LON:XSPS | The BBB Fund Monthly Recap – Oct & Nov 2021 [ISA +1.2%, SIPP -5.0%, FTSE-All Benchmark +0.1%]

2nd Dec '21 by Boon

5 comments 1329 reads

Previous Articles: September, August, July.

Do leave me a comment with your thoughts; I'd love to hear your views on any overlap holdings, or your views on the market and interesting shares!

(Part Time) Fund Manager’s Report

Firstly, apologies for not publishing an October monthly report. I was in Thailand for three weeks, and unlike Paul Scott, have not yet mastered the skill of being usefully busy while lazing on the beach. This also coincided with some of the worst performance in my SIPP so far this year, and in some ways I was grateful to switch off, drink mocktails, and watch beautiful sunsets from the beach.

Another two negative months brings my loss-making streak to four in a row. However, the situation is better than it sounds, as the total loss has only been a -3.6% drop. Nevertheless, the FTSE all-share has been flat during those same 4 months, so I have underperformed my chosen benchmark.

In the ISA, I have eked out a modest gain of +1.2%, but it was a disappointment because four of my portfolio companies reported positive updates - Begbies Traynor (LON:BEG) , Appreciate (LON:APP) , Sosandar (LON:SOS) and System1 (LON:SYS1) . All of them reported either in-line or above expectation results, with not even a sniff of a profit warning, yet all of them have either drifted lower or had the tiniest of increases. The market does seem to be irrational at the moment; marking down many shares heavily like Boohoo (LON:BOO) and Thg (LON:THG) , and even when there is solid trading or a good update, the shares would spike but then come under constant selling pressure in the days later.

Still, I have taken the opportunity to top up a few holdings as well as open some new ones too (which are detailed below), but have still ended November with 42% of the portfolio in cash, and therefore still looking for some new opportunities to get closer to full deployment.

Eleven months into the year, I am still +41% up since the start of the year (measured on total portfolio value) despite being quite heavily averaged in cash (50%) almost all year, so I count myself lucky to have had a storming first half (+31%)…

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abtan

11th Dec '21

System1 (LON:SYS1)

Hi Boon

Thanks for the update as ever.

I've finally had time to catch up on the System1 (LON:SYS1) results from a few weeks ago.

I must admit that just looking at the numbers I can't see the opportunity yet.

I'm aware that growth in Data revenues are offsetting decreases in Consultancy revenues, and hopefully the former will soon increase faster than the latter decreases.

However, my understanding was that Data would be more like an SAAS product, which is why I'm surprised to see average FTE's increasing. Shouldn't #FTE's be going down if there is less consultancy work?

I know that this is your area and that you will know your stuff, so I'll continue to keep my eye on this one and hopefully not regret missing out.

Cheers

Purplebricks (LON:PURP) (no position)

I'm keen to buy back into this one, but fear the short term hit they'll be facing from:

reduced # of listings in the UK, and;
the group litigation claim recently reported, which sounded far more worrying than previous single person claims that I've seen.

I do wonder therefore whether that large cash balance won't take a hit in the short term?

Home Day will be suffering too given recent changes to the German listing fees legislation, but I do agree with you that there will be value there.

The main player here is of course Axel Springer, but I can't see them getting involved all of a sudden after so many years as the main shareholder. That would also rule out anyone else making an offer for the group.

I still have hope for Purplebricks (LON:PURP) in the long term and I will personally re-evaluate my stance early next year.

Boon

13th Dec '21

Looks like you (and I) were right to sit on the sidelines of Purplebricks (LON:PURP) given the news today!

The question for me now really is - at what price is the sum of the parts attractive enough for Axel to go for a bid. I can easily see them going for the cash and Homeday JV (to get 100% clean full control of Homeday), and then getting a strategic partner in their bid consortium. Say another real estate agent in the UK, looking to bolt on another brand, and in one swoop get 4% more market share.

The System1 (LON:SYS1) Test Your Ad product is very good, from the various contacts I know in the industry that are using it.

I'm not too worried about the headcount; it can be explained by ramping up engineering, support, and sales staff for Data. While there's a lag in attrition/redundancies in the consulting.

What I'm more concerned now is having gone through their results powerpoint presentation, I'm getting sceptical whether the increase in Data revenues will offset the decline in Consulting revenues in H2. I think there is a plausible scenario where H2 revenues will be lower H-on-H and Y-on-Y which would be disastrous for the share price, interrupting the growth story.

The other worry is whether there is a natural limit to Test Your Ad. Not all CMOs are tech savvy, many are 40-50+ and like to do things the old fashioned way, and are not tech savvy at all. There's no big marketing budget squeeze at the moment to pressure CMOs to trade down from traditional (expensive) ad testing to automated ones like Test Your Ad. The potential market size is not proven, nor known. A growth ceiling could be hit.

For the reasons above, I think the current price at 350p is one I plan to keep holding, but if it does go above 400p I think I will be taking some profits.

(I hold)

KevinS1

31st Dec '21

Thanks for the update Boon. It's taken me a while to get round to reading it, but always interesting to listen to others thoughts/ideas.

Best wishes

The BBB Fund Monthly Recap – Oct & Nov 2021 [ISA +1.2%, SIPP -5.0%, FTSE-All benchmark +0.1%]

(Part Time) Fund Manager’s Report

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Boon

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