Small Cap Value Report (Thu 16 June 2022) - BOTB, HRN, BWNG, ANX

16th Jun '22 by Paul Scott

83 comments 9297 reads

Good morning! It's Paul & Graham on duty again today.

Agenda -

Paul's Section:

Best Of The Best (LON:BOTB) (I hold) - Results for FY 4/2022 are ahead of expectations. The company also announces that shareholders can tender shares (total up to 11% of the company) at a c.50% premium price of 600p, which has put a rocket under the share price today. It's probably worth taking up the tender offer, given that management is doing so, but they remain very substantial shareholders. Valuation does look cheap, with a PER under 10.

Graham's Section:

Hornby (LON:HRN) - a successful turnaround story continues at the model railway company, after many years of pain for shareholders. Potential operating leverage could generate very significant profit growth in the years ahead, if the Chairman’s analysis holds true. The shares already price this in to an extent, but depending on your view of the medium-term sales trend, could offer some very nice upside.

N Brown (LON:BWNG) - this trading update doesn’t mention any progress with the Allianz litigation. Trading has softened compared to last year, due to the lack of any online retail tailwind from lockdown. Earnings expectations are unchanged. Looks extremely risky due to multiple factors, difficult or impossible to value.

£ANX (no section below) – this credit hire (car hire) and legal services group provides an AGM trading update. Trading is in line with expectations. Credit hire is growing rapidly with vehicles on the road up 52% compared to last year. The legal services division is seeing increased cash collections but it’s unclear if the other information given in this section of today’s update is useful or material. Negotiations continue with VW over the emissions scandal, where Anexo’s subsidiary is representing clients against VW.

ANX shares are superficially cheap versus earnings but investors need to have a strong view on the quality of the company’s £215 million in total assets, including £188 million in receivables (as of December 2021), as any writedowns could be very damaging to future earnings!

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…

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KevinS1

16th Jun '22

With regards to Boohoo (LON:BOO) Michael I feel your pain - not nice watching a SP continually declining.

Luckily I bailed out much earlier, but have traded in and out a bit, but never felt truly bought into the longer-term story/plan - feeling that it needed some evidence of recovery before I felt comfortable.

With todays update I see the light at the end of the tunnel and some better results/promise in the short/medium turn, but the risk is that these trends are stopped dead in their tracks by a downturn in spending patterns if/as recession strikes.

However, today might be a buying opportunity as I am sure the SP is oversold on the back of both the ASOS and broader market down-trend.

To this end I bought a small holding in my SB account, but won't go near them in my SIPP/ISA without a more general market up-move and/or hard evidence of recovery. I tend to trade my SB account so this isn't likely to be a LT holding.

If I was sitting on the big losses as you seem to have its a hard call, but probably I would take my losses and find something else - it could be a very long road to recovery, and probably more a personal view, I don't like seeing -50% shares sat in my PF, so I generally get out and look to make money elsewhere - easier said than done and I don't always eat my own cooking!

Good luck and lets hope Boohoo (LON:BOO) makes a move upwards in the short-term.

Just as an aside, my teenage daughters don't buy anything form Boohoo (LON:BOO) they both use Shien all of the time. Hardly a representative sample, but the competition is definitely out there.

Mark B

My short answer would be - No.

Why, because you're asking for an order - not for advice. Also, perhaps personally, this question horrifies me.

Not everyone will agree with me, but I'm ok with that and power to them. This is a quick snippet of my process.

I would read the last five years of annual statements, do research on the creative director, the chairman, the CEO and the chief financial officer. Then I would also listen to all the presentations, especially the shareholder questions at the end. Once you've done that and you understand the balance sheet, the income statements and the cashflow statements for as far back as you can. Once you've done that, you will know what you are going to do and it'll be your decision.

If you don't understand how to find and value a business, find books (at least five different books is a good start) and read them from people who have at least 20 years experience. Don't short cut as that short cuts yourself.

That's how conviction works.

Brookeda

Surprised here Michael, I consider you one of the wiser people on here and always look out for your wisdom so surprised you are down so much.

I am down around 20% this year after being up 25% last year so pretty much getting back to where I was. I have added some money this year but have quite a bit waiting to be deployed (excess income as I still work and some bonds due to be mature this year.)

I have found has you have that the overall markets have maybe done better than I over some of the years and so any additional money I put in are now going into tracker funds. I enjoy investing and will continue too, but I don't want to have any additional money sitting in individual stocks.

What's comforting is that this isn't us , the whole market is down but it'll recover.

abtan

ASOS (LON:ASC)

Hi Bully15

I completely agree with your positive sentiment.

I was speaking with a friend this morning and saying pretty much everything you have mentioned, especially on that excellent US growth.

If there was one unexpected negative, it was the change from net cash to net debt by the end of the year. That took me by surprise and I'm not sure I understand why the change is so drastic. Stock write-offs from Russia perhaps?

Nonetheless that's a huge fall today (-32% right now) and with a market cap of £800m, I must admit to being very tempted to buy back in.

Hi Mark - totally agree. What is the 5+ book out of interest?

I meant, read at least five books on the subject of finding and valuation of businesses. Sorry for the ambiguity.

MichaelFBS

Brookeda Well that is underserved compliment but thank you.

I have read a lot and sort of know what I should have done but it has been a tough 2 1/2 years which has made me question my suitability for investing. I am envious of people just starting out as this bear will mean they learn a lesson early. From 2012 to 2020 I thought I was a genius.

Just to clarify my figures. I was flat 2020 (but it hurt mentally that if I had nothing I would have been up 30% [I think it was closer to 35%]). Last year I was down 15.3% and this year 26.5% YTD but from ATH somewhere around -50%.

I have been hit by Boo which I have held since Oct 2015 (apart from sell in March 2020, which I started re-purchasing in July 2020). It was at one point something like 13/15% of the portfolio. (Hubris) Best Of The Best (LON:BOTB) and others.

My holdings are below, which as you can see is very AIM centric the US stuff are recent purchases.

I could probably write a small book on the past three years, maybe I should, but hope that gives you a flavour of where I have been.

I certainly agree when you say “have found has you have that the overall markets have maybe done better than I over some of the years and so any additional money I put in are now going into tracker funds. I enjoy investing and will continue too, but I don't want to have any additional money sitting in individual stocks”

I down but not out but yes I have a long back to make. Fortunately I am not 100% invested in the stock market as I have a couple of income generating properties but these are trying times.

Regards

Michael

PS The TSLA holding is just for a bit of a laugh and to be along for the ride. I won’t be buying any more!

jamesalastair

It didn't .... it took 4.5 years. Everyone forgets about the epic dividends.

Harry Hindsight

If you try TradingView basic (free) very customisable charts and loads of chart tools to explore for the rest of your life - fibonnaci, MACD, Donchian, Ichimoko etc etc and subscriber developed ones.

Other than that Stock charts are very good if the SP is above the 50 dma then ok if drops below - warning Will Robinson. Look for where the SP historically bumped either the 200 dma or with markets as volatile as now the 100 dma.

Charts are followed by everyone around the world so your following the 'herd' - the trick is to be a contrarian.

Candlesticks are also great fun - Investopedia a good learning resource.

Influenced by Micheal Taylor unfortunately - let the Share Price tell the story, and let Stocko provide the risk management.

I'm exploring spread betting on a very small losable basis. Learning going long but for some reason cannot read shorts. Things go down quicker than they go up, so should be easier. Maybe upending charts is the issue - is there a programme for that or just turn the screen upside down :)

macro economics are extremely hard. Everyone has a rear view mirror. Are you able to do a better job. It's very hard.

this is a buyers market for me. I have no influence on the market, I am a buyer and I believe it will get better for me, but I don't know. I know this is great. It could become greater. I hope.

lower lower price equals greater return

please sell and make me richer

what you do is up to you. If the market is a casino, then you will be lucky or not

I am seeing the gambling from the investor and until this is finished, we will get back to the real investors. When we own the companies profits and losses.

Understand your business and buy it when it is cheap. It could become cheaper, buy more. This is the best time to buy. Hope that you can buy more at a lower price.

traders will not do well

please sell and give me a better entry price

not not true, very good traders do well. It's a very hard game that I admit I do not have an advantage

Small Cap Value Report (Thu 16 June 2022) - BOTB, HRN, BWNG, ANX

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Paul Scott

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