Small Cap Value Report (Mon 23 March 2020) - Extreme Levels Of Uncertainty, FUL, TED, GYM, FA., MOSB, TAST, ALT, VRS

23rd Mar '20 by Graham Neary

103 comments 12555 reads

Morning!

Boris Johnson announced the forced closure of pubs, bars and restaurants on Friday evening.

Calls are growing for some form of 'lockdown' (e.g. as seen in Italy) to slow down the spread of the virus further.

The FTSE is currently (7am) set to open down 4% at 4940.

More to follow.

Cheers,

Graham

Wow!

The RNS feed is crazy today, I've never seen anything like it before.

Dozens of companies have felt the need to update the market with their latest situation, given the ongoing human, economic and financial calamity. Announcements today fall under a number of broad headings:

delayed results (per FCA guidance)
cancelled dividends or share buybacks
trading updates

I'm not sure where to begin so I will focus on those companies we have commented on before, to maintain continuity.

Fulham Shore (LON:FUL)
Ted Baker (LON:TED)
GYM (LON:GYM)
Fireangel Safety Technology (LON:FA.)
Moss Bros (LON:MOSB)
Tasty (LON:TAST)
Altitude (LON:ALT)
Versarien (LON:VRS)

(This list is provisional.)

Extreme Uncertainty

In this extraordinary time, when vast swathes of economic activity have been cancelled, who would be an investor? It's impossible to predict what will happen in six weeks, let alone in six months.

And now the Financial Conduct Authority has made the strange decision to request "a moratorium on the publication of preliminary statements for at least two weeks".

I don't understand the rationale. If some companies feel unable to publish their statements, due to the rapidly changing situation, they are free to delay. I don't see why all companies should delay? Surely this will mean investors have even less information with which to make decisions?

The FCA says "the audit profession are facing unprecedented practical challenges during the Coronavirus crisis". That's probably true, too - but again, why does it mean that all companies should delay the publication of their preliminary statements?

Less information means that companies are worth even less, since we have to deal with even more uncertainty.

Having so little information to work with, and in a situation where the economic outlook is shrouded…

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smilingmickey

23rd Mar '20

Hi Simon,

The news that Spectra issued today was very exciting. I have been following this Company for a couple of years now . It seems to me to have the right ingredients for a successful future. I would encourage any subscriber to take a look . It has a lot of cash in the bank for its size, some innovative ideas and net profit amounts to around 40% of total revenue.

Gromley

Indeed Herb,

the Italian figures are somewhat encouraging. As was the statement yesterday (I think) that Spain expects to have 'flattened the curve' (whatever that actually means) and today's view that Germany might be on top of this, but they need to see the figures Wednesday.

By the end of the week, I personally think we may have a clearer view on how containment is progressing in mainland Europe and I am hopeful of those results. However, it will be very hard to maintain the current containment measures for too much longer.

Given the measurement changes, the UK figures are imho much harder to interpret. Boris will "address the nation" (per BBC - I'm not sure if that was the official description, but BBC are nudging that might be a significant change in policy. (Lockdown?)

_ony

Hello,

Newbie question - what rules would you apply to screen for shares that have fallen the least relatively?

Thanks

Rusty2

This may help you: https://www.stockopedia.com/content/how-defensive-high-yield-shares-have-held-up-in-the-market-collapse-576888/

You want to be looking at Relative Strength % 1 month and 2 months, I would have thought.

stegga1000000

Unfortunately the basic masks you see worn ubiquitously worn in a lot of asia are absolutely useless and could be more harmful than without one in some cases if worn over the recommended time period (10minutes in a lot of cases)

DRallan

24th Mar '20

UK is only testing patients admitted to hospital with respiratory symptoms. (So not everybody in hospital). Everybody else - don’t even visit GP.

Consider scenario here - Say a group of 100 people have COVID. We are told 80% are mild or asymptomatic. So about 20% require hospital admission (and around 5% require ITU). It is only these 20% that are tested for now. This may increase as they start testing NHS staff but everybody else - don’t even visit GP. The 2-3% mortality refers to this group of 20 that are tested (2% of 20= 0.2). So out of a group of 100, potentially 0.2-0.3 people die. If the 80% approximation of no to mild symptoms we are given is incorrect, then this figure is either much lower or much higher.

Andyin

On what basis do you make this assertion? The wearing of a mask at least reduces the chances of the wearer spreading infection and also offers some protection.

robinleggate

I would have thought that as tests here are only given to people showing symptoms, then this figure is too high.

MichaelFBS

Hi Graham

“We had the longest bull run in history, and we were lulled into a false sense of security.”

I certainly think this is true in my case and one or two errors of which meant I was very seriously hit. I had (because of my state of mind exit into cash last week (from memory I am now 70% cash/gold) but even then I got that wrong by exiting all in one go rather say over a period of days.

I am now sitting back and making sure that I learn from this crisis and what to do going forward. I think I have a good amount of time to decide how to redeploy my cash to hopefully get back my losses over the next two to three years.

This segways neatly into:

“A senior figure in the US Federal Reserve said yesterday that US unemployment could hit 30% in Q2, and GDP could fall 50%. He wasn't joking - he actually thinks these numbers are possible under a "planned, organised partial shutdown of the US economy".

I don’t think this is built in to the declines experienced over the past two weeks and I am personally convinced that over the coming 14 to 28 days we will be substantially lower than we are now and that that low will be maintained for quite sometime (especially if Italy is the precursor of what most western countries will experience), until markets can see some light at the end of the tunnel and some certainty.

I am not trying to pick the bottom of the market. I am fairly certain that my strategy (As I say I have definitely formulated how I am going to get back in) over the coming six to nine months will be to drip feed the majority of my cash in on a monthly basis, mainly into ETF’s, indexes, Brooks Macdonald (LON:BRK) (looks a bargain to me) for now, as I don’t think I am going to able to pick individual companies.

Thank you.

On Tim Martin words almost fail me.

He is now an expert epidemiologist “There has hardly been any transmission of the virus within pubs”. Unbelievable.

Full disclosure I do not own and would never own spoons

”I wouldn't pay any attention to the UK death rate. The rate is based on deaths per confirmed cases. Even though you might have all the symptoms, to be a confirmed case and be counted you have to be tested and from my experience the only way to be tested is to be hospitalised.”

I know I am an N of 1 but I know 4 people (in the UK) who are pretty convinced (by symptoms) that they have the virus and they have not been tested. And there is one lady in my village (here in France) who thinks she may have had it but so mildly that she did not notice.

I don’t know how you scale these figures up though.

I am surprised (well I am not really!) that the UK (and other western) governments have not leveraged the internet, mobile phone and pollsters to try and get a better handle on infections and get better data in general. I would have thought better data would be a priority.

Completely agree but that may not be possible as it may take time for the front end to connect to the backend of their database.

I would rather see a countdown or perhaps the current FTSE 250 change.

Hope Ed’s reading this!!!

"from my experience the only way to be tested is to be hospitalised"

That is not true, certainly not in the first few weeks of testing, I was tested 3 weeks ago, I was not ill, just had a slight cough which I caught on the way back from Thailand. Yes in the last 2 weeks it has been more difficult to get tested.

Yes I agree there are many more people with it than the tests show but they do indicate the % of tests that have it. Some people are down playing the figures and saying the rates are not much worse than flu which I think could be a mistake, the area in Italy that is badly affected is seeing approximately 10 times the number of deaths than usual. With without ventilators even fit younger people could die, the problem is having enough capacity in our health system to cope not just with Coronavirus cases but all the other emergencies which hopefully may fall with people staying isolated. The Italy rate is currently 9.5% on recorded cases but remember many of those cases have not concluded yet, they also have about 3,000 patients who are classed as serious/critical. Italy closed cases 55% recovered, 45% decreased, not sure that will lift the mood but it does take longer to recover than die usually. UK closed cases 470: 135 recovered, 335 decreased.
The other unknown is how many of these deaths are solely caused by CoronaVirus? Also what underlying health issues actually mean, if it high blood pressure then that applies to many people but does not mean they are just about to die.

john652

There is too little data in the statistics, at least being issued to the public.

1, How many of the deaths are deaths that would have occurred anyway this year and the virus has bought forward, as the people were very sick?

This is a very important estimate for understanding the scale of the issue.

2 How many very sick people already in hospital, have died from C19?
I would have thought this death rate to be very high as these are the most people at risk with the most amount of infected people around them.

...and when is this antibody test going to be performed on say 10,000 people at random, the facts here are so thin, I cant believe the government does not have information on the above?

Nick Ray

There is a very great amount of data and analysis of it available. Unfortunately, if you use the popular media for your info then you will form a misleading idea of what is known or being done (and indeed what is still unknown.)

There are various useful starting points on the web to get high quality information. The link below is one that I find useful. But bear in mind that many of these papers are not peer-reviewed and you can't use a single paper in isolation without corroboration to draw conclusions.

https://www.ncbi.nlm.nih.gov/research/coronavirus/

GrahamF

On lack of testing I do wonder why Public Health England, when seeing a massive outbreak in China and then the beginning of the spread to other countries, didn’t realise that if the epidemic grows exponentially then the testing will need to as well. Or perhaps they did but could not ramp up kit production fast enough. Which then begs the question of why the need for massive testing didn’t come out in the simulations they had gamed in the past.

But other countries were caught on the hop too and hardly surprising that mistakes get made along the way.

But lots of people have symptoms but don't have the CoronaVirus. I had symptoms, had the test which was negative, they said a had a virus but not the COVID-19 one, still got it even 5 weeks later.

I think if they tested a random sample they may get a better idea of % infected.

Yes good points, the first I have already asked elsewhere, we should have a figure, is it 10% of people who don't have underlying health issues, that also needs clarifying as many have but they are not immediately life threatening, say high blood pressure. The other issue is how many would have died if they did not have ventilators? I have seen young people on ventilators, it is not just the old and sick who are dying.

I make this assertion based on the standards to which they are manufactured/certified and the usage instructions on such a device. Basic surgical masks are only effective protection against large droplets/splashes and even this is very short term (less than 1-2 hours). They don't have pore sizes small enough to filter microbes (viruses like covid are the smallest of all) out and they don't seal against the face sufficiently. People are wearing these things all day, possibly multiple days if short supply - the mask at this point is saturated with moisture from our breath and billions of microbes. I work in a field where they are used widely despite the weak evidence of efficacy.

Hi Nick,

I think you prove my point, a link to 1500 non peer reviewed papers doesn't really help answer some basic questions that either PHE and/or the government should and must provide.

After all, they have now locked down an entire country, I think a few basic facts wouldn't go amiss.

Small Cap Value Report (Mon 23 March 2020) - Extreme levels of uncertainty, FUL, TED, GYM, FA., MOSB, TAST, ALT, VRS

Wow!

Extreme Uncertainty

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Graham Neary

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