The Weekend Rebel Review, Jan 25th, 2025

IGR MCM LIO GMS WJG IAG, BRBY

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.

So, I ended last week’s Review after 25 pages in Word, with a bit of a cliff hanger with me having been hit by a warning from IG Design, IGR and selling the lot, and having bought a big stake in McBride, MCB. So I thought, perhaps this weekend I’ll do a bit about how my portfolio is set up.

Your portfolio has to be tailored to you and your life and lifestyle in my opinion, so my portfolio shape won’t be right for you and your level of required risk and reward, you need to decide that for yourself. I was told by a few friends here and there this week that they’d seen a comment or two saying I should apologise to anyone that got caught up in IGR’s warning too. To those I’d say there is a huge warning at the very outset of every Rebel Review. It tells you that nothing here is a tip, I am not advocating anyone buys what I have bought. I endlessly say that I will get things wrong, I may be completely stupid, I am likely biased, don’t follow me blindly, do your own research and make your own decisions. So I will say I’m sorry if anyone did lose money on IGR but if anyone thinks them losing money because they never read all the warnings here and them not taking heed is somehow my fault, after giving all those warnings, then you really shouldn’t be investing in my opinion. Sadly, there’s many out there that want to buy shares that others highlight, do no research, and give themselves a big pat on the back when they go right, but when they go wrong they want to point the finger anywhere but at themselves. Eventually, hopefully, they will become adults but they are a long way from that and still in nappies at the moment. One day they may be better investors but until they learn that lesson they are frankly playground investors and should really only play with pocket money size stakes if they want to blame everyone else for their failings.

I’ve invested as a professional, that is, as my primary source of income, for the past 25 years. I’ve used the money I’ve made to live day to day living and I’ve taken money from my investment to build my own lovely house in the lovely village of my choice and I feel I have never done a day’s work in the last 25 years because I love investing. I love passing on information and experience of 25 years, it isn’t a competition, you can give others a hand up without any detriment to your own investing. I sometimes follow stuff highlighted by other but when they go wrong, it’s my mistake, I own my money, I make my decisions and I own my decisions. Investing is always interesting, even if sometimes there are nasty days to take on the chin. Investing is like being a detective, finding the info other have missed, that the company can’t reveal yet, looking at chart trends, number trends etc. I love passing on what I have learned. When I started investing I just had books from old guys that were dead or long gong. Things have changed like the tech boom, online trading, level 2 interface for everyone, SIPPs, cryptos etc. I couldn’t drop them the odd question by post even if I knew where they lived, and get an answer back. Some days I may be gutted, other days I’m elated. My wife often says she doesn’t know how I do this day in and day out, take weeks of down days in bear markets and still brush it off. The fact is, if you invest for a living, you will have good days and bad days. The secret to being a good investor, in my opinion, is working to keep the bad days as minimal as possible and making sure that those odd very bad days don’t harm you so badly that you cannot bounce back quickly.

I kicked off last year with a 3% hit to the portfolio from a warning at WOSG. I’m here still, I was up over 30% for last year, the fact that is the case, gives me confidence I can handle what is thrown at me when bad stuff happens, and it will happen again for sure. I think WOSG was the only real big hit I had last year, I can’t remember the previous one, I get a number of hits, it is an occupational hazard but big hits for me have been rare thankfully, but that is mostly by design. Audioboom, BOOM is up nearly 40% since I bought in December, they have nearly matched each other off so you have to look at it in the round. When one stock goes bad it’s important not to start thinking everything else you own is suspect too. If you’ve researched well, the bad ones are few and far between and the winners are often big winners.

IGR’s warning last Friday saw it hit for 60% in a day, dreadful. I sold out in three trances first thing and escaped down just under 50%. When I read the news at 7am I looked at the shares and I asked myself how big a hit did I think I was going to take. I thought at least 50% so getting out above that was a positive for the day, in these situations I try to focus on the positive. IGR were about 4% of my portfolio. Because they halved my portfolio was hit for 2% as a whole. It’s a 2% hit – so what? I regularly go though weeks when I might be down 2%, because it has all comer in one day, somehow that has to be a disaster but if it came drip drip over a week it would be just another week. As it happens I was up over 2% between Monday and Thursday and I basically gave nearly the whole lot back overnight so it was less painful than it might have been. After reading the trading update I knew I wanted out, all the trust in this co that I had (and it wasn’t that much trust anyway) was gone so as soon as they were sold, that was it – done, took them off my watchlist, knew where I stood – move on. From that point the only thoughts were how do I make this back up as soon as I can, and so I set to task with the cash that had come out of IGR and a bit more that I had. So that’s how I dealt with it myself, others will be different but I can tell you this, having done this for a living for so long, the sooner you get over it, the sooner you start making good decisions again. Dwell on things like this and you’ll pussy foot into the next great opportunity because you have had a scare, you are feeling fragile and you’ll then go in lighter on a great opportunity, when you likely should be buying something heavily if it’s right.

IGR was only 4% of my portfolio for a reason, the risk. 20 years ago I would have had two dozen shares in my portfolio and none were allowed to grow to more than about 10% without me top slicing a fair bit. But gradually it dawned on me that having two dozen shares might have kept me well diversified but it also dilutes any gains. What is the point of holding 20+ shares say, none over 5% even if one or two look like massive winner potential? If every share in your portfolio is under 5 % of your portfolio, then if one doubles you have made 5%. That’s never going to make me grow my wealth fast. So I try to strike a happy medium. I strive to hold 10 shares or less. When markets are short of great opportunities I tends to achieve this and heap lots into stuff that look like they could grow big and fast but have fairly low risk as in the past two years with RR. and MKS making up 35% of my portfolio and multi-bagging. When it gets to times like this in the market, when shares have been ignored but present fab value, and there are lots of them I have identified, I start to let the number of holdings climb, as I hold some shares to catch the trading updates. The larger holdings will be the safer ones, the smaller holdings will be the higher risk, high reward types.

If I had a portfolio of a dozen shares, it would often be like 4 that were say 12% holdings, 6 that were say around 7% holdings, and 3 that make up about 3% each. I’d mentally score these in my head based on likely reward and risk and the” biggest reward/limited risk” shares making the largest holdings. I also say to myself, what is the likely imaginable worst overnight hit I could take from any one stock and if it could hit me for over 3% possibly, overnight, then I’d likely reduce. You also need to look at sector diversity too, having all house builders would mean that if there was bad news about builders in general then the overnight hit could be way higher so I’d rarely have more than two stocks from a similar sector.

That’s what works for me, everyone has to decide what’s best for them and their own circumstances. Do you want a very cautious well diversified portfolio, lots of low risk holdings and likely a steady gradual performance and perhaps a steady income, or do you what spice, racy stocks that that could make life changing investments but come with higher risk, or perhaps a mix of both? I aim to hold only shares I can see possibly doubling in a year as my long term holdings while occasionally I’ll stick a bit in shares ahead of trading updates that could move fast as a trade, where the cash used in them could double in a year over a number of trades. If I know the risk I am prepared to take, for the reward I wish to achieve, then I know how big a stake I should be taking in what sort of shares. But again I’d say remember, you make your own decisions. This is an adult job, you have to have a grown up attitude. When things go right or wrong it’s your own decision making that is responsible. “I was too lazy and I just copied someone else and I’ve lost money so it’s his fault” won’t make you a good investor. Take the credit and take the blame.

As for IGR, that’s the last time I invest in them. Paul Bar has been there for 3 years as CFO then CEO. Three years is too long to wait for recovery, a good new board shows tangible improvements in 9-18 months maximum. Here is the 3 year chart, now lower than when he joined – time to find a new company for him imo.

Looking back, what were the mistakes I made here? Well the main stand out ones were the lack of director buying. Paul Bar never passed my wife’s ‘shifty eyes test’ either and I couldn’t warm to his presentations on the web but that recent PI world confidence suckered me into believing they couldn’t have a bad update just 6 weeks later. Perhaps with a new board I could be enticed but not at least till that happened.

So while the UK languishes under super high energy prices and a government so committed to Net Zero that they are going to open a new runway at Heathrow, I just wonder what goes through the brain of Starmer, if there is one. He now has Rachael Reeves going for growth, abandoning planning restriction to prevent objection while Ed Milliband does everything to destroy growth. Meanwhile the government are so keen to get AI going here that to provide enough energy they are going to put the energy warehouses that these developers need, right next to where the energy is generated, to save the infrastructure build time and cost. Yes, I’m sure these AI developers are going to love being stuck in some godforsaken place in the UK, paying 4 times the price for electric, while other AI developers will be enjoying in sunny silicon valley. On Wednesday, the UK generated 1% of its energy requirements from wind power. Meanwhile we bought in 10% of our energy from abroad at some points last week, at massive premiums, driving up energy prices. Did you know we have enough shale gas in this country for total energy security? There’s more shale gas than we extracted from the North Sea. Meanwhile once the becalmed shores of the UK suddenly got a load of wind on Friday, all these turbines had to be turned off because the wind is too powerful. Chaotic, confused lunacy isn’t a strategy for running a country’s energy policy. It will come to a head soon and it’s going to be messy.

On to markets

The S&P Hit a new high on Thursday night, a very positive sign and Trump is clearly having an effect. Pro business and it shows by a country mile in the indexes. The Russell 2000 Small Cap Index is starting to follow and still in a nice up trend:

Meanwhile the FTSE100 here in the UK has also broken out to new highs as highlighted last weak but the FTSE250 is ugly still:

Investors will be cautious on this chart until there is a clear change of trend and meantime it remains a stock pickers’ market. There are however some big reactions to positive news on a lot of stocks now and if that starts to multiply, in spite of this government’s policies, not because of them, that would spell strong underlying strength and undervaluation imo. There’s a lot of stale bulls in this market. The FTSE250 is where it was 7 years ago:

Investors in that index have had the yield but are suffering from no growth. Many stale bulls have been throwing in the towel but who would be out of this market if this government fell? It isn’t impossible, I forecast the Labour party being so split on compromising growth in order to be green that’s Starmer’s leadership comes under threat, whether the markets cause it or a vote of confidence where his own party abandon him. If that happened and we did have an early election, the market rockets imo.

Here’s the DAX over those last 8 years:

And here is the CAC

Has the UK really underperformed France that much in that time?

On to stocks

McBride. MCB posted an update last Friday while IGR were posting a warning. McBride are manufactures of cleaning products, they make Private Label clients in the retail segment and Contract Manufacturing for established brands. They have one brand of their own which is Surcare – if you have sensitive skin you might know it. They have been in business for 98 years.

I have known these as a listed company for 30 years and it’s a stock you want to be in on an uptrend and out of in a down trend, ie, it is cyclical.

The chart looks like it is due another rise to the highs but it needs the right directors to achieve it. MCB have had a number of boards who have been hot and cold. Chris Smith is now CEO, Mark Strickland CFO. Both joined in 2020, a baptism of fire with Covid on the go. The shares bottomed in August 2022 at around 17p. The directors started buying around 60-80p so the shares are not massively over the directors buy price even now, but they have had a good run. The last director buying was at 95-96p in November.

Below is the update from last Friday:

21.2p eps is forecast this year, 21.4p next year. They did 18.8p eps last year from continuous operations. They score pretty well on valuation and quality:

At the year end they said: “Group full-year outlook is consistent with current market expectations*, targeting a third consecutive year of revenue growth, with profitability significantly ahead of the historical average”

Operating margins were 6.47% last year, the best since 2019 when they were 3.69%

Net debt for this year was expected to be £111.3m this year, the trading updates says they have already reduced debt by £10m in H1 to £117m so they look well on course.

They are restoring the divi which might come as a surprise to many, but they do mention it in the last trading update they put out. There has been ample director buying here which I have been noting for some time. My past experience with these has been one of disappointment, the boards rarely seemed to get their act together, this is the best shape and momentum that I‘ve seen them in. Most interesting was the rise in contract manufacturing volumes by 69% thanks to two contracts for companies in the Fast Moving Consumer Goods (FMCG) sector.

What is worth watching is the last webcast that the co put out, tho now a tad long in the tooth from March 2024 it still reveals a lot. The company has a transformation programme to save £17m per annum net benefit p.a.

“At current profitability levels the business is hugely cash generative” was a CFO quote. He also said “the company operates in a sector that is ripe for consolidation”. “There are selective opportunities that could supercharge the company’s performance” was another quote.

I won’t go on but the presentation is still worth watching even though it is 10 months old.

https://www.mcbride.co.uk/investors/capital-markets-day/

Both the CEO and CFO say they think MCB can undergo a re-rating and with them on a current PE for this year of 5.8 means there could be a fair bit of growth in the share price if they boost earnings strongly an re-rate to a PE of 7-8 or higher.

In 2018 this co was doing12p eps, it had £112m in net debt, it paid a 4.7p divi.

Now it does 20p+ eps, has £117m of debt and is about to restore the divi.

There are 5% less shares in circulation compared to 2018.

I have watched their last presentation from March last year, the board sound confident, directors are buying. They have a lot of cost cutting and efficiencies which will increase margins. They sound like they are going to make acquisitions to enhance earnings.

I like companies where I can look back and see where they have been before. I bought on Friday and Monday to get to a 9% stake in my portfolio. Obviously I’m a complete idiot, I have caused the heart ache to a few people who pretend to be adults so don’t believe anything I say, I’m not suggesting anyone buys them. I am just revealing what a stupid amateur like myself has done to recoup my IGR loss. Do your own research and make your own decisions, as I’m sure the adults here will.

One point – broker forecasts had shown earnings to drop in the coming year by 10% but I noticed today, Friday, that’s no longer the case and they have been raised.

Featured on here a couple of times last year, Liontrust Asset Management are a recovery play. For me it is basically, can they keep paying the current divi of 72p or 17%. Watching investormeetcompany presentation a month or two ago, the board said they believe they can keep paying that divi for 18 months. The question is will the redemptions reverse in that time and put them on a firmer footing? In November the CEO bought 100k, the CFO bought 50k @ 450p

The market has still sold off but on Wednesday the two bought a further 37k and 25 k at £4 or a tad under. That’s over £250k on Weds on top of November’s £675k. Are the CEO and CFO seeing improvements in their data that the market isn’t, enough to make them this confident? Or are they off their bleedin’ rocker 😊

We will all make up our own mind but if the market starts to believe they are right there re likely to see that yield squeezed downwards and the share could double or more on that basis as income hunters rush to capture that yield. Who knows best? Only you know what you think, I’m not suggesting you buy, I am just saying I’m long as the risk reward is looking worth a punt for me. Is it having another go at a bowly bottom?

Gulf Marine Services, GMS are owners of a fleet of marine service vessels liker self propelled life boats and jack up rigs for hire to the exploration industry at sea. They have had quite a stream of decent news for some time but the shares have languished while Seafox, a long term shareholder, appear to be selling their entire stake. I have been waiting for this take to look like it is coming to an end before buying, but in Wednesday there was very high volume. The bowly looking curve on the chart has been my main dashboard here while I wait and on Thursday it made the first sharp move up in a while. It looks like this seller (Seafox?) may be coming to an end.

With the shares sat at 17p, and the company paying down debt at an impressive rate with net debt going from £410m in 2021 to £245m net debt at the interims and forecasts of 3c eps this year and 4.1 c next year, that looks a rather lowly valuation. As the debt comes down and interest payments fall, the company looks like it inflects, with reduced costs and higher earnings growth. £245m is still a lot of debt for a £185m mkt cap but the co seem to have it well harnessed and under control. As ever, don’t follow me blindly, you are responsible for your own decisions:

Watkin Jones, WJG. These build houses for the rental market. “Watkin Jones, you’ve been gone too long” – I loved Bananarama. They posted results on Thursday.

You can read the rest of the results where you read your RNS.

3.5p pre-exceptions earnings from a 23p share looks cheap imo. The shares have lost 90% of their value in 3 years. There has been no share dilution to speak of in that time. They had a new CEO 14 months ago and a new CfO 9 months ago and now is the time they should start to deliver if these ole boys are any good. In August, Alan Giddings, Chairman, bought 157k @ 32p, the first director buying I had seen in a year.

Looking back to 2018, WJG were doing 16p eps on sales lower than this year. The company has Net cash of £83m, £43m after leases. Cashflow of £55m inward this year rather than £31.5m outwards. They need over £100m to pay for current legacy commitments but the big cashflow improvement looks interesting. Also, in the company presentation the CEO credited the new CFO for being responsible for a lot of the improved performance. They are now engaging more capital light project and changes to their financing methods could be good for the business growth and margins according to the CEO in the presentation.

These are beaten up badly and with a market cap of just £69m @ 27p, and with a new CEO and CFO who likely want to make a name and a mark, I find them an interesting risk v reward.

I have bought a decent stake. The shares were heavily bought on Thursday, up 28% on 10 times normal daily volume and a further 12% on Friday on big vol again. I started buying at just over 22.5p so these with MCB have more than reversed all my IGR hit last Friday.

Worth watching the co presentation from Thursday lunchtime, very much doubt many investors watched it. Quite interesting that they have recently done a development with Howorth Group, HWG with no upfront cost using Howarth Group’s land, meaning the contract was cash generative from day one. The new CFO seems to be demonstrating smarter thinking than the previous CFO. They seem to be targeting a lot more capital light projects.

https://stream.brrmedia.co.uk/broadcast/67616bdd139c6b2fd9c48681/6792465fda34b6c1a69efe81

As ever, I can be wrong and have proved it so please make your own decisions, this isn’t a tip, I’m just say what I do, how I invest and what I’m investing in.

I pointed out the bowl on the chart of International Consolidated Airlines, IAG in the December,6^th RebRev - now up over 50% on my buying there – that bowl looks like it’s another FTSE100 company like MKS and RR. that are performing like small cap growth companies – that curve up well worth keeping an eye on, broker upgrades have been strong, and lots of them – results at the end of February.

Burberry, BRBY,I highlighted the start of the bowl in September – yesterday the co said it will break even this year rather than make the 16.2p eps loss expected. I think that means the 22p eps forecast for the coming year is likely to get upgraded significantly.

The bowl has pretty much one-bagged since being highlighted here – the lines are where I have my expected next possible resistance areas on the chart :

Well done anyone who bought and held on, I traded out and back in twice. Currently long after the update:

That’s pretty much my week this week, Quieter than last week.

Remember it’s all just money, health is wealth.

Rebel