The Weekend Rebel Review for the 8th-9th July 2023

a 'perm bull' perspective.

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 another Weekend Rebel Review this week, as the weather is a bit iffy.  Nearly 2500 people downloaded last weekends review so I hope you found it interesting.  Definitely a bit of a wild week where I was up 4% over a few days then gave nearly 3% back on Thursday.  KITW results were well received which helped a lot. Sadly JET2 which posted great results also had the news that founder Meeson was taking a back seat.  I suspect most were concerned he’ll sell a load of his large holding, others may have worried that the guy who had taken these from zero to hero was no longer running the ship.  Either way it triggered a lot of selling to knock the shares down circa 10%. I decided to do what I often do in these instances and sold half. While I don’t think it is a major issue the market will be jaded for a while until the new board deliver imo.

The market spook was driven mainly by the Fed suggesting rates may need to go up further, more than the mkt had priced in.  For me, rates must surely be near to or at a top in the US.  This Weds, the YoY CPI fig in the US is released and it is expected to be 3.1%. At that rate and falling, the Fed is going to have a job justifying further rate hikes imo. You have to remember that the market looks forward.  We are already in H2 2023. The market is now looking at where we will be in Jan-March next year.

The S&P is still in a rally off of a large bowl.

Interestingly tho, despite it falling 12 points on Friday the Russell 2000 Small Cap Index rose 1.2% and looks very firm

It is worth remembering the low in September was on big volume in the US and elsewhere.  That was the low imo, for the bear market. Since then, most markets have risen over 20% in 2 months or more so are technically in bull markets. That doesn’t mean the market just goes up, there will be big retraces at times and we have just seen one. I suspect tho that the low in June on the FTSE250 was the low of this pull back phase. We retested it this week and it has bounced somewhat. Now we have to see what happens going forward. I think the market is over-pessimistic on rate rises and inflation and one better than expected bit of news on these fronts and stocks rally sharply. I don’t want to miss that when it happens so I am very long. I know my personal risk profile as everybody should. An old guy with savings, no mortgage, no kids and just a  single vice of dining, cheese, wine,  (ok, 3 vices) can afford to take more risk than someone with a house, mortgage that needs refinancing soon and a few kids so you need to know what your risk is.  Make sure your risk is a lot lower than the potential reward.

Even after the recent fall, the fear/greed is still at 78 and Extreme Greed.  The VIX did spike higher to 17 but now back down again to just under 15. These numbers are not that useful imo, what is most useful is the recent trends.

A real eye catching chart for me at the moment is the Dow Transport.  Dow Theory says when this index is positive and has momentum the economy in the US should be doing well too.

As Crocodile Dundee might have said “Now that’s what you call a bowl!”  Even more so on a 4 year chart

Basically, these charts give me the confidence to be well invested. If the market is over-pessimistic it won’t take much to send the Small Cap index and the 250 racing in my opinion.

Stocks which caught my eye this week.

KOO -  Kooth Plc, won a huge contract with California worth $188m over 4 years, the co’s current mkt cap just £110m They have a wellbeing app which helps with mental illness and depression.

XAR – Xaar plc, have done a deal with Quantica for them to use Xaar print heads in their Novojet printers . This is special as Xaar’s new Aquious Printheads can already print thicker fluids that other manufactures at 100 centipoise but in conjunction with Quantica they can raise that to 400 centipoise. Game changing stuff imo, like printing with warm toffee.

DLAR – De La Rue, after the trading update, Crystal Amber said they had increased their holding to 15%   They had been at 10% and selling.  They made the claim that the stock is trading on a PE of 7 and had far greater intrinsic value that currently priced in. The sale of Portals is a game changer in my opinion

I bought KOO  and DLAR and increased XAR on this news.

Going forward into this week, I see the potential for a bounce off of support on the FTSE250 low from June 23

On the S&P there’s a good trend line for the next leg up here too

The FTSE 250 PE is 11.  The price to book is 1.2 times. The dividend yield is 3.45%.  As I mentioned last weekend there are a large amount of stocks, 170+ yielding  6%+  While some may be flocking to lock their cash up for a year to get 4% or so, perhaps 5% on gilts, it doesn’t look attractive enough to me to take a fixed income for anything other than short term.

It can be very difficult to go against the crowd all seeking safety or running for cash, it can be very lonely.  If you are wrong there’s plenty out there to point it out.  If you are right tho, and it has worked well for Buffet and many other successful investors, the big gains come from being in early and watching compounding do its stuff.

All just another weekend rambling, do your own research as ever and make your own investment decisions as always.

Have a good weekend

The Rebel

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