It's a little while since I last posted, and market turbulence is still evident. That said, whilst I'd be very nervous holding stocks on p/e ratios of 50+ or loss making, low revenue companies on multi-million pound market caps. of say £30m+, it does appear that the rout in micro-caps (under £10m market caps.) may be close to an end? Or is that just wishful thinking on my part? We'll see.
Common sense does dictate that when a company's market cap. falls below a certain level, assuming it's reasonably well funded (i.e. not going bust) then it's unlikely to fall as heavily as the over-priced multi-million pound companies briefly referred to above. However, this is the stock market and short term you can find that almost anything is possible! If you're not familiar with the quote about "voting" and "weighing" machines then it's worth looking up.
Anyway, I'm going to list a number of small and micro-caps that I'm currently invested in and that you might want to investigate yourselves. Most have been mentioned before in my blogs or twitter or the bulletin boards. I am not recommending that you buy or sell any of these companies of course, and I am currently sitting on paper profits in some of these companies and losses in others. All I'm going to do is list bear and bull points for each stock, and if one or more companies pique your interest then you might wish to do some extensive research.
Will these stocks turn out to be Christmas presents or Christmas Turkeys? I can't say for sure, although of course I'm hopeful that they'll all prosper. At this point I should emphasise that I'm looking at their performance with a minimum 5 year outlook, and I'll review their performance at regular intervals. From my past record of serious investing from the early 2000's then I'd hope that in 5 - 10 years time then 3/4 will have more than 10 bagged. I'm listing 12 companies in order of market cap. (smallest to largest) alongside their current share prices (please note these are not the share prices I purchased at). In all my time investing only one company has ever gone bust on me, although that might be tempting fate! I sincerely hope not. Anyway, here goes:-
Mediazest (MDZ) - current sp 0.075p, market cap. £0.96m. Tiny company that's never made a full year profit and always appears on the brink of a cash call. Latest interims show a maiden profit and increasing recurring revenues. Has it turned a corner?
Aeorema Communications (AEO) - current sp 32.5p, market cap. £2.94m. Always looked a good value share, but growth has never been sustained. There's a new management team. Excellent start. Balance sheet still provides considerable comfort. If they deliver sustained growth then it's off to the races.
Stilo International (STL) - current sp 2.75p market cap. £3.13m. For many years it's been a bit of a plodder. Suddenly growth kicked in, and then disappeared this year when two major contracts came to the end of their lifetime. Can't believe this is the third cheapest company on my list? Fabulous balance sheet and progressive dividend policy even in this dip year. Can they resume growth from 2019 onwards and get back on track? Certainly the product list is expanding. Impressive client list.
Immedia (IME) - current sp 26.5p market cap. £3.86m. History has seen IME win big contracts and lose others in equal measure. Recent acquisition failed to have an immediate impact. Client retention is much improved, and the acquisition is beginning to bear fruit. Encouraging interims. Is growth about to take off?
Spaceandpeople (SAL) - current sp 21p market cap. £4.1m. This was a rising star that fell from grace with a large bump. In 2017, it looked like it had got it's mojo back and they reinstated a dividend. Disappointing again this year unfortunately, but certainly not a write-off with management confident that this year is a temporary blip and they can indeed restore former glories. We'll certainly find out in due course.
Trakm8 (TRAK) - current sp 21p market cap. £7.3m. Another rising star that came unstuck. Well documented on my blog and elsewhere. Ambitious plans that unravelled through slower than anticipated growth. Fabulous client base though and second half of this year will be far better than the first six months. Recurring revenues are building very nicely. A white knight has appeared in the form of a company called Microlise in the same telematics space. They bought a 20% stake in Trakm8 at a 22% premium to the depressed sp. Huge opportunities for Trakm8 if they can execute this time around. If not then Microlise might just snap them up anyway?
One Media IP Group (OMIP) - current sp 5.5p, market cap. £7.46m. Shift in music consumption caused a temporary halt to their growth. Inflection point has been reached and growth restored. Nicely profitable and cash generative business. A recent cash raise came out of the blue as the company was joined by industry heavyweights and an ambitious plan for much accelerated growth. The cash raise is to fund acquisitions in the music rights space. Big gamble? Spectacular if it pays off.
7digital (7DIG) - current sp 2.3p, market cap. £9.2m. Big promises but disappointing so far. Has had a habit of pulling defeat from the jaws of victory. Up until now it's been a big cash guzzler and diluted shareholders. Major acquisition should now be fully integrated? Cost savings will be £5m per annum? Gross margins should be 70%+ , and profitability just around the corner in a potentially exciting space. Market doesn't currently believe the promises, but if 7digital proves them wrong then expect a multi-bagger in double quick time.
Crimson Tide (TIDE) - current sp. 2.2p, market cap. £10.06m. Hasn't really put a foot wrong in recent times, but excellent progress is being temporarily masked by investment for growth. Market sentiment has currently depressed the share price, but TIDE is growing impressively with huge gross margins (80%+) and a great balance sheet. One of those companies that is currently overlooked, but will set the market alight when investors twig about future growth prospects?
Biome Technologies (BIOM) - current sp. 545p, market cap. £12.88m. A stock market favourite in it's early days. A loss making "story" stock that was valued far too highly with little to show in terms of revenue. Share price collapsed to around 80p at one time. It was friendless. Now beginning to fire on all cylinders. Two businesses in one company. RF business is profitable and in demand, Bioplastics is currently loss making but in the right place at the right time. Recent reports suggest Bioplastics revenues could see very significant growth in the medium to long term. Very exciting space, excellent balance sheet with plenty of cash. Mouth watering potential with a still modest market cap.
Scientific Digital Imaging - current sp 37.75p, market cap. £31.6m. Not a micro-cap, but was when I bought in. Like TIDE it hasn't put a foot wrong in recent times. Growing organically and through acquisition. Buy and build can be risky, but so far so good. Another JDG?
PCF Group - current sp. 36p, market cap. £77m. Certainly not a micro-cap, but a very promising company. PCF has endured it's hardships in the past, but has now transformed itself and investors should be handsomely rewarded. Don't listen to my blathering, but read PCF's finals released earlier this week. One year ahead of schedule with impressive growth and modestly valued.
That's it. They are not tips, but you may wish to have a more detailed look at one or two of the companies listed. As I said earlier, I'd be disappointed if there aren't at least 3/4 potential 10 baggers in there (with a long term time frame e.g. 5+ years). Which ones will they be though, I have no idea? Of course it could be all of them or none of them since (as they say) past performance is not a guide to future performance, or something like that anyway?
May I be the first to wish you all a ……...No it's still far too early!
ATB.
Saturday, 8 December 2018
Tuesday, 20 November 2018
I'll always play the long game!
In my last blog post I wrote a little bit about my stock picking journey and how an early investment in Trakm8 was life changing, and how Avesco put the icing on the cake. It's not meant as a boastful post, but I'm hoping it provides comfort to some novices as we currently endure a bear market in the small cap. sector.
I should re-iterate that bear markets are opportunities. "Be greedy when others are fearful". In Trakm8's case we might actually live the phenomenal share price appreciation again and then some more?
I previously mentioned that I started to invest seriously in the 2000's. What do I mean by that? Well to summarise, if you can't read a balance sheet, don't know what a p/e ratio is or TNAV or dividend yield etc then you should probably stick your money in a tracker fund. I'm not patronising, but you do need to (at least) find out about the basic financial measures to avoid many of the pitfalls. I also advise, as I did before, to read extensively about the "Great Investors" and their investing ideas. I did all those things before getting heavily involved in stock picking.
Anyway I digress. Why did I become a long term investor rather than a trader? Personal experience basically. Before my success with Trakm8 and Avesco, in 2002 I had invested in a company called Ashtead and a shipping company called Clarkson.
Starting with Ashtead. I bought my first tranche of shares in Ashtead for about 34p. At the time, I remember thinking that they were easily supported by NAV. Slightly naively perhaps, I hadn't taken into consideration their huge debt pile. I'm a little more clued up these days hopefully! Ashtead got into trouble and the share price fell to around 2p. "Oh dear, how sad for me" are words I didn't use at the time, my language was a little more colourful I seem to remember.
Anyway, I just held on and hoped for the best. Disaster was averted, and slowly but surely the share price began to rise. I bought more at 15p to average down, and let out a sigh of relief when I sold for a small 7% profit. Phew! Dodged a bullet there?
Have a look at the chart from 2002 to now. It's certainly not been a straight line journey, they never are, but even in today's market the share price stands at £17.12. My first purchase would have been a 50 bagger, and my second purchase a 115 bagger. Oops! Hang on, did I mention they also restored a dividend payment? They've paid out £1.39 in dividends since 2002. In fact last year's dividend alone would have given me nearly half my money back without selling a single share.
Clarkson is a slightly different story, but a similar theme. I bought Clarkson in 2002 for £2 a share. It was debt free and paid a 7% dividend yield. Pretty safe stuff I thought. I then watched the share price drop to £1.30 or so. Let's just fast forward shall we. I eventually sold mine for a handsome 74% profit. Not so handsome sadly! Today's share price is £23.65. The dividends paid out since 2002 amount to £7.30. So that would have been 3.65 times my money back in dividends alone, and a 12-bagger.
Now don't get me wrong, not everything you buy will become a multi-bagger and if you're a speculator i.e. having a punt on early stage oil or mining companies or low/non-revenue multi-million pound "story" stocks then prepare for lots of disappointment or even total wipeout. However, if you grasp "value" investing or GARP stocks or preferably companies exhibiting both characteristics then the chances are that in a portfolio of 10-15 companies (at least) 2 or more should prove to be multi-multi baggers in the long term, and eventually you won't really care what happens to the ones that don't. I might add that in the past 18 years, only one company has ever gone bust on me and that was a speculation.
I don't do advice or share tips, but this current market will throw up some absolutely fantastic buying opportunities if you've got the cash and if you're fully invested already then maybe switch off your monitor and do something else for a while.
ATB.
I should re-iterate that bear markets are opportunities. "Be greedy when others are fearful". In Trakm8's case we might actually live the phenomenal share price appreciation again and then some more?
I previously mentioned that I started to invest seriously in the 2000's. What do I mean by that? Well to summarise, if you can't read a balance sheet, don't know what a p/e ratio is or TNAV or dividend yield etc then you should probably stick your money in a tracker fund. I'm not patronising, but you do need to (at least) find out about the basic financial measures to avoid many of the pitfalls. I also advise, as I did before, to read extensively about the "Great Investors" and their investing ideas. I did all those things before getting heavily involved in stock picking.
Anyway I digress. Why did I become a long term investor rather than a trader? Personal experience basically. Before my success with Trakm8 and Avesco, in 2002 I had invested in a company called Ashtead and a shipping company called Clarkson.
Starting with Ashtead. I bought my first tranche of shares in Ashtead for about 34p. At the time, I remember thinking that they were easily supported by NAV. Slightly naively perhaps, I hadn't taken into consideration their huge debt pile. I'm a little more clued up these days hopefully! Ashtead got into trouble and the share price fell to around 2p. "Oh dear, how sad for me" are words I didn't use at the time, my language was a little more colourful I seem to remember.
Anyway, I just held on and hoped for the best. Disaster was averted, and slowly but surely the share price began to rise. I bought more at 15p to average down, and let out a sigh of relief when I sold for a small 7% profit. Phew! Dodged a bullet there?
Have a look at the chart from 2002 to now. It's certainly not been a straight line journey, they never are, but even in today's market the share price stands at £17.12. My first purchase would have been a 50 bagger, and my second purchase a 115 bagger. Oops! Hang on, did I mention they also restored a dividend payment? They've paid out £1.39 in dividends since 2002. In fact last year's dividend alone would have given me nearly half my money back without selling a single share.
Clarkson is a slightly different story, but a similar theme. I bought Clarkson in 2002 for £2 a share. It was debt free and paid a 7% dividend yield. Pretty safe stuff I thought. I then watched the share price drop to £1.30 or so. Let's just fast forward shall we. I eventually sold mine for a handsome 74% profit. Not so handsome sadly! Today's share price is £23.65. The dividends paid out since 2002 amount to £7.30. So that would have been 3.65 times my money back in dividends alone, and a 12-bagger.
Now don't get me wrong, not everything you buy will become a multi-bagger and if you're a speculator i.e. having a punt on early stage oil or mining companies or low/non-revenue multi-million pound "story" stocks then prepare for lots of disappointment or even total wipeout. However, if you grasp "value" investing or GARP stocks or preferably companies exhibiting both characteristics then the chances are that in a portfolio of 10-15 companies (at least) 2 or more should prove to be multi-multi baggers in the long term, and eventually you won't really care what happens to the ones that don't. I might add that in the past 18 years, only one company has ever gone bust on me and that was a speculation.
I don't do advice or share tips, but this current market will throw up some absolutely fantastic buying opportunities if you've got the cash and if you're fully invested already then maybe switch off your monitor and do something else for a while.
ATB.
Saturday, 17 November 2018
Market madness and setting personal goals!
Investing in illiquid small caps is not for the faint hearted. I should know since it's where I concentrate all my efforts. Yesterday I experienced the worst one day share price collapse in a company I hold (if memory serves me correctly) since I started investing seriously in the early 2000's. The company in question is Trakm8. I'll address yesterday's debacle later.
Of course these things work both ways. Yesterday largely reflects the panic and irrational behaviour of a current bear market in micro-caps pushing their share prices well below fair value. Bull markets do just the opposite with the exact same companies.
With all the above in mind, whilst I'm constantly banging on about being a long term investor, it's vitally important to keep personal goals in mind and act accordingly.
I bought all my shares in Trakm8 back in 2011 when the share price was even lower than it is now i.e. it was in the teens. Here's my blog post from that time:-
http://michae1mouse.blogspot.com/2011/09/your-m8-my-m8-trackm8.html
Trakm8 was one of my largest investments. It ticked so many of my personal investing criteria for a micro-cap.
Fast forward to Spring 2015 and Trakm8's share price had risen above £1, and I took a gamble. Trakm8's results were improving, trading statements were excellent and the share price had real momentum. I quit the day job with a (hopeful) £2 plus price target in mind which would make my dream of full time investing possible. In early October of the same year (2015), as the share price rose above my £2 target, I attempted to sell half my holding. I managed to sell a good portion, but given the huge illiquidity of the shares, I didn't sell all that I wanted to. As luck would have it, share price momentum continued and I actually sold the rest of that 50% for well over £3.
My two sales gave me a 12 bagger and a 20 bagger respectively. This translated into more than 6 times my original investment with the remaining 50% to hold for "free".
I hope this doesn't sound like bragging because it's not, I'm just trying to state the importance of having personal goals when making buy or sell decisions.
Trakm8 changed my life and I'll always be grateful to the management team that had done so well up until that point in their development. For regular readers, I hope this also goes some way to explain why in the past I've defended them so vociferously (and clearly I still hold 50% of my original investment).
My personal experience in the micro-cap sector has taught me to pick 10-15 such companies that you believe have significant potential. Carefully consider their financial situation and prospects before investing and buy them as cheaply as possible. Hold tightly unless the story changes or you've reached a personal goal. One or two of these success stories will change your life. There are other successful strategies of course, but buy and hold works for me. Never forget with all the best research in the world then you'll still need a bit of luck, but "the more you practice the luckier you'll get".
Hot on the heels of Trakm8 came another success story. Avesco. What I don't think I've mentioned about my investment here is that before I started the thread below, I'd bought a small maiden purchase at around 80p, which I thought was very reasonable at the time.
https://uk.advfn.com/cmn/fbb/thread.php3?id=20681152
How I laughed as the price plunged to as low as 20p. I kept thinking maybe I was missing something, but the shares seemed ludicrously cheap. That's when I bought the bulk of my holding. In 2016, Avesco was bought out for £6.50 and along the way investors enjoyed generous dividends that included a bumper £1.10 payout after winning damages against Disney.
http://michae1mouse.blogspot.com/2016/11/avesco-value-realised-after-recommended.html
This brings me back to yesterday's interims and trading statement from Trakm8.
The interims and trading statement were extremely disappointing there is no denying it, but a near 70% drop in the share price is just plain silly.
As a long term investor, what you need to decide is where will they be in 5 years or more?
I see a company that's still making good progress (albeit slower than hoped) but had a bit of bad luck in regaining momentum. It's recurring revenues make up 58% of total revenues which in 2018 are likely to be around £22m or so. Lexis Nexis and EE are two major contract wins recently announced and join the AA, Scottish Power, Direct Line, Marmalade, E.ON etc in employing Trakm8's cutting edge technology. Reading yesterday's report again, I still believe the company has excellent medium and long term prospects.
I don't give advice, but I'll be holding my shares now until the end game which I'm hopeful will conclude in a few years time in a similar manner to Avesco i.e. huge capital appreciation, dividends when appropriate and an eventual buyout at a premium.
ATB to regular readers, and if you're relatively new to investing then don't be depressed by the current sell off in micro-caps, it's an opportunity and not a negative.
As ever, AIMHO and please do your own research.
Of course these things work both ways. Yesterday largely reflects the panic and irrational behaviour of a current bear market in micro-caps pushing their share prices well below fair value. Bull markets do just the opposite with the exact same companies.
With all the above in mind, whilst I'm constantly banging on about being a long term investor, it's vitally important to keep personal goals in mind and act accordingly.
I bought all my shares in Trakm8 back in 2011 when the share price was even lower than it is now i.e. it was in the teens. Here's my blog post from that time:-
http://michae1mouse.blogspot.com/2011/09/your-m8-my-m8-trackm8.html
Trakm8 was one of my largest investments. It ticked so many of my personal investing criteria for a micro-cap.
Fast forward to Spring 2015 and Trakm8's share price had risen above £1, and I took a gamble. Trakm8's results were improving, trading statements were excellent and the share price had real momentum. I quit the day job with a (hopeful) £2 plus price target in mind which would make my dream of full time investing possible. In early October of the same year (2015), as the share price rose above my £2 target, I attempted to sell half my holding. I managed to sell a good portion, but given the huge illiquidity of the shares, I didn't sell all that I wanted to. As luck would have it, share price momentum continued and I actually sold the rest of that 50% for well over £3.
My two sales gave me a 12 bagger and a 20 bagger respectively. This translated into more than 6 times my original investment with the remaining 50% to hold for "free".
I hope this doesn't sound like bragging because it's not, I'm just trying to state the importance of having personal goals when making buy or sell decisions.
Trakm8 changed my life and I'll always be grateful to the management team that had done so well up until that point in their development. For regular readers, I hope this also goes some way to explain why in the past I've defended them so vociferously (and clearly I still hold 50% of my original investment).
My personal experience in the micro-cap sector has taught me to pick 10-15 such companies that you believe have significant potential. Carefully consider their financial situation and prospects before investing and buy them as cheaply as possible. Hold tightly unless the story changes or you've reached a personal goal. One or two of these success stories will change your life. There are other successful strategies of course, but buy and hold works for me. Never forget with all the best research in the world then you'll still need a bit of luck, but "the more you practice the luckier you'll get".
Hot on the heels of Trakm8 came another success story. Avesco. What I don't think I've mentioned about my investment here is that before I started the thread below, I'd bought a small maiden purchase at around 80p, which I thought was very reasonable at the time.
https://uk.advfn.com/cmn/fbb/thread.php3?id=20681152
How I laughed as the price plunged to as low as 20p. I kept thinking maybe I was missing something, but the shares seemed ludicrously cheap. That's when I bought the bulk of my holding. In 2016, Avesco was bought out for £6.50 and along the way investors enjoyed generous dividends that included a bumper £1.10 payout after winning damages against Disney.
http://michae1mouse.blogspot.com/2016/11/avesco-value-realised-after-recommended.html
This brings me back to yesterday's interims and trading statement from Trakm8.
The interims and trading statement were extremely disappointing there is no denying it, but a near 70% drop in the share price is just plain silly.
As a long term investor, what you need to decide is where will they be in 5 years or more?
I see a company that's still making good progress (albeit slower than hoped) but had a bit of bad luck in regaining momentum. It's recurring revenues make up 58% of total revenues which in 2018 are likely to be around £22m or so. Lexis Nexis and EE are two major contract wins recently announced and join the AA, Scottish Power, Direct Line, Marmalade, E.ON etc in employing Trakm8's cutting edge technology. Reading yesterday's report again, I still believe the company has excellent medium and long term prospects.
I don't give advice, but I'll be holding my shares now until the end game which I'm hopeful will conclude in a few years time in a similar manner to Avesco i.e. huge capital appreciation, dividends when appropriate and an eventual buyout at a premium.
ATB to regular readers, and if you're relatively new to investing then don't be depressed by the current sell off in micro-caps, it's an opportunity and not a negative.
As ever, AIMHO and please do your own research.
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