The Weekend Rebel Review Dec 12th, 2024

GAW, CARD, BOOM, VCP, CURY, AVON

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.

Okay, so first things first – thank you to all the subscribers here for last weeks views and passing around of my Substack, it hit a record 6k reads in the first 16 hours and over 10k+ by Friday morning, the highest ever by several thousand. I’m chuffed with the growth in subscribers, now 3400+ up over 1000 in 6 weeks. It’s free and it’s staying free while I enjoy doing shares so much and talking about them.

To the markets and the first thing I need to highlight is very bullish – and that is the moving averages on the FTSE250. If you look at this chart, all 3 moving averages are turning up now that the 50 day is joining in. The last time the 50 day started turning up was in the March rally after curving over and before that in December last year which saw the FTSE250 rise 20% in 8 months. There has been a feel to the market for the past few weeks, that this was going to happen, I cannot put my finger on what that feel is but definitely less weakness into the close of the day lately.

Watching out for these signals is important because being wise after the event is a shame when you are heavy in cash. If you are heavy in cash you are likely nervous about the market and having the gut to go back in or more heavily in, requires more than just hope. You want at least to have some sort of market signal to bolster your confidence. Rising averages tell you that investors are feeling confident. There’s a lot made of ‘golden crosses’ where say the 50 day average rises through the 100 day or two hundred day which investors tell you is a good signal. It is, but by the time you actually see them on a chart you have missed a lot of the rally. Look at when the red 50 day line went up through the blue 100 day and the yellow 200 day late Jan this year, the bottom was actually October last year, so by the time you get the cross you have missed nearly 20% the rally. Far better just to look for all three averages to be trending upwards in my opinion, and you are on the case before many other investors. Give it a week and the FTSE Small Cap will likely show all 3 averages rising again. Of course there’s never a guarantee how long these things will last but for now, sentiment is improving and it could be a better few weeks into the New Year or the start of a long bull run.

What every investor should remember is that if the market just went sideways it would be flat-lining and dead. If it went up in straight line it would be easy for everyone to make money. It goes up and down and creates winners and losers, there needs to be losers for there to be winners. Good research, planning and experience makes you a winner and part of that experience is living with the fact the market goes up and down, and learning the best times to be invested at the heaviest and when not to be. I use charts a lot. I wouldn’t get hung up a about Elliott Waves and Fibonacci , I use them for trends which is their best use. Charts are used by scientists, governments and business to detect and predict trends, use them for the same reason in my opinion and learn to spot trends developing. Try back-testing your own predictions from charts to see how well you are doing and you’ll have a guide to how worthy your own chart predictions are worth acting on. Here is the chart of the Aim All Share Index:

That’s an interesting trading range and likely to gather momentum if it breaks out here as I suspect it will. The FTSE AIM 100 has already broken out and is probably a decent pointer to where all Aim is going imo:

One of the big things I have been thinking about is AI. I don’t normally do tech, I don’t fully understand AI and machine learning, ‘ere in’t country we’re just simple folk, aye. 😊 I have watched with interest as Nvidia outperformed my multi-bagging Rolls Royce. But you don’t just need to know what a company can do, you need to know what the competition can do too. For that reason I leave anything other than simple sort of tech alone. The basis of AI is simple, keep doing things and see what works – then do more of that increasingly – investors could take a leaf out of that methodology. AI has been the increasing story for years and soon, I think we are going to see a lot of businesses outperform as they embrace AI. Lots of businesses I have seen say they are using it now but you don’t see the results on the bottom line for a while after. I think we are about to see a lot of companies start to report better than expected results aided by AI. I’ve seen a number of CEOs and CFO’s allude to using AI and getting improvements in performance. The businesses that do well going forward will be the embracers, not those who try to ignore AI. Could we have another surprise booming market? I don’t know but the potential is there and the focus may turn to all companies using it as much as developing AI soon. Perhaps the catalyst for the Russell 2000 turning up?

All of the onshoring over the past two years will only really be seeing returns now, after the costs and upheaval have gone. All in all, with the 250 and the FTSE Small Cap both breaking through resistance, things look and feel a lot more positive. I have been saying for weeks now that when many businesses post trading updates there will be some huge reactions – these are already starting to show. OTB, BOOM and VCP have all had 40%+ reactions in no time in response to trading updates and results . I think there will be a lot more reactions like this in the coming weeks and months.

And so onto stocks:

Games Workshop, GAW announced on Tuesday that they had finalised a TV and Film licensing deal with Amazon.

After the recent trading update I noticed that the original news of talks was announced 2 years ago almost, so I bought into the trading update, thinking 2 years seemed like a decent deadline that the two co’s would have had to agree a deal, and so it has proved. I don’t often get guesses like that right so this came as a big surprise.

The reaction was quite mooted to the news, up a couple of quid, down a quid. I don’t think it’s priced in yet tho it may still be a little while till the cash rolls in. There’s two things for me here though, they get the royalties but also the publicity feeds the sales of the existing model business and drives more sales, so it will act as a bit of a double whammy. I think the punters want all the details but I suspect they will be made clearer in the Jan trading update perhaps.

Rowntree runs a tight ship with few leaks in my opinion so I dare say few will know the ins and outs yet. Interims Jan 14^th where I suspect they will tell more and the shares will rise ahead of.

Having mentioned Cardfactory’s trading update last week, Moonpig’s interims were out on Tuesday – what a stark difference.

Moonpig @ 267p a share gets you 12.9p forecast eps, and no dilute earnings growth since 2021

Cardfactory @ 102p a share to get yourself 14.4p forecast eps and massive dilute eps growth of 700%+ since 2021 and double the yield of Moonpig.

If we looked at debt, at the interims Moonpig had £119.5m net debt. Cardfactory had £75m net debt at the interims, excluding leases.

CARD are priced at less than half the valuation for far better growth and yield imo.

Cardfactory have a trading update in January.

Audioboom, BOOM – which I highlighted last week, came out with another trading update on Wednesday saying they were even further ahead of forecasts :

A very good statement and upgrade so soon says that there is strong growth momentum here imo. There will be upgrades for the year ahead as they say they expect to see next year’s EBITDA significantly higher. With at least $3.1m adjusted EBITDA this year then significantly higher’ adjusted EBITDA next year should be somewhat more than the current $3.5m forecast imo. With $1.3m EBITDA in the first 9 months and $3.1m for the year now, then they must have done $1.8m in the final Q at least - the $3.98m EBITDA for the year looks well doable and beatable imo.

Cavendish Brokers said this on Wednesday:

“We reiterate our target price of 1,300p based on 4x FY25E EV/Sales, and we look forward to Audioboom capitalising on its robust momentum at further trading updates, the renewal and win of key podcasts on attractive terms, and potential external interest in the platform.”

The legacy contracts end in Dec. There has been 2 trading upgrades in a month. The next scheduled trading update is in January – I wouldn’t be betting against a further upgrade then too. I love it when companies rattle out upgrades, it shows clear momentum in my opinion and an incredible bowl on the chart:

Bowls of the week

Victoria VCP – six month chart and 10 year chart: High Risk!

First of all I have to say this bowl isn’t for widows or orphan or the risk averse – extreme volatility!

Victoria (formerly Victoria Carpets) is a UK and Australian Carpet manufacture run buy the love/hate figure Geoff Wilding. I think if you made big money following him here in the past you love him, if you were on the losing end you hate him. He’s a somewhat very confident Aussie that got into this business by doing a huge share deal with the previous family owners where he gained hugely if he turned the co around. With a heap of debt and some fancy footwork he got the shares to fly and ended up biggest shareholder and Chairman with 20%+.

The business has always been highly geared under Wilding. While gearing adds risk it is also behind leveraged growth which this has had in spades in the past. The shares were around 40p when he stepped in, within three years they had 20 bagged. There are a lot of people that remember that and want to live out the replay after the previous replay after Covid where it 20 bagged in 15 months again .

Recently they have been plagued with high debt and a weakening market and the shares have sold off to 40p again. The market has bad sentiment to highly geared cos with falling sale. Net debt to EBITDA was 6 x at the interims.

However, at the recent investormeetcompany presentation they said net debt would fall and they had liquidity of over £200m. They also said they had cut circa £40m costs without reducing manufacturing capacity by divestment. They also said if they needed they could sell other property that is valued on the book way below market. They are also confident of trading improvement.

So to sum up they expect better trading and falling debt. The shares were bottoming when the CEO bought 200k shares at 40p on Tuesday, nearly doubling his holding. Forecasts are now for a 7.4p loss this year and forward eps of 13p for the year ahead.

Diluted adjusted eps in H1 was a negative 5p.

‘Macro economic factors are becoming more favourable’ ‘Production capacity has been maintained’ ‘Higher operational leverage going forward’ were the massages. ‘Confident demand will normalised’. These were the headlines from the presentation.

Looking at the chart above, there are now nearly 10% fewer shares than when the shares hit the highs. Business now geared to recovery but debt is still very high.

Koch Investments were investing £175m just a few years ago as VCP identified investment opportunities – that was @ £3.50 a share.

Warning - High Risk:

Taking all of that onboard, investors drove the shares up 40% on Tuesday alone after the CEO buying. A great looking bowl and a huge fall from the high creating huge recovery potential for big gains but big risk too possibly. Unless you are a hardened risk taker I’d leave it well alone but I’m here to point out the bowl and what’s driving it. I did buy in in a small way and am fully aware this is the much riskier end of my investing. Do your research and have your eyes wide open, any moves can be fast, gut wrenching and volatile. This is only a tentative bowl, very early, so it may not develop still.

The best way to get rich fast is to try to get rich slowly and safely in my opinion.

Currys, CURY reported good results on Thursday, better than expectations. I am not a fan of the business but the bowl here over the past two years has been sending a message imo. Might be worth watching longer term. A safer long term bowl that has developed longer term.

In Brief

Cardfactory – CEO bought 49k shares on Wednesday after the CEO bought last week. In September, a couple of days before the market panicked, UBS put out a buy and a 180p target. The CFO also bought 21k last week.

If CARD are inline or beat (and brokers have not reduced forecasts) it should be very interesting to observe the share price move imo.

https://www.edisongroup.com/research/confident-on-fy25-outlook/34019/

Avon Technology, AVON say they will be having an investormeetcompany presentation on Friday Jan 31^st with their AGM statement. Unusual for them and After the recent trading update that sounds like they have something positive to say imo, but I’m ever the optimist.

I did VOXmarkets with Paul Hill on Friday, covering a number of stocks:

https://www.voxmarkets.co.uk/articles/q-a-with-richard-crow-aka-cockney-rebel--14e11b4/

And now a little year-end plea from me!

I will have been running Cockney Rebel’s Substack for nearly 2 years come April. I have never charged anything and never actioned the numerous pledges that I have been offered, the Substack will stay free for as long as I do it, I do not want any financial reward from it, I enjoy doing it.

However, I have been tasked to raise £250-£300k to refurbish our village hall which will be 100 years old in two years time. We all need village halls, they are special for the community coming together. Our one has been well used over it’s time, a place to come together for marriages and celebrations, where people can run quizzes, do judo and other exercise classes, plays and entertainment and provide a base for the local nursey and after 98 years of use it is looking very tired inside and out. To raise funds I am creating a “Super Auction and Raffle”, also running some quizzes to raise funds for this mammoth task. Some local villages have had fab village hall upgrades that cost £600k+but they also have some extremely wealthy benefactor builders that have put up a lot of the funds and work. Our small village is not so blessed. It needs a side and rear extension, new windows, kitchen, toilets, drains and proper insulation and an exterior and interior refurb.

We are going out to the Lottery Fund and places who give grants for these things but most will only match to what we have already raised. So I need to raise a big lump sum as our commitment fee.

If you have found my Substack worthwhile and have pledged to subscribe or have just enjoyed it or benefitted from it to a decent degree financially, I wondered if you might be able to find it in your hears to donate to the Auction and Raffle? It could be anything from drink to an experience day if you own a co that does that type of thing, electrical techy stuff like blue tooth speakers, tablets etc if you are in that business, free rooms at a hotel perhaps, work experience for a day or a week at somewhere flashy perhaps. Good old gift vouchers would be great, perhaps those of you may get given over Christmas but cannot make use of. Anything that won’t perish basically and would be a nice prize/product or service. We can then leverage the value of these by doing a large raffle, auction and quizzes with prizes which will hopefully raise even more than the value of the items. If you are one of these wealthy fund managers that I know subscribe and you have a left-over Lamborghini getting in the way of the new 2025 Ferrari about to arrive then that would be gratefully accepted too! 😊

When I ran the Rebel Chatroom I auctioned 2 very limited places which normally cost £255 p.a. and they went for nearly £9k each with gift aid a few years back, this went to Great Ormand Street Hospital so I know there are people out there that are both generous and value the sort of opinion I provide, who are happy to give back something for all the hard work.

If you can’t do any of those then a plain donation to the Dinton Village Hall Fund would also be great. The BACS details are below.

If you have benefitted from my substack to a decent degree and can use your imagination, feel a bit in your heart for a very worthy cause and reduce my blood pressure all in one hit, I would be really grateful. This is quite hard for me as I don’t do begging easily but hopefully you can see the size of the task at hand and understand. I have already had a few donations from people who had been in touch wanting to send me a little something to say thank you this Christmas so I know the Substack is appreciated, and to those who have already donated, I say thank you again for kicking the fundraising off.

If you email me to let me know what you are donating, I’ll give you the details of how to send it to me – or if it’s that Lamborghini I’ll happily collect it 😊. If you do donate by BACS, please email me to tell me, you don’t have to say how much but I can then at least thank you personally for you generosity, with a personal reply.

If you want to make a donation the bank details are:

• Acc Name: Dinton Village Hall Power Fund account

• Sort code: 30 98 56

• Account number: 30386160

Thank you.

rebel@cockneyrebel.uk

Twitter @rebelHQ

It leaves me just to wish all of you a very happy and healthy 2025, which is all we need, and if it’s a prosperous one too then that’s a bonus. Unlikely to be enough news over the coming days for a weekly review. Enjoy the break and I will be substacking a Review of the Year and 5 Naps at the end of the year – appropriately enough. Over the Christmas break.

Thank you and have a great holiday break.

Rebel