Small Cap Value Report (Tue 9 Jan 2024) - GLE, MTW, QTX, IPX, SHOE, SIG, HAS, IUG

9th Jan by Paul Scott

110 comments 10202 reads

Good morning from Paul & Graham!

I'm getting up really early every day at the moment, trying to finish the full article on my 2024 share ideas, which is turning into a nightmare, but it's almost done. We scored a lovely (lucky!) early success yesterday, with the positive update from CMC Markets (LON:CMCX) which both Graham and I picked for our 2024 lists. For anyone who missed it, here's Graham's Top 10 ideas for 2024. The real-time prices spreadsheet for both our 2024 lists is here (note there are 2 tabs, at the bottom) -

Why not make a personal copy of this spreadsheet, and add your own share ideas to a new tab (using "Duplicate" on the tab button at the bottom)? Then we can compare performance amongst readers at the year end! You could publish a screenshot of your choices, or provide a link using the "Share" facility (anyone with the link can view, is the best setting).

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 people won't necessarily know what company you are referring to.

What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.

Green (thumbs up) - means in our opinion, a company is well-financed (so low risk of dilution/insolvency),…

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DaviStoVest

9th Jan

I buy shoes for my children on-line...usually good quality merchandise bought tactically during promotions. I live overseas and there are practical reasons why on-line long distance shoe purchase makes good sense ... the quality available in the local market is generally very poor and not inexpensive.

I'm not 'representative' but I can vouch for the fact that, if you use a reputable foot measurement gauge and try to buy a little ahead of actual need, buying shoes on-line is really straightforward and saves a boatload of cash. I haven't tried sourcing from China. Perhaps I will give it a try and see how it goes.

mojomogoz

As its not cheap on any sort of ordinal or cardinal type ranking that is taken to give relative value in a fairly simplistic quantitive context either at market or sector level...these measures don't use any long duration growth or profitability forecasts and of course long term estimates are thin on the ground so can't really do that cross sectionally...

...but in world where long term profit and growth forecasts were broadly available and somehow normalised such that we don't implicitly assume overall GDP is going to be 20%pa then Games Workshop (LON:GAW) could look good value even cheap.

If you think the future looks something like the past at GAW (not necessarily such a high level of top line growth but some growth and high margins) then it looks cheap IMO.

Tortoise investor

Although AuM up to £52.2bn from £50.2bn last year and higher performance fees. The market has reacted negatively - understandably given the manager of 20% of its funds is going to be leaving - but there are some positives here and we're still in the middle of a turnaround.

turbo

Borrowing Graham’s summary on Supreme (LON:SUP):

"Risks would seem to be priced in here given that Supreme has built up a really solid track record in recent years. In addition to being a distributor, it does own a vape brand, and the distribution deal should stay in place for the foreseeable future.

At a PER of 7x and with great momentum it looks cheap:"

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Graham notes bear points include regulatory risks around vaping (and ethical concerns), Supreme doesn’t actually own Elfbar, and Supreme's ability to generate consistent profitability. Demand in the lighting industry can also be highly volatile.

Since Grahams's report, Supreme has recently acquired, out of administration, the trade and assets of protein manufacturer FoodIQ UK Holdings Limited for a consideration of £175,000. FoodIQ is a state-of-the-art, fully-automated contract manufacturing facility which was opened only 18 months ago at a cost of £1.2m. This has the potential to add up to 40% to Supreme’s wellness manufacturing capacity. The new wellness production capabilities should help bring in new customer opportunities.

I have bought today.

NewInvestor1972

I didn't realise this was in their plan but Just to explain this a bit, From Berlin for example EZJ now offers holidays as well as flight only. So flights, Transfers and hotels as an opaque package.

They have a competitive advantage as they own the airline, so can give themselves exclusive discounts on the flight, they still make more as it's with a hotel and transfers which are better margin than flight only

It will take time time to get traction but it's a fantastic opportunity. The have already got the online traffic. They can slowly open up holidays for the rest of Europe.

I didn't realise they flew to so many destinations from Berlin.

jmallin1972

what is the best site to use to get an alert when fund managers increase their stake in a certain share

Wolf of Small Street

A look at a few asset managers since they bottomed around Nov last year. Apart from Jupiter they've all been a pretty safe way to play the year end rally. Some decent gains especially from Impax.

Impax Asset Management (LON:IPX) +42%

Foresight group (LON:FSG) +22%

Premier Miton (LON:PMI) +30%

Polar Capital Holdings (LON:POLR) +11%

Liontrust Asset Management (LON:LIO) +13%

M&G (LON:MNG) +16%

Jupiter Fund Management (LON:JUP) +3%

Rusty2

Delivery takes about 5 days. If late they pay you £5. Returns, not actually had to return anything, they just refund me, either a credit or refund on my credit card. Sizes tend to be too small. Some items are nothing like the images. Reviews are misleading as there is a default to 5 stars, which a lot people just do.
Minimum order was £10 but now is £15.

tony axon

In the light of Gleason RNS ,there have been several comments on builders ,. Have held Bellway, and Vistry in the past few years ,when they did so well with goverment backed schemes , but have been out of this area since covid hit.

I still run a set of sieves devised by CD Refs,basicly a 'zulu' interpretation. If you fancy a builder , Cairn[CRN] is sieveing and the stats and stoko rating look VERY good .

I have a decent holding with a few %age points gain , as it started to sieve around august.

Whil'st Irish rather than UK firm , the market there has some correlation to here ,namely a large shortage of housing stock - unlike here the govt is still backing 'help to buy schemes' - it also appears to be in a better position to continue this, rather than here where we are so deeply in debt. When you look up their website you realise they are doing a lot of building, and seem well thought of .

Those same sieves threw up TIME finance as well, and that looks a strong hold again'st stats even after a good run.

Had the good fortune to take a strong position in Ashtead Tech ,early last year ,my share of the year with over 90% gain. The current figs ,in my view ,make it a strong hold / buy. My take on Slater 'peg' mean it is still under 0.7 Jim would suggest that was a strong buy ,all other figs. falling into line. Good luck in this new year to all your 'picks' Tony

Chipspa

Re Shoe Zone (LON:SHOE) , I would appreciate if anyone could kindly help me with a query working out their free cashflow per share.

I have taken their net cash flows from ops and then subtracted the net of PPE purchases and sales (as I believe this is essentially their Capex spending). I would normally take this to be the free cashflow and divide by the number of shares, but I wonder if I should also be taking account of the capital element of lease repayments and subtracting this?

Any thoughts appreciated

From their final results, I have taken their net cash flows from ops and then subtracted the net of PPE purchases and sales (as I believe this is essentially their Capex spending). I would normally take this to be the free cashflow and divide by the number of shares, but I wonder if I should also be taking account of the capital element of lease repayments and subtracting this?

planetx

No idea

I only keep an eye on the RNS of all my holdings and watch lists just to see who’s coming / going

MetalMaid

Hays (LON:HAS) recovered much of its loss today, closing at about -7% (I think at one point it was over 15% down). What's odd though is that Robert Walters which initially opened down about 7% and did start to recover, ended up closing -9.5%. Not sure the last time I can remember a stock falling in sympathy further than the other stock that initially caused the fall. Perhaps the market is taking the view that Robert Walters is suffering more than Hays at the moment; or could just be random market behaviour. Will be interesting to see if these find support from here or whether this is the start of a deeper pullback for recruiters.

MJ GLEESON (LON:GLE) was similar, down 15% in the morning, closed down 8%.

Robert Walters (LON:RWA) is a lot smaller, so more vulnerable?

WarrantStar

Hi Jmallin1972. I use investegate.co.uk . You can set up customized alerts on there, and it's free. But I don't know if you will be able to set up exactly the kind of alert that you want.

Cuddlesticks

Yes, I would deduct all lease cash payments from cashflow to get to Free Cash Flow. The split between finance and capital lease payments in terms of cash flow is in my view erroneous - they are lease payments all the same

cadmunkey

10th Jan

Thanks for the reply, I think I am guilty of taking the metrics at face value too easily.

thank you

Fegger

12th Jan

Im in roughly same situation. It is tricky as you are supposed to run your winners. My own estimate is that this share has another 10 to 30% in it. Plus good dividends. Have done a small top slice to buy something else I wanted to invest in. Decided to hold at least until qualify for dividend and then keep reviewing price performance against market. There are other appealing options out there at present which may increase more in price long term but this is a solid quality family run company with a good track record well aligned with shareholders which appeals to me.

Freight costs have gone up considerably recently, due to the problems around the Red Sea.

Small Cap Value Report (Tue 9 Jan 2024) - GLE, MTW, QTX, IPX, SHOE, SIG, HAS, IUG

Explanatory notes -

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Paul Scott

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