Weekend Rebel Review, 26th April, 2025

Retail the place to be?

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.

Expect some spelling mistakes – I’m dyslexic and in a rush to get this out on a Friday so a bit of a task at times.

“The Times, They Are A-Changin’ “….Bob Dylan wrote that back in the 60’s – so come gather round people wherever you roam…. have you roamed too much of late? Investors across the world have roamed to the US to find somewhere easier to make money and the US has been a one-way bet, until recently, when it bit back in style. It was suggested by a few people to me many months ago that I should invest in the US as it was easier to make money there. I had already been thinking about it, it was tempting. I sort of think I’ve been doing this more than the average guy but 8 months ago I sold out near completely because making money looked tougher. I had made nearly 90% in a year up till them and having had such a fab run, heavily on the back of MKS and RR., I thought the best thing to do was dash to cash so I never gave it all back, well that was the plan. I’ve bought back 50% odd since, and I’ve sold out again. People said to me” why not do the US? Look at Nvidia, it’s easy money”. I have to say it was really tempting, I could see some great charts, every day the US had done better than the UK, in fact most countries’ markets were doing better than the UK. I had a think for a while but then I came to the conclusion that it wasn’t for me. I could look at charts and find bowls there I suppose, make a bit of money just trading charts but actually, it isn’t all about money, it’s about enjoying what you do, and I like hunting value. Whatever the US had it wasn’t value by any stretch of the imagination. Secondly, in the UK I’m a small fish in a large pond and if that is the case then in the US, I would be a tadpole in an ocean. Everything I know about UK stocks would bear little relevance to trading charts in a foreign country, in a different time zone. At the end of the day my head said ‘stick to your knitting’, just as I’ve told many others to do in the past. Why give up a huge advantage just out of impatience? It would be like Ronnie O’Sullivan taking up darts, I know deep down, value eventually outs. In the UK I was staring at lots of hideously low valuations on top of which many companies were doing share buy backs of up to 10% of the company’s shares. Everything being equal, on a profits and eps basis, if a company stands still and net profit growth is flat, the dilute earnings per share rises 10% due to less shares in issue after a 10% buy are cancelled and off the share register. Of course that company will now have less cash than it might have had or higher debt to pay for those shares but investors tend to focus on earnings ability. That is a basic example and eventually the valuation will become so compelling that investors will buy at some point. Selling out last July was a bit of flat trade, I made very little for doing it though I did buy a number of shares back lower, I doubt the gain was worth the total effort to be honest. Selling 90% just before Trumps ‘Liberation Day’ and the tariff board was a real winner though. I have now bought back enough to be 80% invested now.

In the UK, making things worse was that funds and pensions and companies, where they were allowed, were investing in the US and moving from the UK. They were getting the double wammy of rising earning in an overseas country where the currency was out-performing the GB Pound. Over the past year or two it has been hard for investors to make money here and the US was rubbing their nose in it. It has been hard to ‘stick to your knitting’ in the face of this but has Trump’s farcical behaviour over tariff finally awakened the markets and set the start of a change? The US has done itself a massive PR disaster, for a nation it is equivalent to a Ratner moment in my opinion. Trump has bullied Zelensky on full show at the White House after inviting him there. Nobody likes bullies like that. He has sided with the west’s enemy, Russia. Trump has bullied most other nations in the world from Canada, Europe and the far east and he has tried to bully China who actually finances Americas debt – they are both at logger-heads but both need each other too much to ignore the other’s view. It’s not just governments who are miffed, individuals are not buying Teslas, not visiting the US and generally abandoning US products where they can. All of this is making funds and investor rethink investing in the US in my opinion. The S&P, the Dow Industrial and the Nasdaq Composite have all given back 20% in 3 months.

Here is the FTSE350 and the FTSE 250 v the S&P over the past 3 months – since the bottom and the US taking the biggest fall, the 250 and 350 have outperformed on the bounce. The white vertical line shows the tariffs announcement.

Will this be the start of money rushing back to the UK? Inflows for funds perhaps with many paying double digit yields – will some of those divis prove sustainable? Meanwhile in the UK, growth numbers have out performed, inflation has come in lower than expected and now expectation of rate cuts over the coming year has changed to 3-4 cuts perhaps. Wages are rising faster than inflation too. Are those that have been patient enough to stick with the UK about to see the payback from numerous earnings beats? Retail was pretty written off with the NI and Living Wage rises but companies seem positive in their ability to absorb these costs. If the £ gains value v the $ as it has been doing, up about 8% in three months then retailers may benefit from cheaper imports. Retailers are already benefiting from the fall in container prices having fallen nearly 60% in the past 9 months in $ terms, more like 70% in £ terms which will be helping Reeves’ inflation numbers and helping retailers deal with the NI and living wage rises. Next and Dunelm have already surprised to the upside.

I would assume container prices may fall further if China and the US continue to beat each other up over tariffs which helps out the rest of us, especially retail imo. Perhaps those that have stuck to their knitting in retailers are about to get the pay back? I think there is some good positive weighting for the UK now, particularly retail. After selling out ahead of the tariffs and buying back petty firmly with the US off 20% I managed to get back to being 75% invested ahead of the Easter break. I don’t know if we are now in for a period of UK out-performance but I think we could be. I have been buying retail in particular. It seems to me all the bad news is priced in but shipping and the lower $ may not have been fully accounted for in investor sums. Next and Dunelm have beaten, B&M (BME) has also risen off their recent trading update as has Halfords (HFD) and Associated British Foods (ABF) has risen firmly off that bowl. Currys (CURY) is testing the recent highs and has a fantastic bowl (I’m very long there) Premier Foods(PFD) is also testing recent highs. A number of other retailers seem to be bottoming especially Cardfactory (CARD) with a big double bottom. Retail sales data on Friday showed retail sales volumes in March rose 0.4%, an unexpectedly strong figure after analysts had predicted a 0.4% fall. This is the third month in a row of retail sales rises. Peeps get a boost in their pocket in April too with pensions, benefits and wage rises kicking in.

I hold most of the retailers I have mentioned above and a few others, I also now have a small speculative position in WRKS but it is risky and speculative. I watched their last webcast on IMC and the CEO, Gavin Peck looked like he was bored imo, the CFO seemed to know a lot more of the general stuff than he did. But they have a new chair and a lot of new non-exec recently and I suspect Gavin Peck may not be there a lot longer. There has been strong director buying – the Chairman buying 225k in Jan and a non exec buying 100k. The Chairman has acquired 655k since arriving. The webcast is worth watching even if the CEO was a bit dull, but this is higher risk - they will likely benefit from the currency and the shipping container prices falling though in my opinion. I’ve bought back heavy into the market and the bulk has been retail – not a very diverse picture and higher risk/reward than spreading it around the sectors.

The S&P has bounced well off the lows and went trough a key previous high on Thursday which was positive, a weak sentiment would have had it pulling back there in my opinion:

Another thing, supply chain. If the US and China stay at each other’s throats will that ease the supply chain issues that have dogged most countries since Covid? That may give non US countries an advantage over the US. The more you look at it, Trump may have dodged a bullet in the head, but he looks like he has shot himself in both feet on the economy. There used to be a saying that when the US sneezes the rest of the world catches a cold, well the US is still a major trading nation but now only account for 9% of global trade rather than the 15% they made up in the 70s. In 2020, global GDP declined by 6.7 percent as a result of Covid. We are not even talking about a global recession. The IMF have halved global growth forecasts (but then they are hopeless) but not a recession for the world. Current GDP growth is around 3.3% so we are talking about will global trade reduction in growth be a bit over 1% over the coming year. Compare that to the 6.7% actual decline of Covid which caused a 45% drop in the S&P. The FTSE All World Index which fell 35% has fallen 17%. It’s sort of reasonable to think the US would be hurt more than the UK which has seen the FTSE350 already give back 18%.

In all of these big falls, large funds and institutions use the dip to buy shares they were buying anyway, but at a discount, which is part the reason why any bounce off the bottom is often exacerbated.

Basically what I’m saying is the UK now looks better placed than most countries here on valuation and compared to the Covid fall, a lot looks priced in now for the UK and the upside perhaps a lot greater than the potential remaining down-side after the recent fall. I saw this on Friday:

I may be wrong but that’s the way I like to compare with past events and situations and to do a bit of ‘price discovery’ to use that dreadful “brokerspeak”. With all the above taken into account, I think there are a lot of plusses for retail that the market has missed including, lower shipping, lower Dollar and potential lower prices from China as they find markets for goods not going to the US now, so I’ll be watching retailers closely and have positions in a fair few now.

On Tuesday, the markets reopened and sort of confirming my feeling about where markets were going, after a 100 point drop on the S&P overnight, 160 points at one stage, the UK opened scarcely off then rallied. There was a time when we would have been off more in percentage terms than the S&P. Council elections are this coming Thursday May 1^st, and a drubbing for Labour may see a change in approach towards business hopefully, then next Thursday, the 8^th, we have the BofE meeting – will they cut rates? One thing Reeves can’t do is stick it to retailers and consumer stocks again. Not after the outcry of her last budget. Growth has been better than expected but inflation has come in lower. We head into May with a lot of results due to be published. If sentiment is more positive and the news from companies better than expected, then there is potential for some spectacular share price moves, so let’s see where we go.

Onto Stocks

Monday was a bank holiday, Tuesday lacked much news as directors dragged out their easter breaks aside from Argentex, AGFX “the global specialist in currency risk management” being suspended due to liquidity concerns, through not managing its global currency risk. Truth is often stranger than fiction. Argentex always looked an iffy little company that often had a lot of insider selling to me, thankfully, it was something I never understood well enough so I always steered clear. Sorry for all those that have been given a bolt from the blue on Aim yet again. I admire them putting that statement out and saying in the header the “global specialist in currency risk management“ when that is what has just mullered them – so tactful. Things like this happen though despite the most in-depth research, I’m reminded of Patisserie Valerie which had Luke Johnson at the top – even the ‘experts’ were caught out there, Apparently. Looks like shareholders will have to be grateful for a tuppence hape-ney bid, all of which sounds a bit suspicious to my sceptical mind.

On Tuesday, Holliwood Bowl, the leisure and bowling business posted their half year trading update:

You can read the rest of the statement where you read your RNS News.

I did highlight these in last weekend’ Substack (though I posted the wrong chart, sorry)

I bought a number because the shares were beaten up and the valuation looked historically quite low. Not a growth share but decent growth for the PE and a very decent yield and little debt. Directors have been buyer. I don’t think they would be a long term hold for me but in markets like this they look solid, and downside looks limited and if I was looking for income then this would rank nicely. I think I can find better performers for the longer term but short to medium term it looks an interesting trade perhaps. A 4.5% yield and a PE of 12 – the shares have risen around 10% off the results.

Filtronic, FTC, the RF device experts and manufacturers put out an RNS this week.

Very nice to spread your eggs out more into various basket. I don’t suppose it will bring in income anything like SpaceX in the near term but it helps de-risk the business further, going forward.

M&S (MKS) posted not such good news this week in that they had been on the receiving end of a cyber attack.

This was still affecting their contactless payments by Thursday night but I would have thought having to do payments in the standard electronic method wasn’t a big deal as far as sales go though it may lose them a little in sales by those too impatient to wait 20 seconds at the checkout and push a PIN in. But late Friday the co said they had paused taking online orders from their UK and online websites. That sounds like an escalation, more news next week I guess.

Carclo (CAR) the plastic moulding company announced refinancing and a reduction in the pension deficit on Thursday:

Pretty good news and the shares rose 14% in response. It wasn’t exciting enough for me to buy back as I have my eye on a lot of interesting positions in the market at the moment that I’d like to buy or increase. Adding CAR would only be another small position. I like Frank Doorenbosch though ad I think he is doing a great job.

A few stand out bowls:

Harworth Growth, HWG

Currys, CURY

Helios Towers. HTW

Associated British Foods, ABF

So that’s it really for this week, next week the results start to rattle in for May so enjoy the weekend, it’s going to get busy – I think we might need a considerably bigger Substack as Quint from Jaws might have said if he traded shares 😊

Rebel

Twitter: @RebelHQ