The Weekend Rebel Review , Nov 30th 2024

3 weeks till the shortest day.

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 I start to get excited about Christmas approaching, not so much the feast, even the Santa Rally that so often happens, more the start of the days getting longer from Dec 21. I think it has a notable impact on not just mine but everyone’s psyche. Subconsciously I think we all start to feel a sense of something new approaching, a ‘get that year over and done with’ after such a tough one (doesn’t every year seem tough these days?) and the thought of having a new year and a better year often helps the mind focus more, something which helps trigger the Santa Rally that we see so often. A New Year is like getting a new clean exercise book at school imo.

The mind is an amazing thing and so important when it comes to investing. Get a month or two of markets going down and most people are just not interested in buying shares because they are losing money already. See a market race to new highs over 2 months and everyone wants to buy more. Really, everyone should be doing the opposite and buying into weakness and selling into strength but it’s easier said than done. The one thing you can do though is remember that most people likely feel the same as you and when you are selling down then likely everyone else is selling down. Trying to imagine what others are doing helps to time your own trading better. If a share is off 10% and you are quite keen on it but scared of the market as a whole, then buying a small few to start with and being prepared to buy more if they fall is often a decent approach. If something has already come off by some way then you have to be nearer the bottom that you were when everyone was buying it way higher and the time to the bounce must be closer than it was, even if the market feels week. A chart is the best guide to buying imo.

I’ve felt more nervous about the market recently than I have in a long time and I have been investing for a living for near on 25 years so I suspect many with less experience may be feeling even worse. So based on my theory above about trying to gauge how other investors feel, then now might be a really good time to be buying when so many are perhaps happy to sell to you cheaply, just to get out of the market.

Monday was pretty poor for news but on Tuesday there was a deluge. Past investments of mine often catch my eye when they announce results and the good thing about them is I already have a decent knowledge of the business having held in the past, which helps.

As for the indexes here, things look flat on the charts but there have been some positive reactions. I wouldn’t want to get overly bullish but the market feels like punters are bored with selling imo. I did say a couple of weeks ago that the 250 could be rolling over here or curving up but while it looked more like a roll over there was still good support at this level. That support has continued, in fact it has firmed up and broken through the line of the roll over which at least looks better than neutral:

The Small Cap Index is trying to do the same:

These indexes have gone sideways for 6 months. What you have to remember is the £v$ has moved a lot recently. The £ has fallen 6% v the $ which helps co’s with US sales but weakens retailers that buy in from China.

Meanwhile shipping costs have nearly halved since July which aids most businesses other than shipping co’s.

I think here on the indexes I’m inclined to be longer rather than shorter and I’ll let the trend be my friend. In the US the S&P is hitting a new high as is the Dow Industrial:

Onto shares:

IG Design, IGR, posted results on Tuesday:

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

This has been a co I have followed for 20 years. I originally bought it when Paul Fineman took over and did a cracking turn around. Eventually, I think he over acquired into the US and when he sold a shedload of shares, I knew that was the time to leave them alone. More recently, a new board took control under CEO Paul Bal. I have traded these a lot and been pretty successful timing then since the new board took control, which is better than my average trading. They seemed to be well in control here too until last summer when they hit weakness mainly in the US but also UK. This is something they have addressed over recent months. It’s interesting because they have a lot of input costs heavily weighted to H1 where they create loads of stock for Christmas and it’s H2 when all the cash comes in from the sale of the stock. This has all been pretty predictable up until Covid when all the timings of transactions with inventory builds etc, changed the co timings of cashflow. They also had a lot of reduction in orders in the US which made things tougher while the market was weak.

This week they posted 11.2c adjusted eps and said they expect to post a profit in H2 as well. Depending how big that profit turns out will decide the valuation for punters here imo. I watched their webcast on PI World and it is definitely worth a watch. They have two properties for sale that will boost that positive net cash and the rest of their remarks sounded very positive regarding the balance of income from factors occurring last year, which won’t occur in H2 this year and will boost earnings. I think the market is very spooked and this may be a great buying opportunity possibly. They have said markets in the US and UK have been tough but they also sound confident. The broker consensus has been creeping up too:

16.4c is the current forecasts, I don’t think they want to over promise and under deliver again. This is a stock that if you a brave at catching the bottom can see you make big gains rapidly. They did 36.6c eps last year.

I recommend watching the IMC Webcast and gauging for yourself, don’t trust me. Historically, when these beat forecasts they absolutely fly thanks to the illiquidity of the shares. Pay particular attention to the Q&A at the end, it’s very interesting and they show their confidence.

IGR H125 presentation and Q&A from Tuesday
https://www.piworld.co.uk/company-videos/ig-design-group-igr-half-year-2025-results-presentation-november-2024/

I picked up a few while the market is generally scared on most things. The chart keeps bouncing off a long term solid support line above.

Wednesday saw results from Focusrite, TUNE.

This is a co I have never really held because it just raced away and left me back in 2018. There is what looks like a long term curved bottom forming on the chart and a short term bowl in my opinion:

Focusrite design and manufactures audio equipment for studios and clubs and home musicians, their equipment is very well regarded and sought after. During Covid they got a huge boost as people stayed at home and played music but inevitable that huge demand was short lived and the inventories at their customers were way higher than needed so there was a glut of kit at the stores and Focusrite’s sales dropped. The Founder of the business, Phil Dudderidge, is Chairman and Tim Carroll is CEO. The shares actually rose off of the results, this must be a first since Covid.

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

Firstly I would say the numbers on the face of it don’t look exciting. But what you have to take into account is the adjusted eps of 18p was better than forecast. Also, if you compare H1 to H2, aside from as light fall in gross margins, H2 performance seems better than H1 slightly, if you compare the performance of individual divisions. H1 should be slightly better than H2 because it benefits from Christmas sales, which has been the case in the past so if H1 this year benefits from momentum and having a heavier weighting then H1 this coming year v H1 2024 could be a decent amount up imo.

Buying recovery plays means buying before the recovery is “bleedin’ obvious” to plagiarise Basil Fawlty. The really interesting thing for me with this co as a recovery play if they get their performance back to 2019, where they achieved 21.2p eps on £84.7m sales then on the forecast sales of £157m this year, they would do over 40p eps.

There has been next to no share dilution and it needs to rally 600% to get back to the old highs.

I had bought in the week before the results when I saw a lot of buying going on in 18 and 19 Nov and added after the results.

I watched the Web presentation on Friday and having watched all the past ones there was less negativity in this one. The co clearly don’t want to over-promise and under deliver after past years and they sounded to me like they were ‘holding back’. The worst of their inventory issues are over and like so many co’s with inventory build up at customers, when this all dries up the rebound could be very swift. I like their products and ethos and the CEO and CFO were buying at this level in March so I believe they foresaw things deteriorating a lot less if not improving back then imo. Next update in January.

Thursday saw Creightons post interim results which were ahead of expectations:

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

Surprisingly, or maybe not, the shares sold off on the news – they have had a great run and in all honesty, most of the punters who have been buying likely do little research and don’t care, they see a tick down and so sell, which creates a sheep-wave of selling by traders. I would say that often a clue to good results is the numbers right at the top, as these were. When you get a chuffing great fairy tale to start the results, then the numbers way lower, those are results to be very careful of. I added more on the pull back.

A lot has happened at CRL so expecting most punters to grasp everything in the hour between news and the open is asking a lot. They have reduced footprint, getting rid of the Emma Hardy site in Rickmansworth, ended night shifts and doing just one daytime shift, curtailed sales of products that don’t create sufficient margin and concentrated on the business that does produce better margins.

They basically have 3 business lines:

Own Brand (this is exactly what it says on the bottle, brands Creightons own, like Emma Hardy, Blossom and Bloom etc) 39% of business= H1 down 15%

Contract Manufacturing (making stuff for existing brands) 16% of business = H1 down 21.5%

Private Label (Aldi, Asda, Boots, M&S, Superdrug, Tesco) 45% of businesses =H1 up 17.4%

All three of these divisions seem to be quite fluid and add diversification. You can see from the above that Private Label is the largest sector and up enough to pretty much cancel out the declines in Brands and Contract. These are down through some weakness but also due to ending unprofitable or low margin business which frees up capacity to make products on better margins.

The fact that Private Label is strong excites me. One of the big stories has been Warpaint London, W7L here and ELF in the US who make ‘dupes’, pretty much the same products as some big name brands and packaged similar but far enough from the originals not to be copies. The growth in this sector and the margins are huge. I am pretty sure the likes of Tesco are not going to sit by and just watch these ‘upstarts’ just help themselves, just as Tesco bought Paperchase so they could do their own greetings cards when Moonpig and CardFactory were grabbing all the business. I am pretty sure at least one or two of these stores will do dupes. About 6 months ago, Creightons picked up M&S as a customer, they are now selling via M&S, the biggest, fastest growing retailer in the UK. M&S do not have their own cosmetics brand so there’s scope there for them and all other major retailers to get on the ‘as good but cheaper’ bandwagon imo.

The co has said that the cost of NI rise will be £400k and the minimum wage rise will cost them £200k, they are in talks with customers to pass this on. Frankly, if anyone was surprised by that after how much NI and living wage has been talked about here and elsewhere then they must have been in a fall out shelter imo.

Pippa Clarke has only been MD since March since Bernard Johnson left after his mad spending spree. She is a confident and smart individual imo. They reinstated the divi which they pay at year end at the final results and that was a vote of confidence. They did 1.22p eps in H2 last year, their ‘Christmas half’ and this year will benefit from two more retailers that they never had last year and lots of cost cutting so there’s greater profits to be had in H2 imo. After 1.6p eps in H1 then 3.5p eps looks easily doable or perhaps more, even if some of those costs kick in. Net cash of £2.2m should also rise well into H2. There has been no share dilution and they have good property assets too.

Now a few heads ups and ones I’m watching and have bought a few to keep them on my watchlist:

Dr Martens, DOCS, Interim results on Thurs were not good but nobody was expecting them to be, and while some my have been disappointed, the shares rallies. A new CEO from in-house, new recent CFO and the results about as bad as I would have expected. The shares rallied Thurs and Friday. Feels like the bottom is in, imo. One for the watchlist perhaps? There’s some coverage here:

https://www.cityam.com/dr-martens-swings-to-the-red-but-analysts-positive-on-future-growth/

On the Beach, OTB, results on Tuesday. The chart has been making a bowl after their tie up with Ryanair was announced, one to look out for perhaps after they bigged up their tie-up with Ryanair.

Saga, SAGA, has given back all it’s gains since the Agean tie up was announced, looks like punters have got bored. A nice bowl on the chart again here so might be worth watching:

Lastly Carclo, CAR results are on Thurs, a large holding of mine so looking forward to the results.

No share dilution and the last results beat expectations and the chart looks pretty erotic for a recovery play imo.:

So that’s it. Up to my neck in mud with the builders here and holes everywhere. The worst is over now they are out of the ground (I’m told 😊 )

Remember, I hold a number of these shares, I could be wrong or mistaken or plain lying and you will never know unless you do your own research, so don’t just take my word for what you read here, they are just my views of what I’m doing.

Enjoy the weekend.

Rebel