Avanti Communications - "The triumph of hope over experience"

When I started this blog, I did say that it would be a warts and all blog. DCD media was one such blemish, and I can now safely add Avanti Communications to my ignominious pile.

I bought shares in Avanti Communications in 2012 for £2.60. Thankfully not too many, as I explained below:-

http://michae1mouse.blogspot.co.uk/2012/10/speculate-to-accumulate.html

Reading that blog again today did bring a wry smile to my face, particularly this bit :-

However, on the flip side there are probably a thousand and one things that could still upset the applecart, hence until there are visible significant revenues, cash flow and profits it remains highly speculative. Brokers quote anything from £6-£20 a share as possible in the medium term (which probably tells you everything you need to know i.e. just pick any number out the air?).

Since 2012 the share price has pretty much been in terminal decline, although remarkably there were two occasions where I was briefly in profit, although coming back to my purchase and blog post, my speculation probably serves to illustrate

"The triumph of hope over experience"

Note to self. Don't deviate away from sensible investment criteria. I usually stick to micro-caps which generate revenues, profits, carry little if any debt and have solid balance sheets. What was I thinking?
Avanti could boast growing revenues, but that was about it. It wasn't even a micro-cap, aaargh!

Anyway, today's trading statement and funding requirement was the final straw, and I have cut my losses. I did get a bit of luck in selling for just over 39p, given that as we speak the share price is currently 23.5p to sell. Nevertheless, a substantial loss on my original investment.

On a more positive note, the losers often teach you far more than the winners (as with DCD Media).  I always review my other holdings following bad news and I am more than comfortable with all of them at present, chiefly because they adhere to my strict criteria. Furthermore, since I recognised that Avanti was a speculation, my original outlay and hence subsequent losses were negligible when set against my overall portfolio.

Finally, I feel that I ought to mention a company called Optibiotix.  I set up a thread on Advfn which expresses my negative views re: the investment case for the company. I don't really have a vested interest one way or another in the company, but I have allowed myself to get drawn in to trading insults with some rather unpleasant individuals who are no doubt currently leaping up and down with joy following Avanti's trading statement. It reflects badly on me as well as them. Would I behave like like outside the virtual world. No. Shame on them and shame on me.

Bad Karma with Avanti?  No just a crap investment decision on my part.

I will simply say the following, and then leave it at that. Optibiotix is a speculation, and not a company I could invest in, even more so now. It is already valued at over £60m, but doesn't generate any significant revenues. The balance sheet is ok, but doesn't justify a market cap. anywhere near £60m. Profits will be years away yet, and I expect further fundraisings will follow. That said, sometimes speculations pay off. However, returning to my heading, more often than not, money thrown at companies like Avanti, Opti, Moni, Nano, IOF etc is "The triumph of hope over experience".

Good luck.

Volatile times

r1singson - As I'm sure you're well aware, markets are jittery at the moment and Trakm8 is an illiquid stock, expect volatile moves in the share price.

I'd never offer advice because everyone has their own unique set of circumstances.

Personally, I was a very early buyer of Trakm8 shares and I'm more than happy to keep holding for the foreseeable future. The trading statement was issued at the end of April and made for excellent reading. We know revenues and earnings were in line with expectations for the year end March 2016, and that the outlook for the new financial year is encouraging with strong revenue visibility reflecting the strength of their business model. This confidence is underpinned by a maiden 2p dividend. At today's closing price of 191p the current p/e ratio is around 16, and next year's forecast p/e is 11. Hardly expensive for a high growth stock.

As ever, I'll just ignore the noise and volatility and look forward to my dividend payout which represents an approx. 11% return on my original investment and I'm hoping that they may adopt a progressive dividend policy.

Good luck to short term traders, but it's buy and hold for me every time.

Stilo International

Stilo International is a company that I have bought shares in over the past year or so, buying at prices between 3p-5p. It's a micro-cap which is making excellent progress and describes itself as follows:-

"The Company provides software tools and cloud services that help organisations create and process content in XML format, so that it can be more easily stored, managed, re-used, translated and published to multiple print and digital channels. "

It sounds a bit boring and niche to me, and exactly the sort of company I like.

The company has been listed for several years and hasn't really fulfilled it's promise yet. It appears to have been long forgotten by many investors.

However, all that appears to be changing.

In their last reported results, sales revenues had increased by 20% and operating profit leapt from £89,000 the previous year to £255,000. EPS doubled to 0.28p (on a fully diluted basis) leaving the shares on a p/e ratio of around 19 at the current share price of 5.5p.

This is another rare example of a profitable, cash generative and dividend paying Aim company which is under the radar of many investors.

Gross margins are massive at 99%. The company is growing revenues, profits, and cash generation. The current p/e of around 19 might look high, but given that increased revenues pretty much drop through to the bottom line then the p/e will fall quickly and Stilo will look very cheap. Add to the mix a progressive dividend policy (hiked by 33% last year), no debt and a very solid balance sheet and the company also looks low risk given it's size.

Stilo boasts three core technologies in OmniMark, Migrate and AuthorBridge. OmniMark is used in the development of Migrate, and both Migrate and OmniMark technologies are utilised in AuthorBridge, which results in very efficient integrated development and support activities.

It's the latter two which will drive growth in the company. Migrate sales improved by 61% in the year to December 2015. AuthorBridge is being rolled out this year and will start to make a significant contribution to revenues from 2017 onwards.

Their recent trading statement indicated that trading for 2016 is in line with management expectations, and they had this to say about AuthorBridge:-

"We continue to invest significantly in the ongoing development of AuthorBridge, our new cloud XML authoring tool. Following extensive testing by a very prestigious client, it is now scheduled to be deployed by them in full production in May 2016, representing a significant milestone for the Company."

It's highly likely that the very prestigious client is IBM.

Despite a Director sale on 10 June which I comment upon here:-

http://uk.advfn.com/cmn/fbb/thread.php3?id=25760470 (post 1503)

I believe that the company has excellent growth prospects with a short, medium or long term view, and with a solid balance sheet, no gearing and a progressive dividend policy, the share price should be well supported as investors await news on their progress.