Bull markets and Telematics

The bull market has been running for 5 years now, so surely we are due a bear market phase shortly. Not so according to Ken Fisher in his weekend article entitled "Back to the future as we rerun the nineties"

http://search.ft.com/search?queryText=back+to+the+future+as+we+rerun

You will need to be a subscriber or buy the paper for the full text.

It's an excellent article that draws a startling number of parallels between now and 1995 when the bull market ran for a further five years. He writes :-

"Then, as now, a five-year-old bull was still in its early stages. Small stocks had beaten large ones and US stocks had beaten the world. After stocks rose sharply in 1995, fear of heights was catching, just as it is today after 2013's big gains. Folks fretted that the bull was losing steam and couldn't fathom it lasting years more. It did.".

He talks about investors memories of the IPO frenzy, but points out that in the mid 90s mature firms such as Alcatel-Lucent, and Andarko floated and it was only at the end of the decade that companies such as Netscape - exciting technology that later became obsolete came to the stock market. He goes on "Those (later) memories drive jitters over Facebook today, but recent IPOs are mature, quality offerings such as Hilton and Container Store. This is a sign of rising optimism - just like the mid-1990s. No euphoria then, none now."

Whilst I consider myself a stock picker and long term investor with little interest in macro conditions, I believe that he may be right and this bull has a few more years to run yet.

I don't think investors have truly grasped the enormity of the financial crisis and deep recession or indeed the subsequent opportunity it presented to investors to pick up great stocks in  a sort of "sale of the century". I said at the time and still believe that 2009 was a once in a lifetime opportunity to build a great portfolio at ludicrously low prices. The events that took place were unprecedented in recent living memory and global recovery is still in its infancy.

Whilst many p/e ratios may looked stretched, they may look less so when economic recovery moves rapidly through the gears. Other factors to consider are whilst interest rates remain at historic lows with no immediate threat of increasing, where else can you get a decent return on your money? Finally it is interesting to note that many Directors are snapping up shares in their own companies like they're going out of fashion despite (in some cases) their shares have risen considerably in  the past 5 years. From a contrarian point of view, many traders and investment managers have already increased their cash piles. Bear markets are rarely anticipated.

I currently see no reason to sell any of my holdings, and touch-wood I have been very pleased with their progress where recent RNS releases have been very encouraging. As ever, I constantly keep my eye out for any bargains that may arise through irrational selling, or any other reasons. Mr Market always provides opportunities.

Moving on to one of my current portfolio favourites - TRAKM8 - this weeks Sunday Telegraph has made me think that as optimistic as I am about this company's future, its recent trading statement and tie up with Direct Line Insurance (sole supplier), perhaps even I've underestimated just what a potentially exciting area and company this could turn out to be. On the front page of today's Sunday Telegraph and in their money section we have:-

"Drivers to have a spy in the car"

http://www.telegraph.co.uk/finance/personalfinance/insurance/motorinsurance/10837263/Drivers-without-insurance-black-box-could-be-forced-off-the-road-within-10-years.html

Some of the key paragraphs include:-

"Drivers will within 10 years face inflated insurance premiums – or even be forced off the road – unless they allow their driving to be monitored at all times by tracking technology."

"Tom Ellis of Gocompare, the insurance comparison website, who spoke at the British Insurance Brokers' Association (Biba) seminar, told The Telegraph: "In 10 years' time there will still be customers who prefer not to have a telematics device installed, [but] it will be an opt-out situation, rather than an opt-in. "

"The technology will soon be fitted in new cars as standard. Under EU regulations, all new cars will need black box-style technology, known as eCall, from October 2015, to help emergency services find crashed vehicles. "

"Direct Line this year launched a self-install device available to all drivers, which it said could save young drivers up to 25pc. The firm said drivers with the best driving records could get a 40pc discount on renewal. "

It's worth reading the full article but it also includes this:-

"Penny Searles, managing director of the firm, said: "We are seeing a tipping point this year, where more insurers are making this technology available to the mass market. "

From Trakm8's recent trading statement they also talk about this year being a tipping point for their Telematics solutions. The market is potentially massive, and the sole supplier agreement that Trakm8 has with Direct Line is a hugely significant milestone.

Without trying to get too overexcited, Trakm8 are operating profitably with excellent cashflow, a high percentage of recurring revenues and gross margins (last reported) above 70% in a potentially explosive growth area. The market cap. is still just under £25m. If the company continues to develop in the way it has so far then it could potentially be worth  many hundreds of millions in the not too distant future.

Here's hoping anyway.