Small Cap Value Report (Fri 14 Oct 2022) - BKS, LGRS, REVB, WAND

13th Oct '22 by Paul Scott

105 comments 8865 reads

Today's report is now finished. Don't forget to check out tomorrow's podcast!

Good morning from Paul! It's catch-up Friday today. For those of a nervous disposition, and reading this on Thursday, no you haven't accidentally fallen through a worm hole in the space-time continuum, I'm publishing this early, partly so that I can have a bit more time in bed on Friday morning, and not get so stressed at 7am, but also so that everyone gets to see my notes on yesterday afternoon's interview with Beeks Financial Cloud (LON:BKS) (I hold), which might have otherwise been overlooked, if it had been added late to Thursday's SCVR.

Forthcoming CEO interviews - I'm really enjoying doing these CEO interviews, although it is quite a lot of additional work & stress, but if we can't flag up decent companies at attractive valuations, and quiz management, then there's little point in us being here!

So I've lined up some more. NB I only approach companies where they've issued a recent trading update or results which look good, and where I think there might be a long-term opportunity because the shares seem cheap, either as value, GARP, special situation, etc. So it's really my best ideas from these reports, and then I contact the company and ask for an interview (no fee, as I want to be independent). So far, every company I've approached has been delighted to engage, so that's encouraging. The next companies lined up for my interviews over the following fortnight are -

Sanderson Design (LON:SDG) - good recent results, and looks cheap. Lovely balance sheet.

Zotefoams (LON:ZTF) - we flagged it looked good in August, but yesterday's update sparkled.

As always, these are never recommendations or advice. DYOR please, and it's up to you to decide if or when to invest.

So if you have any particularly insightful questions, pop them in the comments section below, and I'll pick up the best ones, as I did with BKS yesterday. If you're finding them useful, then leave a comment, as otherwise I don't know if these interviews are useful or not.

Agenda

Paul's Section only as it's Friday:

Beeks Financial Cloud (LON:BKS) (I hold) - I've typed up a summary (below) of my interview with CEO & CFO yesterday, also available on podcast, or here in audio version. It's worth…

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Northender

14th Oct '22

Another possible option is to invest directly in short-dated gilts e.g. Treasury 0.125% 31/01/2024 £TN24. This was trading around £96 today and will be repaid at par on 31/1/24, giving a yield to maturity of around 4% over 15 months or so. Something to bear in mind is the cost of dealing, particularly on lower amounts, and the management charges with some ISA providers.

Paul Scott

Exactly! People don't have to take any notice of the "My opinion" section. The purpose of the SCVRs is to plough through the announcements, unpick them, and give you some interesting & independent analysis (e.g. on balance sheets, cashflows, etc) that you can't get anywhere else. Covering a large number of companies (500+)

That's intended to be one of the tools available to you, in addition to the data tools such as the StockRanks & Styles.

There's an archive too, where you can quickly get up to speed on previous announcements & reviews of the results, which saves a huge amount of time to find the key information.

Put all that together and use it as part of your further research process, and then make up your own mind on if, and when to buy or sell.

I know a lot subscribers use the SCVRs as an initial filter, and if we flag a good trading update, strong balance sheet, and low valuation for example, that's a good starting point for something you can research in more depth, if you want to.

Maybe some newer subscribers think I'm meant to be a guru that you can blindly follow? That's never been the case, and isn't what we do here.

Happy to clarify that!

Have a relaxing weekend everyone :-)

Paul.

Rusty2

The only times I have transferred money from my ISA, both took around 3 months, both were in cash, so it sounds good in theory but they need to spend up the process.

It was also a lot of hassle, I got the impression, they wanted to hold onto my money, as long as possible.

Cash in ISA is a real issue now. You should be able to switch money between share and cash ISAs quickly.

Graham Neary

Thanks for the lovely message Jonno! G

yiannos1

Hi Paul ,

I believe he was the CEO and behind the success of Mears Group ; and that was about 2000-2001. I remember I first bought at 26p sold all at 80p and then went to £5 ( in 18 months ) and paying a dividend of 20p a year!!

However he loaded the company with a lot of debt and he was basically kicked out ( can’t remember exact year).

Then he was involved in a company similar to Mears Group , again I am not 100% but I think the company changed its name (twice!) to the current Sureserve Group plc after a big dilution of the previous shareholders.

Hi Dodge, thanks for the comment but I'd like to make a couple of points:

1) the CUKS ETF tracks the MSCI UK Small Cap Index.

This index (as of the Sep 2022 factsheet) consists of 269 constituents, having a median market cap of £733m. In other words, half of the companies in this index are not within the traditional SCVR market cap limit.

Here are the ten largest components of this index (disclosure: I own RMV and IGG):

To put it simply, this index has a definition of "small cap" that includes many non-SCVR companies. It's a great index to invest in, but it's not a good index to compare with SCVR companies.

2) The AIM All-Share Index also includes companies worth over £1 billion, but it's likely to be a better representative of the type of companies that we cover. For example, the largest companies in AIM include the likes of Burford, Keyword Studios, Fever-Tree and YouGov, all of which we have covered in the past on multiple occasions.

The AIM All-Share Index is down 36.6% over the past year (before dividends), which is much closer to the result you calculated when looking at SCVR companies.

3) Not that Paul needs or has asked for me to defend his record, but I think it's fair to say that his specialism happens to be in retailing, to include both physical retailing and e-commerce companies.

Like other sectors, retailing is sometimes wonderful and it's sometimes awful.

It has been butchered over the past 18 months.

The FTSE AIM - Retail Sector index is down by 83% since its peak in February 2021. It's down by 70% since this day a year ago. What this means is that if your specialism happens to be retail shares listed on the AIM index, then you have just experienced the investing equivalent of the apocalypse.

Best regards

Graham

Thanks yiannos!

I thought of Mears when I saw the name Bob Holt, so good you confirmed that.

I think Sureserve was previously Lakehouse. I remember meeting the original mgt there, and thinking it seemed a bit odd. It looks a lot better now though.

Have a great weekend!

Regards, Paul.

AnonymousUser1822519

Takes me about a hour to transfer between my Shares ISA and my current account; I bank and trade with Barclays. They also allow withdrawals as long as it's returned within the tax year as Robbie has discussed above. As for not paying tax on money outside ISA, well you can't have your cake and eat it: taxes and death....

My plan is to short the DOW and to buy oil and gas stocks and when the macro outlook looks better start looking at other sectors.

However, with Armageddon Joe in power may need to start looking at nuclear bunkers as none of the above will matter.

Thats it Lakehouse , and before that was something else ; the business had something to do with pest control and the shareholders ended losing everything.

Thanks

You can't do that with most brokers. Also can you only move this years amount, ie £20,000 or more than that?

gregatr0n

15th Oct '22

He lead the turnaround of Lakehouse . he was appointed after the founder stepped back in and kicked out the mgmt that took it public and nearly bankrupted it. He also is (was?) Chairman at Totally . For both of these he stepped in and stopped the bleeding / stopped them going broke. Neither have seen huge returns though but havent gone to zero.

Epitychia

Yes, as the late Queen said:

'Recollections may vary'.

The Phoenix

Hi Tim

Is it not the case though that although the B of E won't buy anymore gilts from pension funds they are now willing to lend pension funds cash against the gilts the funds hold so all sounds a bit smoke and mirrors to me.

Regards Andy

Hi Rusty,

I believe you should be able to withdraw the full amount of your ISA and return it regardless of amount but I've not tried this myself except for small amounts only.

I found this on Google:

https://www.bestinvest.co.uk/i...

A while ago, Barclays trading services used to be called "Barclays Stockbrokers" and it was a totally separate account to its banking services with a separate login, but it relaunched as "Barclays Smartinvestors" and is now integrated with its online banking services(same login), so transfers between them appear like internal accounts. That's the bonus of banking and trading with the same business.

Tommy H

Whilst I am no longer with Halifax, my current account, ISA and Share Dealing Accounts all showed up on the front page of my log in system.

Though typically deposits were there instantly, withdrawals up to 3 business days

With Vanguard SIPP I can leave my money in cash, not sure if they pay interest like they do on my standard dealing account or not as only just transferred in my previous company share scheme.

I have to say hats off to Vanguard and Aviva, took less than a week to transfer the SIPP though turned out the company had not made the last pension payment so now I have to wait until they reopen another Aviva account and then close that one too!

I have to say that there were not a lot of options in the Aviva account when I was trying to find something like cash or cash equivalents, and not the best range of funds either, but then company's choice not mine, though they went through People's Pension, Aegon and Aviva in under 18 months!

timarr

Hi Andy

Is it nt the case though that although the B of E won't buy anymore gilts from pension funds they are now willing to lend pension funds cash against the gilts the funds hold so all sounds a bit smoke and mirrors to me

Sort of. The BoE has devised a scheme whereby they will lend against collateral via commercial banks. This supposedly comes at a higher price than if the pension funds had taken the straightforward bailout.

The whiplash u-turning of the last few days hasn't made much difference to gilts overall, and it looks like Hunt wants to hang on till Halloween before providing the certainty that the markets want (well, hopefully) so there'll be some nervous fund managers out there at the moment.

The whole situation is ridiculous, though. Truss and Kwarteng have been acting like Britain still has an empire and sterling is the world's reserve currency. We don't and it's not. As Mark Carney memorably said, the UK is dependent on the kindness of strangers to fund our debt addiction. This week we found out what the price of that dependence is.

jamesalastair

Gold Bullion and BH Macro.

16th Oct '22

Thanks Tim

Hopefully given virtually all the tax breaks have now been rolled with the exception of the stamp duty cut Hunt won't have to come up with two much to calm markets down although I think it will take a combination of fiscal responsibility and Truss given the boot to try and get gilt rates back down.

It really is incredible what an own goal bomb, Truss and Kwasi came up with plus throw in the usual derivatives working until they don't story again.

Small Cap Value Report (Fri 14 Oct 2022) - BKS, LGRS, REVB, WAND

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Paul Scott

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