Small Cap Value Report (Tue 10 Mar 2020) - FCCN, BAR, SRT, SBIZ, SSTY

9th Mar '20 by Paul Scott

103 comments 9687 reads

Estimated timings today - I'll be doing 2 stints of writing today, as I hardly got any sleep last night. Therefore the main report will be ready by noon, then I'll add some more bits late afternoon. Edit at 16:37 - today's report is now finished.

(I wrote this first bit late last night)

Good morning, it's Paul here, with the placeholder article for Tue morning.

This is partly to allow subscribers an early opportunity to post your thoughts about the 7am RNS.

Also, of course, in this time of market disruption, for you to all have a good old rant about anything (shares-related) that you want. I read all comments with interest. Community is really important at times like this.

I've closed almost all my hedges (short positions) now, because I think the 20-30% price fall is probably enough. So my focus is now on adding little positions to my small caps portfolio. Although I have to say, this crisis has really made me wonder (again!) about position sizing for small caps. After all, if you cannot get out, then risk:reward might be not so good.

I topped up these stocks yesterday (NOT recommendations, we have to do our own research);

Beeks Financial Cloud (LON:BKS) - I tried to buy 25k shares at 80p, but only got 10k. Had to up my price to 82p to get the balance.

Cloudcall (LON:CALL) - dropped sharply. My buy order was not filled at all.

Zytronic (LON:ZYT) - same. I didn't get a fill, nothing done - lack of sellers.

Altitude (LON:ALT) - complete punt, got 50k at 27.25p. Not convinced by mgt. At all. We'll see.

Revolution Bars (LON:RBG) - took me all day to get 50k shares at 50p. Half done, to work the balance. Again, no sellers to speak of.

Several others - put orders in, got nothing.

Overall, this gave me the feeling that small caps seemed to be bid-less and offer-less. In other words, existing holders have stopped or given up trying to sell, and buyers know there's no stock around. This feels to me like people sitting on the sidelines, waiting for a recovery, to buy, rather than a stampede of sellers.

After that, I just scanned my watchlist for signs of sellers. Then I gave buy…

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Thornabian

10th Mar '20

£w7L found out the new supermarket stocking them is Tesco. Big news for them. Will be buying more.

Warpaint London (LON:W7L)

FREng

Today's rally in the FTSE 100 and the Dow didn't last long!

ridavies

Where are these podcasts please? How do you access them?

TamzinPiworld

Ultra Electronics Holdings (LON:ULE) FY19 results presentation to analysts from this morning.

By Simon Pryce, CEO and Jos Sclater, Gp CFO.

https://www.piworld.co.uk/2020/03/10/ultra-ule-fy2019-results-presentation-10th-march-2020/

A nice looking turnaround with relatively new management. The market likes the results, up 8.5%, and Stocko has it as a 'high flyer'.

HumourMe

https://www.macrovoices.com/

The latest one has an interesting document analysing bed availability. If you are going to get a severe case, the conclusion is get it early. Or an intravenous vitamin C drip as suggested by marigolds link.

pippasfan

Hi Sady. I think it was Alexander Elder in his brilliant book, Come Into My Trading Room, who said, there is only one thing that effects the stock market, Everything....

timarr

According to this article it seems that intravenous Vitamin C is a cure. So what is all the hype about?

Perhaps because there's no evidence that it works? Correlation is not causality. This is from Snopes:

"Considering that novel coronavirus belongs to the same family of viruses – coronaviruses – as the common cold and flu, it’s unlikely that taking vitamin C will prevent or cure you of a COVID-19 infection."

https://www.snopes.com/news/20...

There is a study underway in China on the impact of large amounts of Vitamin C taken intravenously but researchers are desperate to find anything that works, so there are studies on lots of things. Something may work.

I'd also note that the website you linked from is supportive of a form of alternative healthcare that promotes the idea that nutritional supplements can cure most things. It's run by a US clinic that, in its own words:

"... specialize in nutritional testing and holistic/naturopathic treatments for sustained illnesses such as cancer, Lyme disease, gut issues, anxiety and depression, autoimmune disorders, diabetes, and more"

They may, just possibly, not be providing a balanced view of the efficacy of the use of Vit-C to fight Covid-19.

Gromley

“The authorities are” clearly trying to ensure a continued level of fear about covid-19 that will ensure we are sufficiently compliant to any emergency measures that may ultimately be required, such as those we are currently seeing in Italy (and have previously seen in China).

However, there is a serious risk that the hyperbole gets too far extended and becomes debased as “crying wolf”. We are on the precipice of that IMHO.

Today the Daily Mailis running with the “we are two weeks behind Italy” narrative.

They are backed up in this story by “a scientist” (it must be true then) who is “tracking the outbreak in the UK”.

This “scientist” is one Mark Handley who is : “Professor of Networked Systems and part-time Roboticist at UCL” (whatever that means). He is obviously too modest to tell us that he is an expert epidemiologist and a wizard at drawing suggestive excel graphs that even I would be embarrassed to include in a business case.

It just a pity that today’s data from Europe provides virtually no support to his nonsensical theorising (Spain being the worrying exception).

Meanwhile Sky News is running the headline : UK will see ‘MANY THOUSANDS of people' contract coronavirus (my capitalisation).

This quote is attributed to our own Deputy Chief Medical Officer, Dr Jenny Harries. I actually feel sorry for Dr Harries as it seems she has probably bot had sufficient training in dealing with manipulative media interviewers.

If you watch the clip, you see that Kay Burley attempts to inject “many hundreds of thousands” into the discussion – Dr Harries gets somewhat flustered by this and ultimately says “we will see many thousands of people infected with coronavirus”

How many is “many” thousands? Surely in the high tens of thousands? Probably above 50,000? Well perhaps (and it is certainly less than the 45 million mentioned elsewhere), but Dr Harries sentence continued with “that’s what we are seeing in other countries”.

Actually, aside from the epi-centre China no country is yet above 10,000 cases (Italy probably will be by the time you read this).

I am appalled by Kay Burley’s interviewing technique here, she engineer a misspoken quote by an eminent medical practitioner (who is clearly not tech savy) and Sky have gone on to lead with this (wrong) Sound-Bite. Disgusting.

Trident

I think before traducing globalisation, just remember we weren't that far away from a Jeremy Corbin Govt.

Anyone who can remember the 70/80's can recall the issues by having too many production assets subject to the diktats of Unions, strikes etc

Even the current Govt. is heaping regulations on employers, often it seems in a way that is hard to predict.So there is no escape or mitigation if everything were to be sourced here.

Also globalisation has generally helped living standards increase around the world.

There may be some shading of risk that needs to be done. But its hard to find a truly safe zone.

jwebster

Yes, the dot com bust in 2000 started with a rolling top then a three year bear. Along the way there were a couple of bear market rallies dip-buyers bought into. At the end of the bear was a violent capitulation drop. The crisis in 2008-09 looks the same with a rolling top, couple of rallies then a last leg collapse, although this bear was quicker, around 18 months. Both of these events included recessions.

Since then we have had some V-shaped corrections, steep drops and somewhat fast recoveries. No recessions, just panics within the bull market.

Interestingly, this time the drop is sudden and very step, looks more like a bear market capitulation phase. Probably doesn't help FTSE is stuffed with financials, miners, energy.

We will take our lead from the USA both in terms of how they get on with the virus and the SPX.

Interesting, if you look at SPX versus FTSE100, while the FTSE100 has been drubbed, SPX looks more like a simple correction. No rolling top. And look how far SPX has come since 2009, this looks more like a blip in the scheme of things, unless it snowballs into a recession.

mojomogoz

Hi Ken, thanks, wasn’t trying to go through all bear markets. I was trying to highlight that beginning (or really getting going at least) with a bang tends to be systemic like 29 or 08...I could have probably included the 70s oil one too as systemic.

Much more typical in history of US and U.K. market is death with a thousand cuts with a few knife plunges along the way (but 3inch blade rather than repeat 6in).

Imo we are not undergoing systemic crisis (yet at least) but we are having 6in repeat stabs. The oil crisis will blow over (damage to some oil cos but Shell etc will make good from it by buying bargains). COVID19 will also pass over with not much scarring IMO -> in the age of hypermedia we are overreacting and manufacturing bogus data and scenarios. So imo we are left with a growth and expectation issue...and that should be a more leisurely bear market, if indeed we have a bear market.

As stated elsewhere COVID19 and now oil shock may be a positive in the sense that it pushes a rather quick and massive response function that would have been slow and incremental.

There remains a danger that we overreact to COVID19 (and I’m not saying it’s a nothing but note that in Italy the average death age is >80 I believe...from bemused Italian friend...and there are very different structural factors at play that seem to have severely aggravated relative to UK). An overreaction will see very surprising events like 2 month bank holiday and markets closed....if COVID19 is as bad as feared or if fears dominates we will end up there some point by end of March.

If we do the opp to profit from a bear market will be fleeting.

Obvs my views may be seen as wingnut;) ....these the risks I’m seeking to manage optimally

Yes jwebster...and refer you to above response as partial one to you too.

IMO 2008 was a bang. Technically you are right. In global context it was risk positive in many markets up to mid 2008 and the pace of implosion in US financials accelerated

Rusty2

The main US indexes are now up around 2.5-3.5%, yes the FTSE rally did not last long.

ken mitchell

Hi mojomogoz

Thanks for the reply. Your thinking is the same as mine.

Mike888

My pockets are burning, but I've learnt to resist the sirens, it will be clear when to buy, and for me, that is not yet.

Patience is the hardest of disciplines, but it is the one that invariably pays off, albeit it little spikes do little to calm the nerves.

I sit and wait, and wait, and watch, acknowledging that timing perfection is impossible, but timing adequacy is good enough, because the closer you strive for perfection, the riskier the proposition, adequacy is all you need.

it will be clear when to buy

Please be sure to tell us when, as identifying that point is a skill that I have failed to learn so far.

Albertos

US stock markets up by 5% give or take.

Not sure why - new cases today of over 4,500 - centered in Europe.

I don't fear the virus other than the economic disruption it will cause - Europe is the next economic block where growth will stall.

No confidence in Brussels to address this situation - more likely to enforce austerity on a country with CV problems than allow it to fiscally stimulate.

Nervously watching

MiserableJacktPotato

11th Mar '20

As a complete amateur at this who offers no advice, I suspect this is a dead cat bounce based on the market expecting the Fed to bail out huge swathes of industry. Personally I think there's a bloodbath waiting to happen with people being sent home unable to afford mortgages and other loans. I also expect there to be a load of houses unlocked into the market (non payment of mortgage and owners dying - a bit morbid but older people are very vulnerable to this virus) and think that assets generally are going to fall heavily in the next few months.

I could be well be wrong, but the news coming out of Italy doesn't look good.

The crash was because of oil prices falling around 30%, oil prices were up yesterday.

Small Cap Value Report (Tue 10 Mar 2020) - FCCN, BAR, SRT, SBIZ, SSTY

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Paul Scott

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