Over the weekend I wrote an article about the current bull run in the UK stock market and shared my personal thoughts regarding its likely duration. In truth, guessing the direction of stock markets is a bit of a mugs game. Not dissimilar to predicting the weather.
Whilst I am sure much of the UK has suffered from the much hyped storm this morning and last night, where I live it's a nice sunny day with a light breeze. Of course it's possible that the storm is currently making it's way towards us, but I won't hold my breath. Interestingly, although forecasters are rarely able to accurately predict even a few days in advance, it never seems to deter them from predicting the outcome for a year or even further out. It wasn't so long ago that climate change experts were predicting that Britain would soon have a climate akin to the South of France and that mild winters would prevail for years to come. Well this summer wasn't too bad, but if the past three winters have been mild then I'm not looking forward to a severe one.
Anyway, I digress.
In the article I wrote over the weekend, I mentioned again that the Financial crisis and subsequent recession had provided the investing opportunity of a lifetime, a view I expressed at the time.
I noticed today that Pendragon released a trading statement. It's a good statement which says that profitability for this year is materially above expectations, and that they are cautiously optimistic about 2014. The shares are currently around 40p.
Of course during the height of the panic, unbelievably the shares were driven down to 1.5p. A £1000 investment at that point would now be worth around £26,600.
This brings me to a more general point about investment strategies. It appears to me that many investors are too fearful and cautious about individual losses whilst ignoring the possible exponential gains from buying a small basketful of such shares.
Consider buying shares in ten companies that looked like basket cases at the height of the crisis when they were at or close to their nadirs. Let's imagine you bought PDG, JSG, HRG, TCG and AVS(a share I currently hold). A £1000 investment in each when they were at or close to their lows would now be worth £26,600, £11,000, £16,000, £10,000 and £11,000 respectively (please note that I haven't checked the exact lows, but I am quite sure that the figures are pretty accurate from memory). That's a whopping £75,600 from a £10,000 investment. Let's assume that the other five picks went bust and you lost £5,000. In reality, with reasonable stock picking ability and common sense, you are unlikely to pick five companies that go to the wall.
In fact it appears to me that many investors are totally irrational regarding risk.
Put simply, imagine tossing a coin 10 times, and it's £1000 per go, Heads you win £5000 and tails you lose your £1000 stake. You only need to win twice to break even. Nobody in their right minds would offer you such good odds where the chance of winning is 50%. If you have proven yourself to be a reasonably good stock picker then of course your chances are undoubtedly greater than 50%.
Psychologically it's difficult to take a loss, no matter how small, but actually with a small basket of such shares the fear of loss is totally irrational.
Monday, 28 October 2013
Sunday, 27 October 2013
Access Intelligence
Access Intelligence Plc (AIM: ACC) is a leading supplier of Software-as-a-Service (SaaS) solutions for the full life cycle management
of a company's governance, risk and compliance. They issued a profit warning at the end of September stating that current trading and anticipated results for the year ending 30 November 2013 would be below expectations.
The share price dropped as a consequence, but has subsequently returned to the level it was before the announcement. The current market cap of the company is just below £7m.
Whilst profit warnings are unwelcome, I believe it's crucial to keep a perspective and consider the medium and longer term potential.
Even though trading was reported below market expectations, revenues will come in 5% above last year's at £8.4m and EBITDA is also ahead of last year. This is hardly a disaster or a company in trouble.
The company has recently made a substantial investment in a Development Centre in York on product innovation that is expected to drive growth for 2014 and beyond, and cash flows remain robust with the year-end cash expected to be approximately GBP1.2m.
Gross margins are very healthy at this company, and a high percentage of revenues are recurring.
There is a report on their website from Merchant Securities (March 2013) stating the investment case for ACC with a target price of 7p.
http://www.accessintelligence.com/downloads/07032013_accessintelligence_initiation.pdf
Hopefully, the missed expectations this year will prove to be a blip, and I can't see anything to suggest prospects for the medium and long term have materially changed. I continue to hold, and may add on any further weakness.
of a company's governance, risk and compliance. They issued a profit warning at the end of September stating that current trading and anticipated results for the year ending 30 November 2013 would be below expectations. The share price dropped as a consequence, but has subsequently returned to the level it was before the announcement. The current market cap of the company is just below £7m.
Whilst profit warnings are unwelcome, I believe it's crucial to keep a perspective and consider the medium and longer term potential.
Even though trading was reported below market expectations, revenues will come in 5% above last year's at £8.4m and EBITDA is also ahead of last year. This is hardly a disaster or a company in trouble.
The company has recently made a substantial investment in a Development Centre in York on product innovation that is expected to drive growth for 2014 and beyond, and cash flows remain robust with the year-end cash expected to be approximately GBP1.2m.
Gross margins are very healthy at this company, and a high percentage of revenues are recurring.
There is a report on their website from Merchant Securities (March 2013) stating the investment case for ACC with a target price of 7p.
http://www.accessintelligence.com/downloads/07032013_accessintelligence_initiation.pdf
Hopefully, the missed expectations this year will prove to be a blip, and I can't see anything to suggest prospects for the medium and long term have materially changed. I continue to hold, and may add on any further weakness.
Trakm8 confirms acquisition of BOX
On Friday Trakm8 held a General Meeting and confirmed the acquisition of BOX Telematics. John Watkins, CEO of Trakm8 Holdings PLC, commented:
"We are pleased to welcome the new shareholders who have helped us to complete this transformational transaction. BOX Telematics extends our client base, strengthens our IP ownership model and adds manufacturing capabilities. We look forwarded to delivering enhanced returns for our shareholders and reinforcing our position in the Telematics market."
I like this acquisition, see previous blog:-
http://michae1mouse.blogspot.co.uk/2013/10/trakm8-acquires-box-good-deal.html
With the enlarged share capital, the combined group is valued at just over £9m. I think the current share price will prove to be far too low with a short, medium and long term view. I'm a great fan of the management here who appear to take relatively modest salaries, but stump up plenty of cash to invest in their own shares. In fact to help fund the acquisition the Directors subscribed for £750,000 worth of shares to add to their already considerable holdings. In fact the shares were purchased at a premium to the prevailing price at the time. Not the first time they have done this.
A clear indication of their confidence going forward and their commitment to increasing shareholder value.
In contrast, I noted that Globo, a big favourite on the bulletin boards has also recently made an acquisition and raised a considerable sum through a placing. If the FT weekend is accurate, the Directors have sold £710,000 of shares. Surely that can't be right?
I know nothing about Globo, and haven't looked at its accounts, but I do know it has been targeted by shorters in recent days.
If Directors really have sold a big slug of shares whilst at the same time raising money through a placing then it hardly engenders confidence, and indeed plays right into the hands of the usual suspects.
Anyway, no advice intended or given.
of Trakm8 Holdings PLC, commented: "We are pleased to welcome the new
shareholders who have helped us to complete this transformational transaction. BOX Telematics extends our client base, strengthens our IP ownership model and adds manufacturing capabilities. We look forwarded to delivering enhanced returns for our shareholders and reinforcing our position in the Telematics market." I like this acquisition, see previous blog:-
http://michae1mouse.blogspot.co.uk/2013/10/trakm8-acquires-box-good-deal.html
With the enlarged share capital, the combined group is valued at just over £9m. I think the current share price will prove to be far too low with a short, medium and long term view. I'm a great fan of the management here who appear to take relatively modest salaries, but stump up plenty of cash to invest in their own shares. In fact to help fund the acquisition the Directors subscribed for £750,000 worth of shares to add to their already considerable holdings. In fact the shares were purchased at a premium to the prevailing price at the time. Not the first time they have done this.
A clear indication of their confidence going forward and their commitment to increasing shareholder value.
In contrast, I noted that Globo, a big favourite on the bulletin boards has also recently made an acquisition and raised a considerable sum through a placing. If the FT weekend is accurate, the Directors have sold £710,000 of shares. Surely that can't be right?
I know nothing about Globo, and haven't looked at its accounts, but I do know it has been targeted by shorters in recent days.
If Directors really have sold a big slug of shares whilst at the same time raising money through a placing then it hardly engenders confidence, and indeed plays right into the hands of the usual suspects.
Anyway, no advice intended or given.
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