Small Cap Value Report (Thu 16 Nov 2023) - HOTC, CPC, GLE, CMCX, CRST, DX., PRES, LIO, TYMN, KIE

16th Nov '23 by Paul Scott

124 comments 10681 reads

Good morning, it's Paul & Graham here!

All done for today - a mammoth report! I've added some super-brief comments in the agenda section where I just had a very quick look.

Ed's webinar on multibaggers

Wasn't this excellent, last night?! If you didn't manage to watch live, then do check out the recording, which I think the team is planning to email out to those who registered.

I recognised all 10 of the multibaggers from 2013-2023, because we've written about all of them many times here over that period (our archive of SCVRs goes back to 2013). I have to say, it wasn't at all obvious at the time that any of them would go on to become multibaggers. In every case, management just executed very well over the long-term. There's not really any way to measure that in advance, this is the trouble!

However, Ed flagged some fascinating (and surprising!) insights into some of the common traits these multibaggers did possess early on. It's also very encouraging that a lot of the biggest UK multibaggers were mundane small caps on value ratings (at the start of their run), not sexy sectors or blue sky projects (although the £50m minimum market cap would have excluded those).

So the exciting thing is that the next batch of multibaggers are buried somewhere in these reports here & now! Let's hope we can spot them, and have the patience to hold (that's the really difficult bit!)

EDIT: a reminder that I started the SCVRs in 2013. So we have a full 10 year archive of all the multibagging shares. It's quite interesting to look back at how they were perceived before we knew they were going to be multibaggers!

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…

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psin

16th Nov '23

CMC Markets (LON:CMCX) Robbie has just informed us that he has bought some and also mentions takeover potential.

I dipped a toe in gently.

EdwardJW

Paul, I understand the investment case and I think the share is probably more likely to double from here than go zero.

But why go so concentrated on something which is still speculative? Why not put in 25% of your portfolio - still a very sizeable position - rather than the 60%+ it sounds like you're in for. Sounds like poor risk management to me. Buffet is an advocate of a concentrated portfolio but also advocates using Kelly criterion for his position sizing I believe.

Wolf of Small Street, yes I will/do. But if we all only commented on stocks we're personally invested in then it would be pretty boring. I'm more open to bear arguments on my stock picks and investing style than bull arguments. I addressed to Paul because he has given me pause for thought on my own stock picks and investing style, so I just wanted to pass on my concern.

Pimlico on Thames

Sorry, yes Fevertree Drinks (LON:FEVR)

JohnDoe2378

Robbie Burns believes women ARE better investors!

Paul Scott

Yes thats right. Also the spread bet cos often raise margin to 100% when a share is suspended. Ive had to stump up loads of extra margin when a co went bust, and had to wait 3-6 months

Wolf of Small Street

Are you angling for a job as his personal financial advisor :-)

AstonGirl

Yes I do use stop losses. I realise that they’re controversial but they’ve got me out of some potentially large losses such as Trackwise, SCE & TRMR. On balance they work for me

*I did suspend them though during the 2018 fall and Covid dip as the falls were across the board

Patience is something I too need to work on….

The Phoenix

You should be on a beach in Mauritius Saarf with that kind of winner not lurking on the small cap bulletin board with the rest of us.

Mystery shopper report from 'spoons (Mary Shelley branch, Bournemouth) this afternoon after earning my stripes doing the SCVR -

Meal deal no.1 - Guinness and turkey Xmas dinner - absolutely bloody delicious! Total cost £15.50 including table service, and no tips.

Meal deal no.2 (I was hungry!) £12.01 for a cheese salad (also delicious, but small) and a pint -

It's 'spoons every time for me now!

Quick check on my latest investment on the way home - Revolution Bars (LON:RBG) (I hold) was empty-ish, but always lovely staff, happy to have a chat. Banks have relaxed covenants, just a minimum liquidity one now, and Xmas bookings up, so if they do OK over Xmas & NY, it could see leveraged upside to the tiny sliver of equity (£9m) maybe? Mgt saying that 76% gross margins mean big operational gearing once 18-30 age group start spending again. It's risky, could go either way.

Peach (trading well) could be sold to eliminate most of the bank debt, in downside scenario. That's probably why Nat West is so comfortable, and the only covenant now is minimum liquidity. So if this works, the upside all flows to equity. May not work though, so higher risk. I think it's not bad risk:reward, so I've gone back in at 3.6p. Chance of a zero? Maybe 0-20% at a guess, if Xmas is a disaster. Chance of a 2-5 bagger? Quite good, if it does well over Xmas, and consumers spend now real incomes are turning positive. Risky! Not for widows or orphans.

Might be mistaken ; but something in the back of my mind tells me that the management tried to sell this for about £30m but nobody was interested.

Sounds like you might be getting muddled up (again) with the sale of IP to Technip a few years ago. The non-compete clause has since expired, and Plexus (I hold) has re-entered the market with improved tech & new patents.

Hi EdwardJW,

- rather than the 60%+ it sounds like you're in for.

Where did this come from? I've never disclosed what % of my portfolio is in Plexus (I hold). It's nobody's business. My money, my choice what to do with it. Same with everyone.

I feel you're crossing a line with the above, so let's change the subject.

Thanks, Paul.

whatmore1951

Some years back HL looked at there client database on a male/female basis. They reported that only 15% of clients who were active investors were female but that the female clients outperformed the males by quite a bit. The only difference HL could identify was that the female clients traded a lot less. In other words the males cant resist fiddling and it is costing them money.

I thought you said on one of your podcasts that your portfolio was mainly Plexus at the moment.

Fair enough. Didn't intend to cause any offence.

yiannos1

Muddled up again!

Thanks and good luck with your new investments.

sharw

Eating in 'spoons?? You should have been on the pier with Mary:

https://www.bbc.co.uk/iplayer/...

NeilS

Ferrero bought Thorntons when it all went to rats. Similar to Hotel Chocolate model.

BenHazz

17th Nov '23

I have held Crispr Therapeutics AG (NMQ:CRSP) for a couple of years now. I think it has huge upside potential mid-long term. I topped up recently after watching the Adcom meeting. I am confident in approval from the FDA at the start of December, although I think that is mainly priced in after the recent 50% bounce off the lows. Very volatile but multibagger/buyout by vertex but possible. Let's hope gene editing becomes the next AI and we make a fortune. Good luck.

Caper4

Don’t forget Paul the excellent Spoons on the waterside at Poole Quay. By far the most attractive location for any Spoons I have drank in.
And, many thanks for your superb work, enjoy your beer

Equity Development

24th Nov '23

Tatton Asset Management (LON:TAM) - video recording of post-results Investor Presentation ***

Tatton Asset Management ran viewers through highlights of the period to 30th September which included strong net inflows and growth in revenues & profits, with adjusted operating margin hitting 50.7% - far above any comparables. Management provided a financial review and outlined the significant growth potential going forward. With strong tailwinds they detailed the opportunities and challenges around M&A with price expectations remaining high, while highlighting their organic growth in market share. An in-depth summary of investment performance was followed by questions from viewers. Full video here:

?si=4iIAz0oK8FD6W8AX

Small Cap Value Report (Thu 16 Nov 2023) - HOTC, CPC, GLE, CMCX, CRST, DX., PRES, LIO, TYMN, KIE

Ed's webinar on multibaggers

Explanatory notes -

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Paul Scott

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