Will (the) SUN keep shining?

One of my current holdings at the moment is Surgical Innovations (SUN). I bought shares in SUN for under 2p just over a year ago. At today’s close the shares are priced at 7.3p. When I purchased the shares, they were valued around or below tangible net asset value; the company was profitable with an un-demanding p/e ratio. The outlook statement read very positively, clearly suggesting that this was a company that could grow quite rapidly. These are the type of companies that really interest me, a growth stock that you can buy below the value of the tangible assets on its balance sheet.

So why could you buy the shares at rock bottom prices. Three reasons (I think) at the time:-

1)       The company was under the radar of most professional and private investors.

2)       They had missed broker forecasts because of a delayed contract payment.

3)       The SP performance had disappointed in the past, and consequently investor sentiment was a little negative.

The second reason shows just how ludicrous stock market reaction can be at times. The company had emphasized that payment had been delayed, not cancelled. As a Private Investor these are the opportunities to pounce upon, where there is clearly a mismatch between a company’s true worth, and its market capitalisation.

Now don’t get me wrong, I had no idea that the share price would multi-bag from under 2p to over 7p in little over a year, but when you can buy a profitable, cash-generative company with clear growth prospects for less than its wind-up value, then the balance of probabilities are on your side. Whilst there is no guarantee the share price will multi-bag, it’s unlikely you are going to lose money (unless of course the management team are completely reckless and useless).

Surgical Innovations have already indicated that trading for 2010 was in line with current expectations (results are published on Tuesday 19^th April) which put the shares on a current p/e of around 18. Broker forecasts for 2011 are for an EPS of 0.6p, and hence a forward p/e of around 12. If SUN can continue the level of growth they are achieving then the shares still look cheap.

I shall continue to hold and will read the results and outlook statements with interest.

The Oracle

I upset an anonymous poster on the ADVFN (AVN bulletin board) today by posting a link to this blog. The exchange of views runs from post 4762 to 4791 on the link below:-
http://www.advfn.com/cmn/fbb/thread.php3?id=22947823&from=4778
Have a quick read if you fancy a giggle.

Just for the record I'm not trying to pass myself off as some Warren Buffett like oracle or a minor celebrity. I just like sharing my thoughts in a blog which people can read or ignore as they like. I've had over 10 years experience now as a Private Investor, and I've posted on ADVFN for many of those years. This is something just a little bit different. I did promise myself when I started stock picking that if I couldn't outperform the main market indices consistenly then I'd give up and buy a tracker fund. Fortunately (so far) I have managed to do just that. Of course things could change, and I do make errors from time to time.
Anyway the blog enables any readers to make their own mind up over time and I've always used the same username (Michaelmouse) on ADVFN, so I do already have a recorded history of investing.

I see Premier Oil's results were out today, I haven't really read them, but the headlines look good and the SP increased by 4%. I bought shares in Premier Oil back in 2001/2002 for 26p (after consolidation 260p) and since then they have nearly 10 bagged. Unfortunately I sold them some considerable time ago for a 50% profit. Well done to those investors who have held on! The reason I sold was that just like Avanti I also find it difficult to value oil and mining companies, particularly when they are at an early stage of development. Kenmare Resources has been the only mining company that I have invested in, at about the same time as Premier Oil. I managed to make a 250% profit in Kenmare (buying around 16p and selling in the mid 50s), and was lucky enough to sell just before the financial crisis got into full swing and the shares fell back to around 7p. Probably should have bought them again, since the last time I looked the SP had climbed back up to the high 30s.

I am sure that both Premier and Kenmare will continue to prosper.

Whilst clearly there are great opportunities and fortunes to be made in oil and mining companies, I don't think I'll be tempted back, experience has told me to stick with what I know and feel comfortable valuing. Chiefly those companies with easy to understand balance sheets and where I can clearly identify a margin of safety.

Now I'm going to post the link on the PMO and KMR bulletin boards. It is nice to know that some investors read the blog, but others can't read it if they don't know it exists.

Wish me luck and I hope I don't upset too many people :).

Will this share price fly into orbit?

Directors in Avanti Communications are clearly confident about the company's future prospects. Over recent weeks they've been piling in and picking up large tranches of the company's shares.

It's not a company that I'll invest in though, despite their enthusiasm. I wouldn't know where to start in making a sensible valuation. Opinion seems to be divided about whether Avanti is currently overvalued or undervalued. A bit like their satellites, the share price will either fly into orbit or come crashing to earth.

I have put them on my monitor, but only out of curiosity. It's funny how some situations capture your interest even when you don't have a pecuniary interest.