Small Cap Value Report (Mon 31 Dec 2018) - Reflections - VLE, BRBY, HAT, PCF, CRL, BATS, REC, DPEU, UCG

Monday, Dec 31 2018 by

Good morning!

The news is terribly boring today, so I think I might just do a quick round-up of my personal portfolio, to show what went right and what went wrong in 2018.

Of course, nothing below should be construed as "tips" or "advice" - I make plenty of mistakes.

For context: 

  • the FTSE All-Share Total Return Index is down 9.5%
  • the FTSE AIM All-Share Total Return Index is down 18%.

(Total return is measured from 29th December 2017 to last night's close, and includes the beneficial effect of dividends.)

Volvere (LON:VLE)

  • Total return: 22%
  • Share price: 1050p
  • Market cap: £33 million
  • StockRank: 97

Still my largest holding (16% of the portfolio) and I remain happy to leave it in the portfolio. CEO Jonathan Lander was good enough to come to Mello London this year and explain how this investment vehicle works to a large gathering of private investors.

The cash balance is worth perhaps £33 million after £6 million of buybacks, i.e. it's capitalised at around cash value with two businesses thrown in for free. One of these, a bakery, is of a substantial size and could move the needle again for Volvere if its performance improves and/or it is disposed.

Please note that the stock is illiquid and only suited for long-term holders. The major uncertainty around it now is how the massive cash pile will be used - it's a bet on management's ability to continue their fine track record.

Burberry (LON:BRBY)

  • Total return: -1%
  • Share price: 1720p
  • Market cap: £7.1 billion
  • StockRank: 85

I've had a long-term love affair with this company, first buying into it back in 2012. I traded in and out of it a few times, but my current holding has been in the portfolio since January 2016.

I think it's a highly attractive and perhaps a timeless brand. It is 11% of my portfolio.

The important thing to remember is that British perceptions matter less than Asian perceptions of it. The big spenders, even in the British stores, are Asian tourists.

Top-line revenue growth has admittedly slowed down (adjusted revenue +4% in the latest H1 report), so the focus has shifted to cost savings under new CEO Marco Gobetti and a new creative vision under Chief Creative Officer Riccardo Tisci.

Both of these key employees are…

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All my own views. I am not regulated by the FSA. No advice.

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Volvere plc is a holding company. The Company identifies and invests in undervalued and distressed businesses and securities, as well as businesses that are complementary to existing group companies. It operates through Food Manufacturing segment. Its food manufacturing segment consists of the Company's subsidiary, Shire Foods Limited (Shire), which is engaged in manufacturing frozen pies, pasties and other pastry products for retailers and food service customers. more »

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Burberry Group plc is a manufacturer, wholesaler and retailer of luxury goods. The Company also licenses third parties to manufacture and distribute products using the Burberry trademarks. The Company's segments include retail/wholesale and licensing. The Retail/wholesale segment is engaged in the sale of luxury goods through Burberry mainline stores, concessions, outlets and digital commerce, as well as Burberry franchisees, prestige department stores globally and multi-brand specialty accounts. The Licensing segment is engaged in the receipt of royalties from the Company's partners in Japan and global licensees of eyewear, timepieces and European childrenswear. The Company's product divisions are Womens, Mens and Childrens apparel, Accessories, and Beauty (which includes fragrance and make-up). Its subsidiaries include Burberry Latin America Holdings, S.L, Burberry (Suisse) SA, Burberry (Taiwan) Co Ltd, Burberry (Thailand) Limited and Burberry FZ-LLC. more »

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H&T Group plc is a non-trading holding company. The Company provides a range of simple and accessible financial products tailored for a customer base, which has limited access to, or is excluded from, the traditional banking and finance sector. Its segments include Pawnbroking, which is engaged in providing secured loans against collateral (the pledge); Gold Purchasing, which is involved in buying Jewelry directly from customers through its stores; Retail, which is involved in retail sales of gold and jewelry, and the retail sales are forfeited items from the pawnbroking pledge book or refurbished items from its gold purchasing operations; Pawnbroking Scrap, which comprises various other proceeds from gold scrap sales other than those reported within Gold Purchasing; Personal Loans, which comprises income from its unsecured lending activities, and Other Services, which comprises third party check encashment, buyback, prepaid debit card product and foreign exchange currency services. more »

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

37 Comments on this Article show/hide all

Graham Neary 31st Dec '18 19 of 37

In reply to post #431168

Cheers Chris. Much appreciated.

It's amazing what a bit of positivity can achieve - well done Ole!


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cholertonandrew 31st Dec '18 20 of 37

Thanks Graham, that’s a really interesting report and lots for us to think on. Best wishes for 2019. With you and Paul writing on this site, I think we’re in good hands.


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doug2500 31st Dec '18 21 of 37

Great way to finish the year Graham.

I followed you into IG Group (LON:IGG) so thanks for alerting me to it and lets hope it works out.

More than half of my new holdings (not that I'm that active) probably come from SCVR as a starting point, or idea, now. Even more important though is the education on avoiding dogs and story stocks.

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OsullivanB 31st Dec '18 22 of 37

Happy and prosperous New Year to you both with thanks once again for a wonderful year of insightful commentary.

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Jonathan777 31st Dec '18 23 of 37

Thanks for this summary, Graham, and for all the insights both here and over the course of the year. I'm on an exciting journey of discovery, and I look forward to attending your financial statements seminar at the end of Jan.

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laurie 31st Dec '18 24 of 37

In reply to post #431183

Augean (LON:AUG) Here is a selection of notifications from Augean concerning the unpaid hazardous waste landfill tax, which the company disputes. A full assessment of liability would probably cause bankruptcy.  An ongoing tax liability (for future periods) would affect future margins.
Cashflow and return on assets for the company are not strong. Before considering the HMRC difficulties, I don't consider Augean a bargain.

02/11/2018: the U.K. tax authority has issued it with a preassessment notification for landfill tax of 18.4 million pounds ($23.8 million) for its Augean South Ltd subsidiary. 

The specialist waste-management company said the preassessment covers the period from September 2014 to May 2018 and is in addition to the GBP10.5 million final assessment for Augean North announced in October.
25 August 2017:
has today been notified of an assessment by HMRC for landfill tax of GBP1.9m with interest of GBP0.2m for the three months ended 31 August 2013.
27 October 2017
has today been notified of an assessment by HMRC for landfill tax of GBP0.7m with interest of GBP0.1m for the three months ended 31 October 2013.
3 April 2018
has, as expected, been issued with pre-assessment notifications from HMRC for Augean North Ltd and Augean South Ltd. HMRC has indicated that it intends to issue assessments for a total amount of GBP37.6 million covering the period from August 2013 to August 2017 in respect of Augean South Ltd and from October 2013 to July 2017 in respect of Augean North Ltd. HMRC has also notified the companies that it is considering issuing a reduction in the value of the previous five assessments received, from the GBP12.0m notified with our Preliminary Results to GBP7.5 million.

Disclosure- no position

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dscollard 31st Dec '18 25 of 37

In reply to post #431163

no short positions reported in FCA Open Interest - though there could be some very small shorts under the cut-off.

 French Connection (LON:FCCN) is almost conspicuous by its absence in the league of most shorted retailers

Volume was about 104K today which is about average for French Connection (LON:FCCN) and odd given today was a short trading day and during holidays....

Recently took a position given the weakness and the potential for a bid: technically the bounce from the 39p was off a lower channel line and in an area of supply so look goods as a trade given the potential upside.


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AMD55 31st Dec '18 26 of 37

Hi Graham. I echo earlier sentiments about how rare such transparency is when analysing one’s Portfolio. Such honesty is much appreciated and reflects the integrity of the site. I am also encouraged not to be too hard on myself when assessing my performance! Losses are part of the game.

I am interested to know if you use stop losses? You do not seem to mention them.

Thanks for all your helpful analysis. Best wishes for 2019.

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Laughton 31st Dec '18 27 of 37

In addition to my thanks to Paul & Graham I'd also like to express my appreciation to all those who regularly contribute through the comments section. You've all helped me learn a lot.

Bit worrying that I seem to own 3 of the top 20 shorted stocks.

January is going to be an interesting month - with lots of Trading Updates due.

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David Bagley 31st Dec '18 28 of 37

Thanks for all your articles and ideas this year. I really enjoy reading them and find your analysis perceptive and insightful. It's not been a particularly good year for me - 12% down - but here's hoping for a brighter 2019. Happy and prosperous New Year to all.

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jonno 1st Jan 29 of 37

A big thank you to Graham, Paul, Ed and the rest of the team at Stockopedia and fellow contributors to the Stocko discussion streams for their knowledge, insight and helpful advice during the year.

Here is to successful investing in the New Year, which will be challenging, but may surprise on the upside for UK small caps!

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brryhayward 1st Jan 30 of 37

In reply to post #431138

Re: Augean (AUG), I notice that there has been significant purchasing by one director recently.

It would seem he doesn't agree with the mainly negative comments on here.

I don't hold.

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Camtab 1st Jan 31 of 37

Thanks for your insights Graham. Can't help feeling you are being a bit hard re Record. I have been a long term holder, as you mention the Management are alligned with the business, they have a strong balance sheet and a healthy dividend. Of course it depends what sort of investor you are but for my portfolio that works. I do agree regarding developing the business it has been somewhat pedestrian, but at their last results they mentioned new products coming through and given the ball park change in investment and politics since 2008 I am prepared to give them the benefit of the doubt given the cashflow of the existing business. Anyway that is investment lots of different views and long may it and you prosper! HAPPY NEW YEAR!!

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nquaile875 2nd Jan 32 of 37

Happy New Year top both of you and here's to a 2019 of more insightful comment and honesty as always!!

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Graham Neary 2nd Jan 33 of 37

In reply to post #431363

Hi Camtab, thanks for the comment and the kind wishes! Like you, I am holding on to Record (LON:REC) although that is more out of stubbornness than conviction. I still hope they can deliver progress. Cheers! G

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David Batten 2nd Jan 34 of 37

Hi Graham

Really enjoyed reading this article - it's great to have a frank overview like this!

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Coracleman 2nd Jan 35 of 37

Hi Graham,
Many thanks for your insightful articles. I always enjoy reading them and Paul's also, as well as the articles from the rest of the team. I began investing in 1986 with a £200 investment in British Vending Industries after reading a Tailpiece in the Telegraph. They were taken over by GKN a few weeks later giving me almost 50% profit, if I remember correctly! I thought investing was "easy" but over thirty two years later (with many ups and downs) I'm still learning every day and your commentaries are invaluable.
Have a great 2019 and good wishes to everyone in the Stockopedia community.

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rorystokes 4th Jan 36 of 37

Hi Graham & Paul, Really enjoy your comments and the ups and downs.Big fan so looking forward to 2019. Happy New Year.

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Graham Neary 4th Jan 37 of 37

In reply to post #432478

Thanks Rory!

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 Are LON:VLE's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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