The Weekend Rebel Review 15-16th July

This is just some thoughts, it isn't investment advice or incitement to buy in any way, just my views - please do your own thorough research. I’m not an analyst, I’m just a private investor looking after my own money. Nothing I do or say is meant as advice or should be taken as such. Here I publish my ideas and research that I have done and discuss the way I invest.  Anything written here needs to be verified for its accuracy. Assume any stock I write about I likely own, so my views are biased. Inevitably I will get things wrong, Everyone is responsible for their own decision making and what they buy and sell. Subscribing and reading this article means you accept the above and you take full responsibility for your own actions and decisions. Small Cap stocks can be illiquid and very hard to sell at times when demand is weak so caution is required.

Well even if the indexes rise the market seems to get no firmer. It has been a pretty rubbish week for me to be honest. The week started off with me catching a kerb in my truck and damaging the wheelchair lift it has underneath, a £10k replacement as it wasn’t insured – don’t ask! The week ended with a load of nonsense from 888 plc and selling my holding at it nearly hit 8% down.  I’d been watching the screen all afternoon on Friday as the weather was naff and truck was dead and took my eyes off the screen for 10 mins to answer an email – then came back to the screen to see them off 5p from being up 2p – isn’t that just how things always seem to go?  Anyway I sold out as I was only following the director and insider buying going on there - gaming stocks aren’t something I normally do for more than a quick trade. “Learn the lesson” I hear people say but complacency is a natural human trait. On my guard again for now but time will likely make me complacent again at some point.

Anyway, on to the market and it was good to see the FTSE250 hold up on the support I highlighted last weekend

The S&P bounce off the support I highlighted too, the Russell 2000 rose around 3% and broke through recent resistance, while the Dow Transport broke the Feb high, all very positive signs.

Last weekend I pointed out that the US CPI number would be out on Wed and a big drop to 3.1% was expected. As it happened the rate fell to 3%, lower than expected. The Core came in at up 0.2% from last months 0.4%, this was better than expected too.  I find it hard to see how the Fed can keep hiking rates. CPI was 8.9% a year ago in the US, it is now 3%. In the last 2 months alone it has fallen from 5% to 3%, A 40%  drop in two months, the Core was down at the lowest monthly rises (0.2%) in 20 months.

The weak £ v $ has helped exacerbate the rise in inflation over the past year.  The stronger £, now at $1.30 must be helping import costs especially for retailers imo.  Shipping costs over the past year have fallen 80%, from the all time high they hit last year they are down 90%. Add in the currency rate and shipping costs are well over 90% off their high last year.

The S&P bounce off the support I highlighted too, the Russell 2000 rose around 3% and broke through recent resistance, while the Dow Transport broke the Feb high, all very positive signs.

Last weekend I pointed out that the US CPI number would be out on Wed and a big drop to 3.1% was expected. As it happened the rate fell to 3%, lower than expected. The Core came in at up 0.2% from last months 0.4%, this was better than expected too.  I find it hard to see how the Fed can keep hiking rates. CPI was 8.9% a year ago in the US, it is now 3%. In the last 2 months alone it has fallen from 5% to 3%, A 40%  drop in two months, the Core was down at the lowest monthly rises (0.2%) in 20 months.

The weak £ v $ has helped exacerbate the rise in inflation over the past year.  The stronger £, now at $1.30 must be helping import costs especially for retailers imo.  Shipping costs over the past year have fallen 80%, from the all time high they hit last year they are down 90%. Add in the currency rate and shipping costs are well over 90% off their high last year.

Diesel hit a high a year ago, it has since fallen 25%

UK Natural Gas is now 90% lower than it was last September. Over the next few months there’s some big energy price rises to start dropping out of the indexes.

All of these price drops reduce inflation but this is a three round issue in my opinion. When diesel falls in price it affects the consumer immediately on their travel costs. On the other hand,  retailers’ delivery costs fall but that won’t get passed on right away, this is the first round.  Co’s will have priced goods with higher diesel costs built in, they won’t be any more keen to pass it on than they need to be. Eventually businesses have new six month or annual pricing and market forces say they will have to pass most of these reductions on, this is second round.  Going forward, these falls in prices help reduce wage demand which in turn reduces inflation for a third round.  This is why inflation doesn’t fall fast, it’s usually a longer, drawn out issue but eventually it feeds on itself on the way down as it did on the way up, with a stronger £ helping too imo.

Investors just aren’t patient tho, you can see that in how fast peeps sell shares, few have the patients for holding for years. As I have said before, peeps get over optimistic on inflation, it takes longer than hoped and they  turn pessimistic,  it is at this stage that the positive inflation prints occur and excite the market –f you are expecting bad news how likely are you to be disappointed?

There’s a great poem I love to turn to when things in the market get tough, it’s ‘IF’  by Rudyard Kipling, as many peeps who know me will know.

Bottom of Form

Top of Form

Bottom of Form

If you can keep your head when all about you   

    Are losing theirs and blaming it on you,   

If you can trust yourself when all men doubt you,

    But make allowance for their doubting too;   

If you can wait and not be tired by waiting,

    Or being lied about, don’t deal in lies,

Or being hated, don’t give way to hating,

    And yet don’t look too good, nor talk too wise:

If you can dream—and not make dreams your master;   

    If you can think—and not make thoughts your aim;   

If you can meet with Triumph and Disaster

    And treat those two impostors just the same;   

If you can bear to hear the truth you’ve spoken

    Twisted by knaves to make a trap for fools,

Or watch the things you gave your life to, broken,

    And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings

    And risk it on one turn of pitch-and-toss,

And lose, and start again at your beginnings

    And never breathe a word about your loss;

If you can force your heart and nerve and sinew

    To serve your turn long after they are gone,   

And so hold on when there is nothing in you

    Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,   

    Or walk with Kings—nor lose the common touch,

If neither foes nor loving friends can hurt you,

    If all men count with you, but none too much;

If you can fill the unforgiving minute

    With sixty seconds’ worth of distance run,   

Yours is the Earth and everything that’s in it,   

    And—which is more—you’ll be a Man, my son!

I noticed a couple of bods having a pop at me last week, the ‘you are a perma bull’ quote.  I can take it – when there are people in the market that have the hump and want to blame others I know the market is full of despondent, unhappy bears.  This reinforces in my mind that I am buying and holding very cheap stocks at the moment. I pointed out the large divis around last week but I’d also point out recent reactions to news in the small cap sector. I will never apologise for being optimistic, nobody  ever did well investing as a pessimistic, even a bear shorting a stock has to be optimistic that he/she is right. 

I expect a lot of pleasant, positive surprises in the forthcoming earnings and trading updates as so many expect bad news.This week WOSG put out results to an immediate 10% rally.  TRST was up 17% on results.  SHOE put out the second big beat trading update in 2 months, it has risen 20% in a month and a 2 bagger for me in 20 months, yet still off the Jan high.   MCB up 20% on Friday’s trading update.  Many of these moves will be just the start of a whole new long term re-rating imo as most investors are so cautious.

One thing that does concern me is the US has had a good run. At some point it has to have a decent pull back.  This will likely be just a  normal pull back in a uptrend but most European Indexes are weak even while the US soars. It may be Euro Indexes pull back with the US.  So stocks could get cheaper, but equally there is some great cheap individual stocks out there in the UK and a lot of cheap individual stocks that are going to rally.

So if the market is bearish, I’m bullish.

Stuff that caught my eye this week:

Trustpilot, TRST results to be at top end, directors have been buying, some huge volume going through.  Soon to announce a new CEO – Zillah Bing-Thorne would send the stock up sharply imo, if she did take the job.

Hornby, HRN, a past 10 bagger of mine. The company has invested in a 25% in Warlord Games, a mini Games Workshop run by two ex GAW guys.  Pheonix Asset run this now with a huge stake.  Will it be another GAW?  Who knows, there’s a lot of synergies and low hanging fruit for the recent CEO to grab, the companies have the right ingredients tho imo.

The Works WRKS – audited results delayed due to KPMG, another co results delayed by them being under-staffed. WRKS say they are in-line with previous update so roughly £10m net cash, £10m net EBITDA, £20m mkt and will meet forecasts, looks cheap, and that stronger £ and lower shipping must help going fwd as it should help many consumer stock imo

I bought a small amount of each of these to keep them on my radar, it isn’t an endorsement They are perhaps worth looking at and researching.

LUCE  update Tues. 

CHH, XAR, GDWN, MER all have updates in the coming 1-3 weeks

Have a HAPPY and healthy weekend