Who on earth would be interested in buying shares in a boring old shipping services company when there are so many other sexy options to choose from?
Well in 2002 that's exactly what I did, purchasing shares in Clarkson for around £2 a piece.
It was really my first serious foray into the stock market. I had dabbled between 1999 and 2002, but not seriously and with little background reading to guide me. In retrospect this was an invaluable lesson since the subsequent unwinding of the dotcom bubble and general market collapse made me realise that some serious research was necessary before gambling hard earned cash on the markets. Thank goodness I did some research and started to learn about p/e ratios, dividend yields, balance sheets, net asset values etc. Most of all thank goodness for Ben Graham and his principles of value investing.
Whilst I can't claim to have strictly adhered to Graham's principles over the last decade or more, I do try to look for at least some margin of safety.
In 2002, feeling pretty confident about Graham's ideas, I decided that one company that appeared to generally fit his value based criteria was a company called Clarkson. Whilst the markets were still somewhat volatile I decided to take the plunge and buy shares for about £2 a piece. The p/e ratio was low single digits, the dividend yield just over 7% and the company had no debt. What could possibly go wrong?
You can only imagine my dismay and despondency when the share price subsequently fell further to around £1.50.
I tried not to panic and held on, consoling myself with the fact that at least I would get some money back through dividend payments, but I did question myself, wondering if I had totally misunderstood the principles of value investing and margin of safety.
Luckily as markets began to pick up so did Clarkson's share price, and initially just getting back to break even was a huge relief, but I continued to hold. I received my 7.2% dividend and eventually sold my holding for a profit of 67%. What a result I thought at the time, and let's face it where else are you going to invest and get that sort of return in the space of a year or so? Other successes followed, notably Ashtead and Hunting, both bought for 15p and 114p respectively and sold for double digit percentage profits after a relatively modest holding period (I know, I know.......but nothing teaches like experience) and from that point on I was totally hooked on stock market investment and still am.
But who really wants to hold on to these boring companies, particularly when you've made a great profit in no time at all? I mean what's happened to Clarkson for instance since 2002?
Well firstly the share price is now £19.75. It's nearly ten-bagged in 11 years. That's a compounded rate of 23% per annum just in capital appreciation. £100,000 invested would now be worth £987,500.
Pretty impressive, but let's now consider the dividends paid out during that period.
Firstly, Clarkson have clearly operated a progressive dividend policy. When I bought the shares the dividend was 15p per share, but the dividend has increased year-on-year and currently it stands at 51p. Sticking with the assumed £100,000 invested, dividend payments amount to nearly £200,000 (£199,250), twice the original investment.
Whilst I wouldn't be tempted to buy shares in Clarkson now (it looks expensive on first glance to me), it does illustrate three things. Firstly, value investing can be extremely rewarding, secondly, with prudent stock selection, buy and hold can work very well and thirdly boring companies can be very sexy indeed!!
Friday 30 August 2013
Wednesday 28 August 2013
Tuesday 27 August 2013
A quick commentary using audioboo
A brief mention of UBC Media, Access Intelligence, TRAKM8 and Avesco.
http://audioboo.fm/michae1mouse
http://audioboo.fm/michae1mouse
Monday 26 August 2013
@UK
@UK is currently a bulletin board favourite and has enjoyed a spectacular run in its share price over the past month or so, rising from a share price of around 5p to its current 38p. It's another great example of how an AIM micro-cap can suddenly capture investors imagination and multi-bag within a very short time. Of course the thing to watch out for is whether the rise is justified or simply a result of poor liquidity and over enthusiastic punters. At the current share price, @UK's market cap. is currently £32m.
I have been aware of this company for some considerable time. The price originally spiked from around 5p to 15p towards the end of 2012 and then slowly fell back again, and I did have a brief look at the fundamentals. Unfortunately I never invested. In truth I didn't and still don't really understand their business and the potential market, but as ever, well done to those who took the plunge and have seen their investment increase sevenfold in no time at all.
It appears that the excitement centres around two recent trading statements released by the company. The first one in early July stating:-
"We believe we have the platform in place and market opportunity to significantly grow the international arm of the business to become a truly global technology provider within the next 3 - 5 years, generating annual turnover of over GBP50 million of which approximately 80% will be derived internationally."
That is some claim, and if true, then even at £32m, @UK is still cheap with a long term view since I believe that their gross margins will remain high (currently 79%).
A further strong trading update was released in early August:-
http://uk.advfn.com/news/UKREG/2013/article/58690768
which contains lots of encouraging noises about trading in the second half. Investors appear excited about their tie-up with Visa and certainly this line is also encouraging :-
"Investment
in the first half of the year to support the Visa roll-out resulted in movement into a net debt position, which has since been reversed.
The second half year has started strongly with significant cash generation to provide the funds for international rollout."
However, whilst the company could be cheap with a long term view and I may miss out on a multi-bagger (even from the current price), I'm unlikely to chase the shares since, as I have mentioned in previous blogs, I like to have at least some understanding of the business and I do like some margin of safety (with the majority of my investments).
I've briefly outlined the bull case for @UK, but there are bear points to be aware of. Firstly in my experience most companies (particularly small ones) have difficulty accurately predicting turnover and profits for the next 6 months let alone 3-5 years in advance. £50m turnover sounds impressive, but is it realistic and deliverable given that revenue in the past two years has hovered around £2m. In fairness with the Visa tie-up, and what I gather is a change in business model, then a comparison with previous figures may not be appropriate.
In the short term though, the price does look expensive, since despite the two very positive trading statements :- "Ronald Duncan, Executive Chairman, commented, "We are delighted with the progress made in the first half of the year, both financially and operationally, and expect to deliver full year results in line with market expectations."
Importantly market expectations are for earnings around 0.94p which puts the shares on a p/e ratio of more than 40. That said with explosive growth, and if they exceed expectations, then a quick look at ASOS's history will tell you that exceptional growth can mean companies stay on high multiples of earnings for very long periods.
Finally the business lost over £750,000 last year, and had negligible cash and net tangible assets, although for balance, it also had negligible debt, and as the trading statement points out, it is beginning to generate cash in the second half of this year.
In conclusion, apart from knowing that @UK operates in the cloud eCommerce marketplace, I don't fully understand the potential going forward and as a consequence will pass on this opportunity.
I have no idea how things will pan out over the next few years, but given my interest in the AIM market, I will be following with interest to see how things develop.
Good luck to the company and investors, and as always, this remains a blog recording my personal thoughts and experiences of investing in the stock market and no advice is ever intended or given.
I have been aware of this company for some considerable time. The price originally spiked from around 5p to 15p towards the end of 2012 and then slowly fell back again, and I did have a brief look at the fundamentals. Unfortunately I never invested. In truth I didn't and still don't really understand their business and the potential market, but as ever, well done to those who took the plunge and have seen their investment increase sevenfold in no time at all.
It appears that the excitement centres around two recent trading statements released by the company. The first one in early July stating:-
"We believe we have the platform in place and market opportunity to significantly grow the international arm of the business to become a truly global technology provider within the next 3 - 5 years, generating annual turnover of over GBP50 million of which approximately 80% will be derived internationally."
That is some claim, and if true, then even at £32m, @UK is still cheap with a long term view since I believe that their gross margins will remain high (currently 79%).
A further strong trading update was released in early August:-
http://uk.advfn.com/news/UKREG/2013/article/58690768
which contains lots of encouraging noises about trading in the second half. Investors appear excited about their tie-up with Visa and certainly this line is also encouraging :-
"Investment
in the first half of the year to support the Visa roll-out resulted in movement into a net debt position, which has since been reversed.The second half year has started strongly with significant cash generation to provide the funds
for international rollout."However, whilst the company could be cheap with a long term view and I may miss out on a multi-bagger (even from the current price), I'm unlikely to chase the shares since, as I have mentioned in previous blogs, I like to have at least some understanding of the business and I do like some margin of safety (with the majority of my investments).
I've briefly outlined the bull case for @UK, but there are bear points to be aware of. Firstly in my experience most companies (particularly small ones) have difficulty accurately predicting turnover and profits for the next 6 months let alone 3-5 years in advance. £50m turnover sounds impressive, but is it realistic and deliverable given that revenue in the past two years has hovered around £2m. In fairness with the Visa tie-up, and what I gather is a change in business model, then a comparison with previous figures may not be appropriate.
In the short term though, the price does look expensive, since despite the two very positive trading statements :- "Ronald Duncan, Executive Chairman, commented, "We are delighted with the progress made in the first half of the year, both financially and operationally, and expect to deliver full year results in line with market expectations."
Importantly market expectations are for earnings around 0.94p which puts the shares on a p/e ratio of more than 40. That said with explosive growth, and if they exceed expectations, then a quick look at ASOS's history will tell you that exceptional growth can mean companies stay on high multiples of earnings for very long periods.
Finally the business lost over £750,000 last year, and had negligible cash and net tangible assets, although for balance, it also had negligible debt, and as the trading statement points out, it is beginning to generate cash in the second half of this year.
In conclusion, apart from knowing that @UK operates in the cloud eCommerce marketplace, I don't fully understand the potential going forward and as a consequence will pass on this opportunity.
I have no idea how things will pan out over the next few years, but given my interest in the AIM market, I will be following with interest to see how things develop.
Good luck to the company and investors, and as always, this remains a blog recording my personal thoughts and experiences of investing in the stock market and no advice is ever intended or given.
Saturday 24 August 2013
Updates UBC media, Densitron, DDD Group and C21
Shares in UBC Media rose a further 18% yesterday. Whilst there has been no official news from the company regarding any developments, activity on the bulletin board has clearly brought this company to the attention of more private investors. I've already outlined my reasons for investing in UBC in the BOO below and at present, I intend to hold shares in this company for the long term and watch developments. It's particular attraction to me is that it has the potential for spectacular growth whilst boasting a sound balance sheet.
http://michae1mouse.blogspot.co.uk/2013/08/ubc-media-where-lots-of-boos-are-very.html
There are some very informative links on the ADVFN bulletin board (UBC thread). In particular the article below from the Telegraph in April is interesting:-
http://www.telegraph.co.uk/technology/social-media/10002982/Audioboo-follows-YouTube-with-professionally-made-show.html
"Since I came in in October we've gone from three million listens a month to 12 million," he said. "We're on course to break even in 2014."
If Audioboo does beak even in 2014 then (imo) it's a complete game changer for UBC, who own 36.5% of the company. Investors have a voracious appetite for these rapidly growing social media companies. Speculative yes, but certainly exciting and with a solid balance sheet the rewards could be spectacular. Even after recent share price rises I don't think the market cap. of UBC is overstretched.
In other news, DDD group released a profit warning. I wrote an article about DDD in January where I expressed an interest in buying shares in a 3D company but felt that the valuation of DDD was far too high:-
http://michae1mouse.blogspot.co.uk/2013/01/fantastic-3d-but-where-do-i-invest.html
"With a current market cap. of £30m it's a bit too expensive for my tastes at the moment. However, should a suitable opportunity arise then I'll be a keen buyer."
The valuation has sunk to around £14m over recent months and fell further after yesterday's profit warning. Whilst I haven't taken the plunge yet I will keep a careful eye on the share price for further weakness.
Revenues from their TriDef 2D to 3D solution software fell by an alarming $4m to $2.4m in the first half, but my interpretation is that this is due to a contraction in the PC market as a whole as opposed to their particular software solution. Revenues from TV sales have increased by 16% and they are gaining traction in the tablet market. Margins are a whopping 99%, cash balances over $3.7m and the group has no debt. Not cheap enough for me yet, but I am watching closely.
Densitron was a company in which I held shares, but I did sell in June following a poor trading statement. You can follow my reasoning in the blog below:-
http://michae1mouse.blogspot.co.uk/2013_06_01_archive.html
Following Friday's interim statement, I have no appetite to repurchase any shares in this company.
Revenues decreased by 6% whilst orders booked fell by 7% and the company reported a £315,000 loss.
Whilst the company sounds positive about the second half, has a reasonable balance sheet and is paying an interim dividend of 0.1p, I am nervous about the outstanding writ against the company. This matter has been dragging on for many months despite their attempts to resolve the matter out of court. A date has now been set for the trial on 8th December. This suggests to me that the Landlord has a very strong case, and any settlement either inside or outside of court could (imo) be very punitive for Densitron.
I'll continue to monitor the situation, and never say never, as the saying goes, but allied to recent inconsistent trading this one will remain on the monitor.
Interestingly the fortunes of this company run almost parallel with the fortunes of a company called C21. Just when you think the company has turned a corner, a profit warning appears out of the blue.
It's an interesting parallel since Jan Holstrom is Chairman of Densitron and until yesterday was the Non-executive Chairman of C21.
It is worthwhile looking back at the history of both these companies and the twists and turns contained in their statements and news stories. You gain a good idea of just how similar their histories have been. Certainly in recent times.
As ever, all opinions are just my own musings and no advice is intended or given.
http://michae1mouse.blogspot.co.uk/2013/08/ubc-media-where-lots-of-boos-are-very.html
There are some very informative links on the ADVFN bulletin board (UBC thread). In particular the article below from the Telegraph in April is interesting:-
http://www.telegraph.co.uk/technology/social-media/10002982/Audioboo-follows-YouTube-with-professionally-made-show.html
"Since I came in in October we've gone from three million listens a month to 12 million," he said. "We're on course to break even in 2014."
If Audioboo does beak even in 2014 then (imo) it's a complete game changer for UBC, who own 36.5% of the company. Investors have a voracious appetite for these rapidly growing social media companies. Speculative yes, but certainly exciting and with a solid balance sheet the rewards could be spectacular. Even after recent share price rises I don't think the market cap. of UBC is overstretched.
In other news, DDD group released a profit warning. I wrote an article about DDD in January where I expressed an interest in buying shares in a 3D company but felt that the valuation of DDD was far too high:-
http://michae1mouse.blogspot.co.uk/2013/01/fantastic-3d-but-where-do-i-invest.html
"With a current market cap. of £30m it's a bit too expensive for my tastes at the moment. However, should a suitable opportunity arise then I'll be a keen buyer."
The valuation has sunk to around £14m over recent months and fell further after yesterday's profit warning. Whilst I haven't taken the plunge yet I will keep a careful eye on the share price for further weakness.
Revenues from their TriDef 2D to 3D solution software fell by an alarming $4m to $2.4m in the first half, but my interpretation is that this is due to a contraction in the PC market as a whole as opposed to their particular software solution. Revenues from TV sales have increased by 16% and they are gaining traction in the tablet market. Margins are a whopping 99%, cash balances over $3.7m and the group has no debt. Not cheap enough for me yet, but I am watching closely.
Densitron was a company in which I held shares, but I did sell in June following a poor trading statement. You can follow my reasoning in the blog below:-
http://michae1mouse.blogspot.co.uk/2013_06_01_archive.html
Following Friday's interim statement, I have no appetite to repurchase any shares in this company.
Revenues decreased by 6% whilst orders booked fell by 7% and the company reported a £315,000 loss.
Whilst the company sounds positive about the second half, has a reasonable balance sheet and is paying an interim dividend of 0.1p, I am nervous about the outstanding writ against the company. This matter has been dragging on for many months despite their attempts to resolve the matter out of court. A date has now been set for the trial on 8th December. This suggests to me that the Landlord has a very strong case, and any settlement either inside or outside of court could (imo) be very punitive for Densitron.
I'll continue to monitor the situation, and never say never, as the saying goes, but allied to recent inconsistent trading this one will remain on the monitor.
Interestingly the fortunes of this company run almost parallel with the fortunes of a company called C21. Just when you think the company has turned a corner, a profit warning appears out of the blue.
It's an interesting parallel since Jan Holstrom is Chairman of Densitron and until yesterday was the Non-executive Chairman of C21.
It is worthwhile looking back at the history of both these companies and the twists and turns contained in their statements and news stories. You gain a good idea of just how similar their histories have been. Certainly in recent times.
As ever, all opinions are just my own musings and no advice is intended or given.
Wednesday 21 August 2013
13% rise for Belgravium Technologies
It's been a fairly quiet time regarding tangible news stories for many of the stocks I hold or am interested in, but since AIM stocks have become 'ISA'able I have detected that certain companies listed on this market have sprung into life. I mentioned UBC Media yesterday which is one such example.
Another company that I have invested in recently is Belgravium Technologies which has also shown signs of life in the last couple of trading days, rising by 13% today.
The company describes itself as follows:-
"Belgravium Technologies plc ((AIM:BVM) 'Belgravium' or 'The Group')), designers and suppliers of computing solutions and services for mobile data capture applications to a wide variety of industrial sectors".
I have been accumulating shares in Belgravium at prices below 3p.
Whilst they described their year end results for 2012 as disappointing with revenues of GBP8,669,000 (2011: GBP11,157,000), profit after tax of GBP336,000 (2011: GBP876,000), a maintained dividend of 0.1p (2011: 0.1p), strong cash flows and net cash position of GBP1,566,000 (2011; BP1,074,000) and EPS of 0.33p (2011: 0.87p), at 3.25p the historic p/e is around 10, if they can eventually return to 2011 levels of profitability then the p/e drops to 4. The dividend yield is 3% and they managed to improve their cash balance by £400,000.
Their trading statement reads as follows :- "2012 was a challenging year and we do not expect our markets to change significantly in 2013. However, the Group has a strong balance sheet and has initiatives in place which should at least ensure improved profitability in the current year."
If you look at the figures and project forward to any improvement in profitability in the future then, even after today's rise in the share price, the company looks cheap.
They also state that :- "Whilst the Board believes it is important to maintain cash reserves for development and investment projects, it is also committed to maintaining the payment of dividends, a policy restored in the previous year." It's always nice to receive a dividend payment and I see this as a sign of confidence going forward.
The current market cap. is around £3.3m. The company has negligible debt and has recently acquired a company called Feedback Data plc for a consideration of £600,000.
"FDP specialises in workforce management for companies operating in both the industrial and retail environments with an impressive list of clients within the logistics, manufacturing, healthcare, leisure and consumer retail. FDP's systems sit behind thousands of workers capturing millions of actions using wired, wireless and cloud based networks."
Interim results will be released on 6th September and it will be interesting to assess current trading and how the integration of their recent acquisition is progressing.
Given the fundamentals and a more conducive trading environment, it is difficult to see any downside from here. As mentioned already, any indication of trading returning to 2011 levels should see a significant spike in the share price.
Anyway we won't have to wait too long to find out!
As ever no advice is intended or given.
Another company that I have invested in recently is Belgravium Technologies which has also shown signs of life in the last couple of trading days, rising by 13% today.
The company describes itself as follows:-
"Belgravium Technologies plc ((AIM:BVM) 'Belgravium' or 'The Group')), designers and suppliers of computing solutions and services for mobile data capture applications to a wide variety of industrial sectors".
I have been accumulating shares in Belgravium at prices below 3p.
Whilst they described their year end results for 2012 as disappointing with revenues of GBP8,669,000 (2011: GBP11,157,000), profit after tax of GBP336,000 (2011: GBP876,000), a maintained dividend of 0.1p (2011: 0.1p), strong cash flows and net cash position of GBP1,566,000 (2011; BP1,074,000) and EPS of 0.33p (2011: 0.87p), at 3.25p the historic p/e is around 10, if they can eventually return to 2011 levels of profitability then the p/e drops to 4. The dividend yield is 3% and they managed to improve their cash balance by £400,000.
Their trading statement reads as follows :- "2012 was a challenging year and we do not expect our markets to change significantly in 2013. However, the Group has a strong balance sheet and has initiatives in place which should at least ensure improved profitability in the current year."
If you look at the figures and project forward to any improvement in profitability in the future then, even after today's rise in the share price, the company looks cheap.
They also state that :- "Whilst the Board believes it is important to maintain cash reserves for development and investment projects, it is also committed to maintaining the payment of dividends, a policy restored in the previous year." It's always nice to receive a dividend payment and I see this as a sign of confidence going forward.
The current market cap. is around £3.3m. The company has negligible debt and has recently acquired a company called Feedback Data plc for a consideration of £600,000.
"FDP specialises in workforce management for companies operating in both the industrial and retail environments with an impressive list of clients within the logistics, manufacturing, healthcare, leisure and consumer retail. FDP's systems sit behind thousands of workers capturing millions of actions using wired, wireless and cloud based networks."
Interim results will be released on 6th September and it will be interesting to assess current trading and how the integration of their recent acquisition is progressing.
Given the fundamentals and a more conducive trading environment, it is difficult to see any downside from here. As mentioned already, any indication of trading returning to 2011 levels should see a significant spike in the share price.
Anyway we won't have to wait too long to find out!
As ever no advice is intended or given.
Tuesday 20 August 2013
UBC Media - Where lots of BOOS are very positive!!
I've used Audioboo for my latest blog where I talk about my recent investment in UBC Media.
Click the link below to listen to my BOO.
http://audioboo.fm/boos/1557019-ubc-media
Click the link below to listen to my BOO.
http://audioboo.fm/boos/1557019-ubc-media
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