Weekend Rebel Review 24th Feb, 2023
Roys Rolls have plenty in them .......and more
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.
Still in the February slouches at the moment so again, not a busting lot to review here this week, roll on March results period.
Macro-wise the VIX has become a bit bowly so it needs to be kept an eye on, if it seems we may see some selling, though this may be mainly in the overpriced US, not so much UK with the results season getting underway here in a week or so. Meanwhile there’s a big bowl on the Russell 2000 waiting to break out, very bullish if it happens:
Definitely looking good is the FTSE250 where a nice little bowly formation has formed since the start of the year:
Fear/Greed seems pretty locked around this level which I’m comfortable with. Always a level to be a bit wary but not well over in Extreme Greed thankfully. I’m convinced we are on the way up here. Rather like the Financial Crisis when the mkt bottomed late 2008 but never really got going till March 2009, we now seem to be in a similar time warp. Several people have mentioned feeling more confident to me and a tick down in interest rates would be a big stimulus.
One thing I would emphasise again is don’t just follow others as far as shares go, do your research as thoroughly as you can. In my experience, what many do is follow a punt or a tip with minimal research. What happens then is when the stock falls, you doubt the share and you doubt whoever you followed in because you are not sure how good the tip is or how reliable. Then you eventually bottle it and sell into a fall, at a loss. If you have done your research you can have the confidence of knowing you are more likely right than the market, the market is very often wrong, in fact if the mkt wasn’t wrong so often, making money would be more difficult. There’s not much more I like than researching a company, mentioning it to a share-buddy and have them say they aren’t keen for this and that reason, all of which I have researched and know to be unfounded. That’s when you can have the confidence to add more on a dip, rather than sell at a loss. This whole game is about confidence, research gives you confidence.
And so onto shares in which we saw more bid action with Currys - if stocks stay this cheap in the UK the take-overs will escalate. This week saw Rolls Royce (RR.) post fabulous numbers. Some doubted ‘Turbo Tufan’ the CEO, but he had delivered in spades here. EPS, Cashflow, Debt Reduction – they are fast becoming investment grade and likely to start paying a dividend this year. I listened in onto the Conference call and it was up beat, lots of applause etc. I have to say a few of the acronyms these analysts were using were above my pay grade and it’s too big a company for me to research in depth as much as I’d like, too many moving parts, so to speak, that’s turbines for ya. I need to go a lot on what analysts say to a high degree ad getting in-depth notes isn’t easy as a private investor - so much for the level playing field. That research is theirs not mine, so I feel less confident than I might if, I could understand the business in depth, the way I would like to. I can’t fully understand which parts have what effect on the business as a whole, the way I might say in a small cap rtetailer. Another thing I have to balance is can they one-bag in a year from here to still meet my criteria to hold them. It will be more difficult than the past year to one bag tho they may. Also, there’s the added risk that if there was an ‘event’ like a bombing or a take down of a plane or a major plane crash with RR. engines as part of the plane, then there may be a sharp if only short dip, which may be unpleasant having 24% of my portfolio in there. So for those reasons, and having one bagged them in 7 moths or so, I decided to sell a bit over 50% to leave me with the rest all as freebees, have taken out all of my initial investment. I put some of the money into MKS which has now given back nearly 20% from where I took a lot of profit, these too having doubled in a year. There’s much greater chance MKS can double from here in a year than from the recent high imo. I put more into BMY too. I mentioned BMY last week, I think the market has missed the potential so far after delving around and doing some research, a lot more to do still. Forecasts are definitely on the ‘too low’ side imo, in fact the trailing 12 month divi is higher than the forecast divi so unless they are going to cut the divi the forecasts are too low. Same goes with eps imo. They have done 20% eps growth every year on average o if that was to just carry on you’d get to the coming years forecasts without the monster blow out year they have had this year.
Here’s a great article if you are interested.
Two others I bought this week – the first is Judges Scientific. I originally bought these at 110p some 20+ years ago and sold at around £8-£15 some 3-4 years later, which was nice, but they went on to £100 where they roughly are now. That’s a bitter pill to swallow but I try to remember I sold them 10 years ago in 2014, I’ve had that cash to use elsewhere so where I might have got rid of a future 6 bagger, I have still made good money with that cash in numerous one baggers or better so I won’t beat myself up too hard. Anyway, after the recent trading update, the curve up on the chart and with results on March 21st, I bought back in. The PE looks to be about 25, I can’t remember the PE this low in the past 15 years and they will do 50%+ eps growth this year and it’s a real lass act, buy to build cheaply, with cash generated, no share dilution. Even through Covid. over 5 years they will have done 140%+ eps growth. near 20% compound p.a. I’ll try not to take profits too soon, it will more likely be a trade rather than a long term hold as one bagging in a year looks unlikely, but never say never – that’s a big earnings growth jump this year.
The other share I bought this week was Halfords (HFD). I pointed out the tiny bowl forming recently on Wednesday morning on Twitter and later that afternoon it flew on high volume. There have been bid rumours for a while. Also they put out a trading update a month ago and the shares sold off as the press called it a ‘warning’. They said Dec was weak, but Oct and Nov had been very strong. They also said Jan had returned to the strength in Oct and Nov and they would meet forecasts. I don’t call that a warning even if they tightened up their results pbt range by £5, the guidance is still above the lower end of where it stood, broker forecasts have not been reduced either. Trading at around 20% below book according to Stocko and retailers very out of favour, most look cheap to me and as a bonus there’s that bid suggestion in the mkt. So I bought into these and added on Thurs and Friday. An out of the blue trading upgrade wouldn’t surprise me if Jan to March has been stronger than expected. Here’s the chart up until this week’s spike took it back up to 201p on volume.
All of this is obviously just my opinion. I’m no analyst, just some private punter spilling my thoughts out and I may be totally wrong. Do your own research. As I look through my holdings many look like potential bid targets, probably because I tend to look for good growth on low PE’s where debt isn’t an issue in most cases.
I did a live Vox with Paul Hill on Friday – it covers a lot of stocks so instead of me rambling here this week that has been quiet, if you want to watch it, here’s the link:
March looms, the FTSE indexes get reshuffled on Weds (28th) and I expect KIE to get promoted to the FTSE250. This will mean tracker funds now need to buy to balance their funds accordingly. The following week, on the 7th, they will post interim results and return to paying a divi. This will attract income funds going forward then too. All of this will have a more positive buying weighting for KIE imo, we will see. Berenberg recently put out a buy and a 210p target.
There are a huge amount of results in March so make the most of the week ahead likely being quiet on news, it all kicks off in March and I doubt we’ll get the time to read all the RNSs before 8am on some days! I’m looking forward to then, there should be far more to highlight and many more bargains to be had that the market has missed.
The longer this market takes to wake up, the more bullish I get :-)
Have a good weekend
Rebel
thanks for the write-up mate, all great stuff. On the index reshuffle vis-a-vis Kier, is that date correct? I thought the day after the LIFFE futures and options contract date date for March was the 18th?