Small Cap Value Report (Mon 29 April 2024) - EYE, ZED, SAL, S247, CAM, PFC, ADF, DPP

29th Apr by Paul Scott

74 comments 8102 reads

Good morning from Paul & Graham!

Today's report is now finished.

Woodford Views - this is a new blogging site, started by Neil Woodford - the famous fund manager whose career and business unravelled a few years ago when he strayed out of his area of expertise into speculative small caps in an open-ended fund, with disastrous results. Unlike many other commentators, I don't see it as my job to chastise or pour scorn on him. My view is that he's had a remarkable career, with huge highs and lows, and like many of us, has made mistakes along the way - which he addresses in his three blog posts so far. Anyway, somebody with that level of experience is going to be worth listening to, and I find his blog posts very interesting. So thought I'd flag them up to you here.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.

We stick to companies that have issued news on the day, with market caps (usually) between £10m and £1bn. We usually avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to.

What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.

Green (thumbs up) - means in our opinion, a company is well-financed (so low risk of dilution/insolvency), is trading well, and has a reasonably good outlook, with the shares reasonably priced. OR it's such deep value that we see a good chance of a turnaround,…

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rmillaree

29th Apr

Spaceandpeople (LON:SAL)

My view - surely it's got to be worth more than £1.8m market cap!?

the problem is they have spent many years generating nothing meaningful for shareholders - so i can see why the market isnt going to give them the benefit of then doubt until there is more evidence of something for shareholders is more tangible (divi - profit jump?) . on the flip side they did back in the day make profits of £1 mill even £2 mil plus pa so at least they have been there and delivered before. deffo potential decent upside - but there has to be the danger they subsist only enough for mangement to take their salaries.

planetx

Space and Peopke

I must admit to being somewhat confused as to the coverage it has received on stocko.

On many occasions i recall it has been said “we don’t cover nano caps below 10 million. Market cap “

Nothing wrong with covering SAL but a bit of consistency would be good to see .

Can we take it that nano caps are going to get coverage in future or is it limited to the companies that stocko reviewers hold ?

I’m fine either way but does seem a touch inconsistent to give good coverage to a nano cap 1.8m market cap after failing to comment on others in the past year or so often quoting the “too small for us to cover “ story .

I’ll probably get shot down for this .

Phil117

If you want a great podcast on wind generation I highly recommend ‘Britain’s a Gonner with Wind’ from the team at Argonaut Capital: https://www.argonautcapital.co...

As far as I know I don’t believe they are linked to the oil industry. And just as an aside I don’t understand why people can’t seem to accept that two things can be true at once i.e. climate change is a fact but wind generation is not necessarily the right solution given cost, intermittency, etc. As has been mentioned upthread it seems to surprise some that wind turbines depreciate too. And the ones at sea doubly so given the unforgiving saline environment. Most wind turbine blades cannot be recycled and hence cause a massive issue at end of life. But the key issue is the intermittency. We are not even remotely close to having solved the electricity storage problem. Note this is not just a question of beefing up the grid to get the electricity from X to Y. It’s having the storage. The only solution right now is nuclear. Rolls Royce has some of the best small modular reactors in the world. Presumably with modification they could be used in the civilian market. Why aren’t we helping them to become a world leader instead of subsiding incremental wind power and HS2? The UK is condemned to life in the economic slow lane until we have a Damascene conversion in our approach to energy, amongst many other things…

Samsgrandad

Thanks for that Sharw and apologies KBR for not getting back. A picture speaks a thousand words and I was away from my laptop whenever I had time available. Tried explaining on the phone but gave up.

davidjhill

Very true MH1 - the old adage of “rather be lucky than good” I think.

Harry Hindsight

Rolls-Royce Holdings (LON:RR.) despite their expertise in subs don't expect to have a SMR up and running on land till the early 2030's.

Governments and utilities wont want to invest in theoretical reactor concepts. High risk high reward. Huge rising cost per MW of energy. See Nuscale Power (NYQ:SMR).

Of the larger France's Flamanville 3 has an estimated cost of $15bn 4x the forecast when started and construction has risen from 4.5years to 16 years. These costs translate to expensive electricity - which of course will be sold to the UK.

It seems nuclear is the ONLY net-zero tech out there but it will take years of fossil fuels to get there.

The elephant is the distribution systems to get it around the country with the switching and kit to balance the power and intermittency. Don't know about batteries, they will play a part but huge container like storage, really? gonna need a lot more mining.

So I'm looking at the infrastructure companies doing the building, miners, cable makers, road digger uppers, plylon constructors, steel makers, cement grinders and the stuff to control this 'power'.

I suppose it will still need insulation in the form of oil derived pvc.

Lets hope some 'bring spark' comes up with something new, or perhaps the aliens can revisit Area 51 and give us a boost.

Aislabie

The 2030s are not far away for nuclear to be a key part of our energy pattern, and ten years of oil and gas to make it happen is not a problem given the number of solutions that follow from widespread electrification. But nuclear has another advantage: the serious costs of building out more grid strength is increased by/bringing offshore Scottish wind energy to the heavy usage areas in the Midlands and South. More flexible placement of nuclear facilities allows some of this long distance power transfer to be avoided.

But the ten years has to start now and include the production of the fuel rods for our security, and the two years required to produce sufficiently enriched uranium only starts after we acquire or build the necessary centrifuges. Every pound spent on wind delays this.

Mark Selby1

AIM 100 Shares - Uninvestable, practically speaking the odds of positive returns are stacked against any would-be investor

This is why it is so difficult to invest succesfully in "Small Company" UK shares. And probably why there is No AIM 100 tracker! Only a sucker would buy in. And remember these are the "best" AIM shares

I have tried to invest intelligently and prudently, but the odds of succeeding are well nigh impossible. If the government of the day ever withdrew inheritance tax benefits many AIM shares would be uninvestable and would plummet in value, even more, almost overnight!

Key AIM 100 Index readings

20/03/2020 - 3190.57

03/09/2021 - 6547,27

14./10/2021 - 3686.18

27/10/2023 - 3195.37

29/04/2024 - 3683.98

peterthegreat

I agree with john2 about Woodford exploiting private investors. I think it is fair to say that Paul's surprising attempt to act as an apologist for Neil Woodford has failed. The sooner he disappears (Woodford, not Paul) the better. Woodford has demonstrated an appalling lack of judgement so best of luck to anyone who reads his blog. Incidentally, I did not lose any money with Woodford but my sympathies lie with those private investors who did.

30th Apr

Expensive bollards.

SCI20

Why is Woodford being discussed on the SCVR? Promoting his new blog is imo an insult to all those investors who lost money.

Paul Scott

Well Graham and I seem to do alright here, by screening out the dross, and focusing on the good smaller caps (mostly AIM). We're not buying an index. We're buying carefully chosen individual stocks, of which there are dozens of very good companies on AIM. We're both up about 20% YTD.

I aim for a 20% annual gain each year, and achieve it most years. That compounds astonishingly well. So my message is: don't despair, but sharpen up your stock picking skills instead, and don't invest in the junk that proliferates on AIM, find the good growth companies instead! We find lots of them here, and mark them GREEN, so we've done a lot of the preparatory work for you!

Oh, and I think we're at the start of a new bull market, so the gains from these lows should be really exciting, for the best company shares.

Despair is other people's opportunity! It's exciting! :-)

Regards, Paul.

Hi PlanetX,

It's fine to query anything! :-)

I recently started doing a new section under the companies reporting list, called "Mid-morning movers with news". These are just quick notes from me, on large % daily movers, if there has been some significant news.

SAL fell into that category yesterday, so it was nothing to do with me happening to own the shares personally. I'd read the accounts quickly anyway and made notes, so it was dead easy for me to type those up in about 5 minutes.

The main sections, where we devote most of our time each day, are mostly focused on £10-1bn market caps, and we're tending to do less of the smaller companies where they're only trading in line, as they're less liquid.

Also I'm on a personal mission to exceed last year's coverage of 609 unique companies in 2024!

So the golden rule here is mainly that anything we see which looks interesting, we'll try and do at least a short note.

Best wishes, Paul.

Helvellyn

There are many quality companies quoted on the AIM100 index, that have had outstanding performances over the last few years.

Logical David

Hi Mark, I'm afraid I have to side with Paul, ie it comes down to stock selection. I have a lot of AIM shares in my Portfolio and I find the key to being a successful investor is picking high quality profitable growth companies which have bottom left > top right momentum with rising EPS... this gets you so far. However, the other important part to being a successful investor is to avoid the poor quality loss making dross. I learnt many years ago that by avoiding the dross makes a huge difference to my Portfolio returns. So far this year my Portfolio is up + 18.5% YTD. To view the shares I hold just click on my avatar / name. If only I had bought CMC MARKETS but you can't win them all.

David.

ken mitchell

There’s also a big investment world beyond AIM, including small companies not on AIM, bigger Companies, those paying big and sustainable and increasing dividends, etc as well as Investment Trusts enabling us to invest all round the World. A balanced portfolio with a wide range of investments that can include AIM shares is a good way to go. It’s worked for me if that’s any help!

Yes Ken I agree with what you say. Hence the reason why I don't limit myself to just owning AIM shares, its about having a Balanced Portfolio. In fact when I was typing my response I thought of you and your article 'Buy Quality at Bargain Prices. It Works'. This is very true and it does work.

Buy Quality, avoid Dross.

WDWombat

1st May

My thoughts are that by promoting Woodford you are crossing a line that should not be crossed. He is delusional , has lied consistently, tried to game the system by attempting to list unsaleable companies on illiquid stock markets to meet certain guidelines, but above all has lost millions of pounds of peoples' life savings by almost incredible stupidity, avarice and ignorance. There is absiolutely no excuse for this nor for your proposition that he has 'experienced up and downs' and therefore should be listend to.

I just put up a link to a blog about economics that readers may find interesting. I'll leave the moralising up to you.

Small Cap Value Report (Mon 29 April 2024) - EYE, ZED, SAL, S247, CAM, PFC, ADF, DPP

Explanatory notes -

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Paul Scott

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