Small Cap Value Report (Thu 10 Dec 2020) - SBIZ, MMH

9th Dec '20 by Paul Scott

68 comments 10562 reads

Good evening/morning, it's Paul here with the SCVR for Thursday.

Covid isn't even touching the sides in Zimbabwe. Please listen to Margaret, who I met in 2019, she's an amazing woman. This is just 9 minutes.

Free Xmas Harp Recital!

A few days ago I promoted Lauren Scott’s (my sister-in-law) online Zoom harp recitals. Unfortunately I think we left it a bit late for the paid-for concerts this year, which have been reduced to just 23 & 24 December, which seems to be when there is demand, there are a few tickets left.

In the meantime, I’ve decided to personally pay Lauren to perform live and exclusively for you, my lovely cultured Stockopedia readers! See it as my Xmas treat for loyal readers here, and a way of helping a talented musician in a year when all her usual gigs have been cancelled.

This special, free, harp recital for Stockopedia readers;

** Saturday 12th December at 6pm, for 45 minutes **

Lauren can only fit up to 100 people on this Zoom concert, so please only sign up (free) if you’re definitely going to attend, as we don’t want a load of no-shows, leading to other people missing out! Lauren only needs your name & email address to send you the Zoom link, that’s it. No spam.

Here is the sign-up link

If you like the recital, we’re hoping that you’ll help us spread the word on social media, and recommend Lauren’s Xmas recitals to others. I’m spoiled, because for about the last 20 years, I’ve enjoyed Lauren’s beautiful harp playing in person. It’s a great way to kick off the Xmas season, and singing along with your family/friends is a smashing experience, especially if you get really Christmasy & crack open the mulled wine & mince pies, which is what the Scott family usually do every year! (but not this year).

Harp music is extraordinarily calming, and peaceful to listen to. It’s almost other-worldly in my experience. Whenever Lauren starts playing, I feel the stress just drain away. Ideal treatment for profit warnings, for us investors!

Here’s a reminder (new video below) of Lauren playing Xmas tunes. Like the rest of Xmas, it’s only religious if you want it to be. Personally I’m not religious, but I really enjoy singing along to Xmas tunes, as it reminds me…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Paul Scott

10th Dec '20

Thanks Penny!

Silver Moon

I'm troubled by Xlmedia (LON:XLM) as I'm currently 37 percent down on what is a sizable part of my portfolio having bought more just prior to my finding out that the Google search engine algorithm's had scotched it's business.

UK_Investor_8888

My full sympathies Silver Moon re XLMedia (LON:XLM)

The broker target is still 1 dollar (about 75p)

There's 716K volume in the green colour today.

If we're lucky, we may see 50p... then two more hops to the 60p where you get your money back... We are looking for an earnings surprise.

mojomogoz

Scs (LON:SCS) -> superbly run business. Really like it and owned it for a couple of years from sub 150p when they disappointed post IPO and sold (I think autumn last year) at about 230p, collecting a near 10% dividend along the way.

I sold as I think there's a chance they do something splashy with their cash in terms of an acquisition. They looked at Sofa.com in early 2019 and sensibly got out of the way rather than bid against Mike Ashley. They wouldn't have paid much but they would have needed to commit significant development capital to a sofa proposition outside of their area of competence.

They can grow stores a little bit thro new out of town sites. They are super focused on getting the right venues...this is good but the problem is that there are only approx 30 UK sites they want and they got to wait for their opp to get them. In the meantime they work down leases or exit on some of their less good stores (they went on an ill considered expansion spree in mid noughties and struck a lot of long term leases that still weighs a little in some places).

IMO the thing to focus on with SCS is buy at a price that gives max dividend and then look for a bit of capital appreciation from there. When I bought I felt that there was upside to their House of Fraser tie up (op leverage was coming through) and that management would get round to embracing a share buyback with all that extra cash.

HoF went bad through no fault of their own (...and great mgt by SCS to get out without significant cost) and there is no sign that they will buyback stock (and my suspicion is that they are ambition to buy and expand). When their big private equity investors departed that was great window of opportunity to state they'd return cash. They didn't.

I would love to be holding SCS at the point they announce a major buyback program but sadly I don't feel confident of that. A new CEO may institute that...but given behaviour of mgt and board to date they will perhaps employ someone they view as an acquire and build person.

I guess that the price trajectory will be moderate up but large down on moderate trading disappointment. SCS are perhaps vulnerable to negative impact from post covid opening.

Stocks123456

XLMedia (LON:XLM) made $27m revenues in 6 months to 30 June without high Google rankings and no sports fixtures for much of that time. Given the high margins, if they regain their rankings and get a foothold in the US market, things could rebound sharply. I hold, albeit small and tentatively.

History is always a trap as it stunts imagination ;) (I love market and economic history but I do choose to be careless with it)

The answer to inflation comes from focusing on debt first.

We have preposterous amounts of debt. There's zero chance it will be paid back in real terms. They may or may not be paid back in nominal terms. I believe the 'surprise' this time is that many debts, particularly govt, will be disappeared rather than paid back through the amazingly fluid and flexible balance sheets of central banks (they are like magic compared to a domestic or corporate balance sheet).

Usually we learn a bit more each market phase. What has been learned by policy makers and central bankers in last decade post 2008? They fought a debt depression successfully through QE etc but they did not fully prevent economic malaise...the way I think about it is the real economy has had a decade long demi-depression pre covid.

During covid they showed that they have learned the lesson on the real economy and actions were taken in many ways to ensure that policy interventions where direct and into the economy. Things like furlough obviously but CBILS and grants to biz too, straight cash gifts to consumers by some countries (helicopter money), govt underwriting of credit risk, etc

Its a brave new world. 2008 taught us money isn't actually real...if it were then we would have had a massive depression. And 2020 is teaching us that debt is not as real as we assume.

We actually learned this a long time ago:

This was the slow way of making debt not count and it relied on growth plus sustained modest inflation. I'm not saying we'll do exactly the same this time...and I think we might do some rapid debt write-offs...look to Japan and the massive ownership they have of JGBs (they started QE earlier)...might they just effectively write what they own off? Would this be deflationary or inflationary?

I don't know exactly how inflation comes but it must as the alternative is impossible for our societies

(I realise this is too long for IGPJ but maybe some others find it interesting...listening to boring conf call so handy distraction for me)

doublelutz

I have to say that as a big football fan I have never heard of the XLM's site "101 Great Goals" nor have I ever read anything about it.

sharw

WARNING Stocko'sRNS feed seems to have failed this afternoon and I have missed from my list -
AVEVA (LON:AVV) rump placing (I allowed my rights to lapse)
Venture Life (LON:VLG) Slater goes from 5.3% to 15.2% (I hold)
Codemasters Group (LON:CDM) 7 holding RNSs from 11 32 on - last on Stocko 11.29 which puts breakdown at 11 30 (I am reporting highlights of the games being played for a higher bid on the Stock Pitch thread).

I am reporting this via green button

The Phoenix

Hi Mojo good read they are already disappearing debt in the billions as per link below, the figures used to terrify me but with most developed world debt being probably 40% held by central banks my guess is it will vanish as fast at the point of repayment as it was generated to start with. To be fair though at the moment what is the alternative if the B of E were not underwriting furlough we would probably be north of 10% unemployment.

https://www.thisismoney.co.uk/...

I agree clarea....the debt and way of making disappear are far from riskless...but high unemployment and debt driven austerity and deflation is a known super risk we want to avoid.

Some people will say that economies and money operate almost as natural laws so we must pay the inevitable inescapable price which is austerity/deflation....I think this abuse of maths and historicism (a la Karl Popper)

Just got this in my inbox...related tangent...

https://heisenbergreport.com/2...

SaarfLondon

Blimey ,I thought Croydon was rough !

Logical David

Thanks sharw for the updates because I also hold Venture Life (LON:VLG) & £CDM. Interesting times ahead.

spglet

Indeed, a good read Mojo. Thanks for taking the time to post your views. With this sort jiggery pokery in central bank financing, you can see why people start believing that bit coin is a legitimate asset class. The B of E is the UK's big competitive advance over the European Union countries. They probably know that all to well, which is why a Trade Agreement is proving so difficult to conclude.

Gromley

When I lived in the proper SaarfLondon I always assumed that Croydon was in Surrey.

Behave yourself u rascal ! Born in Fornton Eef and lived in Streatham but kept moving saarf.Now Horsham based.

Warming to you - but when was the last time a Sarf Londoner chastised some as a "rascal"?

Horsham etiquette and a refined audience now dictate my language ...you Slag !! :)

Mark B

11th Dec '20

Hi Paul. There is a market for war medals. Maybe you could help Patrick sell his? I only say this as he was about to give them away and I'm guessing that a cash injection would help him more than the medals...

peterg

Agreed, Gromley. Croydon was an exotic place we made a long, slow, journey down the A23 to once in a while for exciting new foreign things like Ikea and trams

Small Cap Value Report (Thu 10 Dec 2020) - SBIZ, MMH

Free Xmas Harp Recital!

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

68 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...