Small Cap Value Report (Fri 29 Dec 2023) - SND, SED, DUKE

29th Dec '23 by Paul Scott

52 comments 6814 reads

Good morning from Paul.

Today's report is now finished.

Half-day today - market closes at 12:30. So if you're still staring at your watchlist at 13:00, amazed at how illiquid the market is, that's because it's shut! ;-) [we've all done it!]

It's the last SCVR of this calendar year! What a year it's been too, with greatly widened coverage of the market - at the latest count, Graham, me, and Roland covered 607 unique UK listed companies here. That's all in the archive now, for reference under the "Discussion" tab of each company on the StockReport.

It's been a pleasure, and sometimes a challenge, to produce all these reports. I have to say that working with both Graham and Roland is an absolute dream, I don't think we've ever had crossed words.

Graham's top 10 share ideas for 2023 delivered a fantastic return, make sure you check out his new article here, with an astonishing +25% profit for the year. Well done Graham!

** STOP PRESS! ** - Megan's just published this very interesting review of how the StockRanks performed this year. I think it nicely reinforces how the StockRanks are not infallible for individual stocks, but for a portfolio they skew the odds in our favour.

I must also mention the fantastic quality of reader comments this year, with some wonderful contributions from many subscribers, thank you to everyone who has contributed in a positive, courteous way.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.

We stick to companies that have issued news on the day, with market caps (usually) between £10m and £1bn. We usually avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise…

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Peter T

29th Dec '23

And now the inevitable piece on Vox. This entitled "Saietta set for growth after transformational 1H23" Oh dear.

On a positive note though it serves to remind me how lucky it is that we have the likes of Graham, Roland and Paul S upon whose sage advice and integrity we can rely. Thanks guys you are stars.

Lefty99

Hi all,

Thankfully I am in positive territory after a good run from October onwards. I don’t often post, but remember not so long ago posting how it was all getting me down. After some thoughtful comments and advice from the SCVR family I have remained positive, and things can quickly turn around. Thank you to everyone on that day, it was much appreciated.

Highlight of the year for me Warpaint London (LON:W7L)

Lowlight of the year iEnergizer (LON:IBPO^E23)

Good luck for 2024 all !

Revs8

Anyone got an insight on Somero Enterprises (LON:SOM) (I hold). Going straight up in recent days (up 33% from the double bottom). Is it just the realisation it’s been oversold or something else? Either way I’m not selling.

BnB

Oversolds / Out of favour

Wynnstay

I bought a half position this morning. Could go lower but I’m buying at a big discount to NAV when it has traded at 1.5x in better years. I find the ERP on this attractive at these levels for a (hopefully) reliable asset yielding almost 5% against gilts at 3.6% GRY today. Will top up within the coming months in the expectation that I’ll get a better price in the new year.

Charles Mitchell

Duke Royalty (LON:DUKE) Is an interesting investment vehicle (I hold) . The yield of 9% plus growing revenue- up 12% YoY makes this look pretty solid for income seekers with capital growth as interest rates fall.

Burnt Onions

Nexteq (LON:NXQ) haven’t been following this so am surprised the share price has dropped into such deep value territory. And I agree with you the chart looks like it could be turning. Thanks for posting Wolf, will look into numbers this weekend, this could be my first trade of 2024 ;)

Wolf of Small Street

I remember lefty, I'm glad things turned around for you.

There's no harm in reorganising portfolios a little now if anyone was feeling stressed a couple of months ago. Much better to do it when sentiment is high.

Anyone got an insight on Somero Enterprises (LON:SOM) (I hold). Going straight up in recent days

It’s basically catching up with what all construction related stocks have been doing of late, thanks to the potential for interest rates to fall which is already anticipated in falling bond yields

Tortoise investor

I think this is a decent two year performance given how awful 2022 was for UK small caps investors - well done.

Good luck with the pharmaceutical investment(s). Despite having a lot of career knowledge of the sector I find it extremely difficult to unpick different companies' prospects so I have that whole sector in the 'too difficult' category.

I was invested in Saga (LON:SAGA) but sold as its insurance arm seems to be struggling to maintain margins with the new 'loyalty penalty' rules and 'consumer duty' from the FCA so I worry that even if cruises bounce back (why has that not happened already?) then it will get nowhere near previous levels of profitability. The current p/e of 7 therefore looks about right to me given the debt profile.

BenHazz

I looked around extensively for any concrete news on this (excuse the pun) and found nothing . The trade sizes seem highly variable and the volume low, so it doesn't look like a big stake being built by an institution. I think anyone who has held this long was in the "I'm not selling" camp and there simply aren't enough sellers to match the buyers. Once a bit of momentum started that has just exemplified. I wouldn't be surprised to see this jump higher in the new year if interest is maintained and volumes increase a bit more.

murrb

Congratulations, BenHazz, on a positive return 2 years running in the bear market we have just experienced. There will be few who will have done the same. To have achieved that means that you are surely very well set up to succeed in investing with many decades left to grow your pot.

StrawberryDreams

Nicely written.Lovely read as a newbie too i have appreciated all the unbiased teachings and real life experience from Paul, Graham, Roland and all the Stocko team and ofcourse all the knowledgable commentary posters in the cheap seats!I've learnt a lot already.And thanks to the Boon Fund for putting me onto On Beach group (LON:OTB) too at the low £1 level.

P.P.S. There certainly has been a fair whack of M&A going on in the big pharma world of smal/midcap US listed pharma lately with a lot of patent cliffs approaching for big pharma incluidng Bristol-Myers Squibb Co (NYQ:CELG RT) recent purchase of Karuna Therapeutics (NMQ:KRTX) for $14 billion, which was originally developed by UK listed Puretech Health (LON:PRTC) .

There was an article in Investor's Chronicle on the upcoming big pharma patent cliff in the last year.I wish i had bought Vertex Pharmaceuticals (NSQ:VRTX) years ago, but i had only really heard of Pfizer (NSI:PFIZER).

GavR

Thanks Paul, Graham and Roland for all the insights and top quality coverage in 2023. Look forward to following along in 2024.

Dragon

Container shipping costs up again

Freight prices rose 80% in the past week, having already gone up nearly 50% the week before.

The Ox 2906

30th Dec '23

Re Puretech Health (LON:PRTC) the cash they will get from BMS is in return for their stake in Karuna is it not? I’m wondering whether they will have any ongoing financial relationship with Karuna after the bid. Moreover last year they had written a call on their holding and I’m concerned they may have done so again thereby limiting their full upside of the bid. I imagine the co will have to make a pretty full RNS early in 2024. But they have some good pipeline products and an excellent history of founded company success.

Robert W

My portfolio update for the year:

I made a 9% profit on my portfolio of roughly 40% individual shares, 45% investment trusts and 15% bonds.

For comparison: that's 2% better than FTSE Total Return and 2.5% worse than Vanguard 80:20. So a very average year but much better than last year.

TB_Investor

Finished 18% up in 23, happy with that result.

What I’ve learnt

Don’t be scared to buy good businesses when the share price is depressed - my biggest winners were at their near lows in 23 when I bought Belvoir (LON:BLV) and Volex (LON:VLX)
The market will eventually turn so don’t become too despondent. Don’t let good performance go to my head, and don’t let poor performance get to my heart.
Research and reading helps results

What I need to do better

Have higher weightings in stocks I have higher conviction in. Missed out on larger gains from both Jet2 (LON:JET2) and Brickability (LON:BRCK) by only having small positions
Be fully invested, for some reason I’ve been nervous to do this, but need to negate this going forwards - unless I have fair specific reasoning
When you have a good idea, buy it (in a reasonable timeframe) don’t wait forever hoping it will become cheaper. Springfield Properties (LON:SPR) as a good example - was crazy cheap but I sat hoping for a further fall and then sat watching as it made a strong recovery. Currently doing similar with Crest Nicholson Holdings (LON:CRST) which has potential to double in the next 12-18months, will be buying in Jan.
Engage more in the daily SCVR, I read it every day and have been a subscriber for years but barely post. I’d like to become more active here and add my ideas and thoughts in the hope that alternate views can improve my investing knowledge.

Good luck to all in 2024

Jonathan Upite

31st Dec '23

It's quite interesting to see the overall performance of people's investing . Mine as been a bit of a rollercoaster . I decided to start investing in 2019 after 4 years I am 29% up not great by some peoples achievements but I am only a amateur investor and if it wasn't for the last few months it would be nearer 0% . Things change quickly when invested with fewer stocks especially small caps . If I learned to sell at the top instead of holding on to some investments I would do better . Good luck for 2024 everyone . Happy New year

Lincs

Sharepad showing divi forcast reduced by 24% to 27c - that puts it on a divi of around 5.6% at current price - not sure SP will go much higher until divi is returned to the higher levels previously seen.

Paul Hill

8th Feb

Maybe Sondrel (Holdings) (LON:SND) isn't totally dead after all.

Apparently this UK nano-metre ASIC chip designer played a key role in assisting Lon Musk's California-based Neuralink project to implant a chip inside a patient's brain for the 1st time on Sunday.

https://www.dailymail.co.uk/ne...

Small Cap Value Report (Fri 29 Dec 2023) - SND, SED, DUKE

Explanatory notes -

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Paul Scott

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