to do.

andrewdb

On Beeks Financial Cloud (LON:BKS)
disclaimer:I may be wrong (do not hold, but looked into it a few months ago)

I do not think BKS seek to supply directly to the LSE. They provide hardware / services that allow organisations to trade _with_ the LSE (and other exchanges) - ranging from colo to renting servers to a VPS - Lots of people do that and, basic provision is fairly commoditised.

I think Tier1 refers to very large banks, not the actual exchange. (there are many other banks and bank-like organisations that need this service)

BKS (claim to) differentiate by offering faster / more reliable / more secure / lower latency links between exchange and datacentre and exchange-exchange than the commodity sellers.

I work with the 3 main commodity sellers and a couple of others (not in this business area) - they supply services to clients I work with and their standard offerings are ... just about good enough for what we do (as long as the reseller knows what it is doing) but not good enough when any failure for any reason for a few seconds (a human might not even notice) can result in an impact in £millions.

This is a specialised niche - and a lucrative one.

I decided to move on as the while the business is very lucrative, the sales process (from a small holding with another smallcap a few years ago) to a Tier1 bank is measured in years, so revenue growth is v. lumpy (though v.v. sticky) and so felt the price too high (at about 150p)

Camtab

I wanted to float an idea. Given we are all in this together I would be interested in a community portfolio. A portfolio of shares decided on by majority vote to use as a reference point. I see several advantages to it 1) it would free Paul and Graham of the moaning few who seem to think they have a monopoly on picking losers. 2) It would keep at the forefront those shares which we all believe are runners. 3) It would be educational in terms of portfolio structuring, rather than just share picking. 4) I think it would generate more focussed discussion. If there is interest I defer to you Paul/Graham.

BnB

I wanted to float an idea

I like the idea but I fear a portfolio consisting entirely of small caps would not be a trustworthy guide to portfolio construction since it lacks defensive qualities owing to the inherent volatility of small issues. I propose that if split quality/growth vs value approx 50/50, the educational aspect would be enhanced.

Morris1602

Hi Paul,

Many thanks to you and the team for your stellar efforts over the year.

Regarding Invinity Energy Systems (LON:IES) , I'm not quite so pessimistic. The news flow over recent months reflects considerable and growing orders in vanadium flow batteries and an ability to meet them from their facilities in Canada, China & the UK. I'd agree that careful handling of such growth is critical.

The delay in delivery of the Alberta order by 3 months is probably down to delay in site readiness due to adverse weather conditions.

Sizeable alternative energy projects are appearing at a furious rate all over the globe. Most of these will depend on high capacity, low risk energy storage to optimize efficiency. If Invinity can overcome its growing pains then its future should be bright.

JASVFS

Covid testing kits needed in far greater quantities again as the Chinese resume world travel JSLDUK?

Rusty2

Thanks, did not know about Zaks Mir being on Vox. Ive heard he is someone to be very cautious about. Maybe it is to do the Chinese travelling agin soon. Strange policy in China, with cases soaring they are now allowing people to go abroad, from 8th January.

Value is too low for a Superstock and too high for a High Flyer. There are a few high QM stocks that are classed as Neutral.

cafcash49

Maybe 2022 will turn out to have been good for us. In a Bull market we can become a bit too cavalier with our investing. I have suffered like many but I now believe I have become a bit better at what I do. I have also taken more notice of some of the basics of Stockopedia. If value has a low score, do I really want to overpay for a stock? My screening has become better.

A big thank you to Paul, Graham and all of the other contributors. The SCVR reports and the expertise of regular commenters is great value. It is a great community and generally polite and respectful with little to no 'ramping'. Love you all. Here's to a better 2023 for us all and thank you.

Wimbledonsprinter

Aston Girl

I fully agree that if you extend the warrants for some holders you need to extend for all. I am a holder of the warrants in £IES myself - so I have “benefitted” from the extension.

But I still don’t think it can be justified and partly because of that I no longer hold any shares. I want all management to be focused on minimising dilution. I think extending warrant maturities is a bit like rebasing management options - although this can in sometimes be justified by the need to retain/ recruit talent (a justication that does not hold for warrants).

Michael Tee

Paul and Graham

Thanks for your excellent commentary all year.

Increases my understanding and knowledge - no better place in my opinion.

Happy New Year!

Michael

Funderstruck

Thank you Paul & Graham for your super efforts during the year reporting on all these small cap stocks; The depth of coverage for most companies that you provide clearly takes a lot hours ,which is recognised and saves us a great deal of effort so we can home in on the more promising companies.

Wishing you a Happy and Rewarding year throughout 2023 that will leave this year behind.

Chris Brown

I do miss Tip TV a bit... fun while it lasted!

Gnome2

31st Dec '22

I'd just like to add my thanks and best wishes to Paul and Graham for their sterling efforts throughout 2022. Paul, how you were able to stick your head over the parapet day after day, whilst the rest of us were hiding behind the sofa, I will never be able to comprehend. True professionalism.

It's been a tough year for sure, but I can see a lot of positives for the small cap market going forward. Good luck to everyone and best wishes for 2023.

The Boon Fund

Like many other subscribers, I want to say a big thanks to Paul and Graham, for putting out a daily post which has given loads of inspiration, 360 opinions, and immensely added to the way I analyse and look at companies.

But also, thank you to all you other lovely subscribers who have contributed great comments, opinions, and answers to my many questions over the years. I've enjoyed contributing to the SCVR comments thread as well as writing my own articles, and I always look forward to reading the comments from others, especially all the other regulars.

For 2023, my goal is I hope to meet some of you in person! Maybe at a Mello event, or maybe at a Stockopedia event...? :)

I had a look at Traders Cafe and Novacyt SA (LON:NCYT) was mentioned in 22nd December.

Paul Scott

Many thanks for all the kind comments, much appreciated :-)

MFJ11

1st Jan '23

Thanks to Paul and Graham for your insightful words of advice throughout the year. Also, best wishes to everyone for a better 2023, in all sorts of different ways. Only been a lurker up to this point but I will retire this year with two key aims: more time to research the great information that is shared here and a lower handicap. I can guarantee the first, not too sure about the second!

The Scribe

Paul and Graham,

Thank you for your input and insightful commentary this year. I have enjoyed reading your comments on a daily basis, both about specific companies and about the macro-economic and political outlook in general.

I look forward to reading them again in 2023!

Happy New Year to the both of you.

khmkii

31st May '23

Indeed. Scott McGregor has made a pretty penny. Shareholders have not. But he has.

Small Cap Value Report (Fri 30 Dec 2022) - BARK, IES, NEXS

Agenda

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Paul Scott

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