Small Cap Value Report (Wed 25 Mar 2020) - HFD, WGB, DTG, VCP

25th Mar '20 by Paul Scott

107 comments 10140 reads

Good morning, it's Paul here with the SCVR for Weds.

Estimated timings - probably a little shorter report than usual, I should be done by the 1pm official finish time.
Update at 12:52 - today's report is now finished. Thanks for the kind reader comments, much appreciated.

Coronavirus & me

Firstly though, apologies for my absence of late. I started to feel unwell 9 days ago. I've rented a bedroom in my best friend John's house in Islington for about 20 years now. 4 of us (including his Mum) share the house, and it's very convenient and pleasant for me to have a London base. One by one, we started to fall ill last week, with coronavirus-like symptoms. John's Mum is the eldest, at 74, and she had to be hospitalised. The hospital confirmed that she tested positive for coronavirus, therefore it stands to reason we've probably all got it. As things stand, she's in intensive care, on a respirator, with things looking dicey, we're desperately hoping that she pulls through. It's striking how much more serious the virus is for older people, and we're regretting not having properly isolated her. If any of your relatives are questioning the need for isolation, please forward them this article.

As regards for me, I've had a range of expected symptoms, but won't run through all of that. In a nutshell it's just like being hit by a bus. You don't have any energy or physical/mental capacity to do anything, except lie in bed almost 24/7. Today's the first day that I've felt up to writing a report, so my plan is to write sections slowly, then take naps! We'll see how we get on.

Market conditions

Unprecedented, I've never known anything like it. There are echoes of what it was like after 9/11 (when all the travel shares crashed), and at the worst point in the 2008 financial crisis, but the speed & severity of this crash has been astonishing, and horrible to witness. I chronicled the early stages of coronavirus here in these reports. My strategy was to take it seriously, and hedge my longs with various short positions (on travel companies, and on the Dow Index). That back-fired initially, but over the last few weeks it has very much saved my bacon. Hence whilst my existing portfolio of long positions is basically smashed to pieces, I have…

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jamesalastair

25th Mar '20

I am so sorry to hear of your and your household's illness. I pray you all make a full and speedy recovery. These truly are unprecedented, strange and scary times making it almost impossible to plan and structure any portfolio especially one with only 5 years to go until retirement. God bless and good luck to all.

mercury61

It's not total lock down in the air. Checking Heathrow arrivals Rome, Madrid, Paris, USA, Sao Paulo , Newcastle upon Tyne and many more etc. Seems at odds with what's happening on the ground.

GrahamF

"Thousands of 15-minute home tests for coronavirus will be delivered by Amazon to people self-isolating with symptoms or will go on sale on the high street within days, according to Public Health England (PHE), in a move that could restore many people’s lives to a semblance of pre-lockdown normality.

Prof Sharon Peacock, the director of the national infection service at PHE, told MPs on the science and technology committee that mass testing in the UK would be possible by next week."

Absolutely.

Many people are looking to government for explanation and clarity. I think they should be getting PHE to comment much more. The time for examining what went wrong and why will come much later, but in the meantime surely PHE should be explaining what test kits and PPE have been ordered, when they were ordered and when they will be delivered. I get the impression that the politicians are having to take the flack for PHE failings.

I note that there have been some complaints that some masks that were delivered had gone past their expiry date and that a new date had been added after testing to check the stock was still ok. I think that this just illustrates that it is pretty difficult to hold vast stockpiles of supplies when large quantities of it potentially may need to be binned because it doesn’t get used before it expires.

If an epidemic strikes and you’re not prepared you look like idiots. If an epidemic doesn’t strike and you have to write off vast amounts of stock you look like idiots. I seem to recall a lot of controversy about purchasing large quantities of Tamiflu that either didn’t work very well or never got used.

potter12

Thanks, Timar. This is good news. And so sensible to get Amazon to deliver. Given the supply of tests, I guess they are much the best at this kind of logistics.

simoan

Si

In your opinion has the response (with the knock on effect of trashing the world economy for x quarters/years) been wrong?

No. If my parents and my friends in their 60's and 70's got seriously ill or died it would be horrific. The economy will recover in time, but you can't bring good people who had many years of useful life in front of them back from the dead. Trump is an idiot.

Bill Gates talked of the need to prepare 5 years ago at TedX and even now it has only had 16m views.

Yes, governments even ignored the richest man in the world. Isn't it pathetic that somewhere in the UK there wasn't a massive warehouse full of protection equipment for medical staff ready to go should a pandemic strike? How ridiculous that front line medical staff were having to go to DIY stores to buy decorators masks...

All the best, Si

danyou

yes

Gromley

Wonderful to have you back Paul and glad to see you are on the mend.

And to hear that you are bearing up in the current market and still have some dry powder.

I echo the thoughts of others in hoping all the best for your house mate.

Si

“Isn't it pathetic that somewhere in the UK there wasn't a massive warehouse full of protection equipment for medical staff ready to go should a pandemic strike? How ridiculous that front line medical staff were having to go to DIY stores to buy decorators masks...”

I think there is a large stockpile but it seems that at least part of the problem has been inefficient logistics getting the kit to the front line. I don’t think staff have been to DIY stores for masks.

Those stores sold out many weeks ago. I made some checks of on line stores myself several weeks ago and found some that had already said that supplies were being held back for the NHS. But the stores had almost universally sold out already anyway (e.g Screwfix, Wickes etc).

It appears that the Health Care Supply Association (HCSA) did tweet asking for help with visors and glasses though.

I think we need to be a bit careful that the media reporting may not be accurate.

SaarfLondon

Liquidity bad in small caps currently- you can get in ,but might not get out so quickly

bryaz

welcome back paul we all now know what we have to look forward to on a share point did you take out an suk2 - I did and i think it was your recommendation

Pennyledges

Hope you get stronger every day and feel heaps better....Also thoughts to your friend and his Mum....

Looking forward to tomorrow’s reports....Scary but interesting times...Makes stock watching almost compulsive

TheArb

Great to have you back Paul, terrible timing to have positions moving violently when you are so ill. Could I suggest you get tested? I suspected already the daily numbers released on C19 are way understated, but by getting tested at least you would bring more accuracy to the figures if it was confirmed.

Timar

Having checked the report you quoted, it looks like another very optimistic forecast, not a fact.

Watching Newsnight tonight, they showed clips of the minister a week or so ago confidently stating that large numbers of ventilators had been delivered. Then this week, it transpires that the figures were substantially exaggerated.

The promises on PPE are also being exposed as wishful thinking.

The public are being fed optimistic political spin rather than actual facts. This isn't good enough. It's a bit like hearing wildly optimistic sales forecasts from a company that we know won't deliver.

vijayt

26th Mar '20

Hi Paul, Sorry to hear about you and your households plight; hearing about your situation is distressing but glad to hear you are better and back in action. Wishing your friend and his mum a speedy recovery.

You and Graham's efforts in producing the SCVP are HUGELY appreciated.

MichaelFBS

Thx Si. Agreed.

Thank you. Will check out the video.

peterg

I suspect that another issue is that as this progresses the need for PPE inevitably rises exponentially with the infection rate. Ministers and co may be right that they are delivering large numbers more, but they could be doing so and standing still. And it would be no surprise if hospital managments were looking down the road and much greater need and being very cautious about what they hand out.

I think there is a large stockpile but it seems that at least part of the problem has been inefficient logistics getting the kit to the front line.

That's all part of the same problem though isn't it? If the logistics aren't sorted then nothing else matters. The UK government were caught with their pants down is the long and short of it. It's not good enough.

I think we need to be a bit careful that the media reporting may not be accurate.

No need to tell me! I've been struck by how much the BBC has been used as part of the government propaganda machine this week. After all the youngsters were out and about last weekend, not a day has gone by this week without videos of 30 year old's pleading with others from hospital beds with tubes coming out of them, or even yesterday where there was a headline that a 21 year old girl had died. Of course, you're always going to get outliers, but if it works on the kind of brain dead young people that it was targeted at, then so be it.

Being cynical... maybe the BBC have seen this as an opportunity to help out UK Gov to ensure the scrapping of the license fee gets kicked into the long grass...

So, nothing to do with PHE then?

Berksbee

Thanks appreciated.

Small Cap Value Report (Wed 25 Mar 2020) - HFD, WGB, DTG, VCP

Coronavirus & me

Market conditions

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Paul Scott

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