Small Cap Value Report (Thu 15 Mar 2018) - Bitcoin, PMP, TFW | Paul Scott

14th Mar '18 by Paul Scott

68 comments 16815 reads

Hi, it's Paul here with a shorter & earlier than usual report.

NB. No reader requests today please, because I won't have time to do them - I have to attend a conference in London all afternoon & evening, so this will be a shorter & earlier report than usual.

However, please feel free to leave your own comments on results & trading updates from companies that you find interesting, explaining why you think they look interesting. It's a team effort!

I completed yesterday's report in the evening, as the whole day was taken up with Conviviality (LON:CVR) . Additional sections on Somero Enterprises Inc (LON:SOM) and Empresaria (LON:EMR) were added. So here's the link for yesterday's full report, to get you started today.

Bitcoin

I see that is falling again. It's down to $7900. The recent peak was $20,000.

Recent developments have been that Google has apparently banned all advertising for fantasy currencies, following on from a similar ban by Facebook. Christine Lagarde of the IMF made extremely negative comments about fantasy currencies, saying they may need to be banned.

All this is inevitable because there is no way that governments will allow criminals and fantasists to undermine or replace the existing financial system, it just won't happen. Any such threats will ultimately be banned, although authorities tend to be very slow to react.

So I reiterate my previous firm conviction that fantasy currencies are doomed to failure. The fact that they have zero value is also rather important. You only have to go on to social media to see the type of people who are bullish on this stuff – these are not financially sophisticated people by and large. I don't know any serious investors who would go near crypto-currencies, because they can see it for what it is – a giant financial speculative bubble.

I've done quite a lot of research on block chain technology, and I feel that some form of adaptation of this could become very successful and of widespread use. However the speculative mania over completely artificial valuations put on the so-called coins, seems to be nearing the inevitable end-game – of total collapse.

Anyway, I am watching from the sidelines…

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john652

15th Mar '18

Some of the problems I think with xl media, XLMedia (LON:XLM) which I hold, is a lack of understanding of what it does, it’s deep into the plumbing of social advertising and client acquisition. It performed a strategic review a couple of years ago and that seemed to be a conclusion I heard then too, hence the ceo doing more webcasts and roadshows. I’ve topped up based on latest report, so bound to fall now, but if they can replicate the gambling model against finance there are huge affiliate revenues on offer. Regulation is a risk but less so than 2 years ago. Does anyone have other negatives on this stock as I try and persuade myself not to buy?

Rusty2

PZ Cussons (LON:PZC) not a small but issued a profit warning, were down over 20% but have recovered a bit. Could be a read across to other companies in that section. Seems to be challenging at the moment with consumer spending down. "The UK washing and bathing division has continued to experience lower levels of purchases reflecting consumer caution across all retail channels caused by economic uncertainty and inflation out-stripping wage growth,"

I'm surprised that such products have been hit though, are people really not washing and bathing anymore or are they buying other products?

sbotting

Hi Paul,

I really appreciate your commentary on the SCVR and your writing has been very useful, educational and profitable for me.

However why do you report so extensively on bitcoin and cryptocurrency, it doesn't seem to fit into anything really to do with small caps in particular or the small cap investment environment in general, how does it help people invest in small caps?

I ask the question in good spirit and to improve my understanding!

JohnEustace

I thought the same - surely PZ Cussons (LON:PZC) must be losing out to the UK competition in the supermarket and discounter own brands. They also have their own particular challenges in their Nigerian business.
The Stocko label as a falling star seems appropriate here unfortunately.

I used to hold PZ Cussons (LON:PZC) back in the day but now a little of my money is on the contrarian Creightons (LON:CRL) bet.

Paul Scott

Hi sbotting,

I've only mentioned Bitcoin 3 times in these reports, which hardly qualifies as "report so extensively", does it?

Bitcoin is one of the biggest speculative bubbles that the world has ever seen, and people often ask for my views on it. It's therefore very topical. I find it interesting to think about & discuss topical subject matter like that, and the bosses at Stockopedia like me commenting on anything interesting & topical.

Also, given that I have a very strong conviction that Bitcoin is likely to be a financial graveyard for punters, then I feel it's my duty to at least alert readers to the risks, and then it's up to them whether they want to punt on it or not.

It only took me about 10 minutes to write the above section on Bitcoin, and the section is clearly identified with a title - the purpose of which is that people can just skip over any sections which don't interest you.

Regards, Paul.

willhampson

Agreed, sbotting (mainly as I find it then takes over the discussion). Written by someone who has learnt a great deal and highly values the SCVR.

Since it's a quiet day (seemingly), can I see if others agree that we finally get rid of these vote ups and down for individual comments; by all means keep it for a thread in general. It really does just strike me as petty (see the downvotes above for certain users) and takes away from what is an otherwise excellent forum. It also polarizes those with contrarian views; offensive comments can just be removed by admin. Happy to now be hit with a wave of down votes :) ...

@sbotting
Clearly I'm not Paul and wouldn't presume to speak for him, but my answer would be:

Paul does comment from time to time on general market conditions because the small cap universe does not exist in a vacuum - events elsewhere affect sentiment here.
Crptocurrencies attract money that isn't being invested in stocks. If people are borrowing to fund their cryptocurrency purchases and that goes wrong they may have to sell real assets in a hurry to meet their debts.
I also suspect Paul feels some responsibility to his readers to warn us of the dangers of getting involved given his previous experience of things going badly wrong on him.

andrea34

Sorry I so easily annoyed so many people with your cruel thumbs down, I didn't take in Paul's "no reader requests" comment :-(

Thanks john652 for your post on XLMedia (LON:XLM). As per my original comment, I think they are great value, especially in what is a frothy market. Gambling is an obvious scare (or moral dissuasion for some) to invest, but I feel the increasing diversion into finance should help to offset that. Considering that they managed a successful placing at 198p, then I would have thought some support of the price is likely at this level. The only other worry is the chart, where the price is caught between the 50 and 200 day moving averages; I don't know what this is is a sign of....

sharw

Although I have not used a down vote today I notice that the ones that are there are on two posts which totally ignore Paul's opening "No reader requests today please". Paul politely replied to the first (2 down votes) reiterating his request but the second post ignored that as well and got 5 down votes which I regard as fair comment and not petty.

kenobi

Hi Paul,
I have the greatest respect for you views, this bitcoin thing though, I'm not sure you've read it right. I welcome the banning of adverts on facebook and google, seems to me that just sucks in suckers. I remember at $100 thinking it was ridiculous and I had missed the boat. I do agree that the crypto market is doomed, and nearly every crypto currency will fall to the price that is irrelevant.

I've just got this feeling about bitcoin, that it might be like amazon in the .com crash, of course it will fall but will it be the one that people go back to after the decks are cleared ?

I only have a small investment, less than half a bitcoin, and to be fair the volitility has put me off investing any more. The treats as I see them is more from established players creating their own. Why haven't google or amazon created their own crypto currencies ? Why haven't governments ? Seems that starting from here, you could take the best of all of them, create something better suited to a currency rather than a speculative asset, and make a fortune or at least get the jump on your competitors,

The more I think of it, the more risks I can think of, so maybe you're right !!!

K

Damian Cannon

I'm happy to help with your RSI problem Paul. I think that it's going to be a real problem in society in the future as we spend increasing amounts of time in front of the computer. Still by taking action now hopefully it'll resolve itself.

NB another trick is to learn the keyboard shortcuts for things that you do with the mouse - this is often quicker and means less time spent grappling with the mouse making fine motor movements.

Damian

Chrisfarrell21

Andrea341, you've been told!

Just kidding. Echoing what Will Hampson said (post #14), if we're going to give other posters a thumbs down, it's probably more useful to them (and to yourself) to also reply to the person to explain why they've so annoyed you, or what they've missed. If you don't feel strongly enough to reply, then there's probably no need to give a thumbs down. It can be surprisingly demotivating.

Will Hampson - Sorry, I couldn't help but give you a thumbs down, but it was done purely in jest!

Thanks

Chris

Zipmanpeter

Re Portmeirion (LON:PMP) Solid results driven by "Sales to the rest of the world showed the most significant growth during the year, increasing by 54.4% to £24.2 million (2016: £15.7 million)." with another £6.6Mn in Korea, making the group nicely balanced with roughly 1/3 in UK, 1/3 US and 1/3 other. ROW has potential for significant further growth in my view. With online up +13% in H2, group up 20% in first 2months vs LY, and no debt, much to like.
I added more this morning and expect to hold for long term

Yes, Chris, many thumbs down is demotivating indeed, and I agree that a comment is more appropriate. It is not like I said something offensive or insulting. I can't help it if I'm occasionally a bit dim. In a similar way, when Paul IS available, I do notice that sometimes LOADS of people all ask for the same company to be covered... and I could argue that that is a waste of posts, clogging up the page when there could be more interesting or informative posts to try and pick out. But do I down-vote them? No, I just ignore them, I'm not vindictive, I don't like to make people bad, and when I can I try and help people on here too. That's the thanks one gets, I guess.... :-(

Note all, it is possible to undo a thumbs down by doing a thumbs up on the same post... if you really wanted to be nice, and figured your previous action was unnecessary :-)

While I'm on here, I'll ask for some useful opinion... what does anyone think of Symphony Environmental Technologies (LON:SYM) after the latest results? IMHO they seem less jam-tomorrow, as they are now in profit and debt-free. I only wish the outlook sounded more concrete and positive - it's not negative, just a bit wishy-washy with comments about strategy and general world environmental attitude.

Effortless Cool

"Note all, it is possible to undo a thumbs down by doing a thumbs up on the same post... if you really wanted to be nice, and figured your previous action was unnecessary :-)"

I just tested this on your post, and it did not work.

No, it's not possible, if you do it you may just be updating what someone has done recently so it may look as if you have undone it. Thumbs up and down don't work on ipads.

Yes I thought it was a weak excuse. I believe this is one of Lord Lee's core holdings, think he said he will never sell it. I agree people are buying from other producers. This also could be going out of fashion. I that sector I would probably go for Swallowfield (LON:SWL), not currently a holder though.

LeoInvestorUK

Conviviality (LON:CVR) - It occurs to me that they almost certainly have duty / VAT unpaid alcohol in bonded warehouses. If a bill for duty / VAT on goods withdrawn from the warehouse is unpaid then HMRC are unlikely to let them withdraw anything else. This would result in problems stocking / supplying alcohol quite independently of any issue with suppliers' credit insurance.

CVR supply Stonegate and Wetherspoons, who will doubtless have started making contingency plans already. Wetherspoons will be particularly sensitive to supplier problems having suffered from Russell Hume's meat hygiene / labelling issues. Perhaps some of these companies have been squeezing their supply chain too hard - see also KFC not willing to pay enough to get competent logistics until business disruption forced their hand.

ricky65

I agree with Paul that Portmeirion (LON:PMP) is a Minervini stock as it meets his Trend Template.

RichardK

Elegant Hotels
Bad press for Barbados in the Telegraph this morning.
"Stench of economic decay is overwhelming Barbados JULIA BRADSHAW

Barbados stinks. It really does. A foul effluvium bubbles up from the manhole covers and rainwater drains in the streets, pours into the roads and pavements, and out on to the island’s pristine beaches 24 hours a day. Red flags along the white sands tell us it is unsafe to swim. The smell of human excrement is sometimes unbearable.

This sewage problem is blighting the entire south coast of the island I used to call home, and is a symptom of the incompetence and perceived corruption of the current administration, which Barbadians have dubbed the “do-little government”.
The article goes on in this vein. It could hit Elegant Hotels' business. I sold some this morning, but the rest are frozen in Beaufort Securities!

Richard

Small Cap Value Report (Thu 15 Mar 2018) - Bitcoin, PMP, TFW

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Paul Scott

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