Weekend Rebel Review 8th Feb 2025

#BOOM #FTC #FCH #W7L #WOSG #AVON

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.

Into February now, the birds have started sing, the snow drops, crocus, and daffodils are all starting to bloom and love is in the air. So with that in mind, Trump initiates big tariffs and shows his love the only way he knows how. Markets were rattled by the news but was it news? Was the market surprised? He never even announced tariffs on the UK and the FTSE250 fell 2% by 9.30am. What to do when these sort of things happen?

On days like Monday, it is often the mugs that sell into the fall. MM’s know that punters will want to sell and they take advantage of it by marking down sharply, if you want to sell into weakness like this then they are going to make you pay the price, just as they do in a strong piece of good news and a market rallies. Trying to behave in a rational way when the market is behaving irrationally is never easy. One of the irrational things that happens is punters sell anything. Even if a co was unaffected by Trump’s tariffs it was being sold in all likelihood. So for me the best thing to do is watch if I think the fall is more noise than substance. Trump was soon rowing back on his tariffs – it’s negotiating, it’s saying you are going to charge a customer £100 and then dropping it to a tenner, the customer is then happy and paying more.

These falls can be very revealing, rewarding and useful if you make the most of them. I try to add rather than sell if I think something might be down on misplaced sentiment. Another thing I watch for on heavily down days are stocks that are up, especially on volume. This often reveals a stock that has a lot of buying pressure or a story that I might have missed. Also watch for the shares that start to rebound first, that shows demand too. Lastly, get yourself a good intraday chart and watch it closely. It will likely show you the trend changing intraday and reveal a good time to start buying the dip. A good point to watch is 11.30am to 1.30am as the US market starts to open at 2.30pm. The trend for the day often shows up in the US futures and this time and the UK starts to follow, you can often see an intraday bowl starting to form or an up-trend, when one is about to happen. US futures early in the day often reverse.

Investing in stuff that is easy to understand is really important to me. I tend to bracket investments into 3 groups 1) pretty fully understandable. 2) mostly understandable and 3) Not enough knowledge how it works.

Group one I pretty well fully understand enough about the business that most aspects don’t have me guessing. These would be retailers, manufacturers, engineering, house builders, construction and service sector. I won’t know everything, I never do. There will be hedging policy, sourcing destinations etc that I will never fully know but I will know enough to feel very comfortable. These would be my largest investments.

Group two would be things I sort of understand but there will be a lot of complicated or moving parts like investment funds, finance, banking, insurance, tech services etc – I basically know what they are doing but not exactly how they are making their money doing it. These would all be modest investments.

Group 3 – tech and pharma, miners etch, all too much going on in the businesses to fully understand unless I spend so much time boring myself to death researching and then be little more the wiser as to competition, what’s best, pitfalls etc. I might buy these for a trading punt over days, but that is what they are to me, punts.

I like finding a group of stocks I understand well and focusing on them. It’s better to know a small group well than a large group badly. There’s a lot of stocks in a lot of sectors, it’s hard to get very informed in so much. In nature, it’s all the birds that feed or behave the same that have to battle for food all the time. Kingfishers have very little competition, they can sit on a branch and rest all day then just drop in the water and pick up a big meal without a fight with other birds that can’t do that, when they want. Find a sector or three that you understand and try focusing more perhaps, that’s what works for me.

On Thursday it was the Bank of England rate decision and as expected they reduced interest rates by 0.025% to 4.5%. Good news for business and those with mortgages. The bad news was the Bank of England halved the UK growth forecasts from 1.5% this year to 0.75%. Was it ever going to be different under Reeves and Mortimer, sorry, I mean Starmer? It’s all very well saying you are going for growth and then announcing a third runway for Heathrow and lots of nuclear power stations but none of those will even start to come out of the planning envelope for 5 to 10 years. We need stimulus now! We need the government to do things that make people wealthier short term like cutting taxes, reducing local government bills by making them cut waste. Schemes to give tax breaks to businesses that are ready to go like AI, reductions in energy bills by drilling our own energy and scrapping all the Net Zero nonsense. That gets the wheels turning which in turn brings in more tax from busier businesses and people. To get a car moving, you turn the starter motor first, not put it straight into fifth gear.

Indexes are still unidirectional. The FTSE250 is still rolling over nut it’s trying to break out of that trend:

The FTSE Small Cap Index is trying to do similar:

Aim has been in a constant down trend for months again but it may be making a bottom here and worth watching to see if it can break out through that resistance:

In the US the S&P keeps pushing at that high, meanwhile the VIX has come back down from the recent “Trump tariff spike” to 20+

All in all the market feels like it’s at a cusp – lower growth forecasts but it will be certain businesses here that most affected in all likelihood, possibly consumer stocks. The positive is with higher inflation, businesses can often get away with bigger price rises, which is how inflation grows, Lower interest rates will help inflation, lower growth forecasts will weigh on confidence. It’s all a bit to and fro. Let’s all look forward to Rachael’s spring statement.

Onto Stocks

Just a short note to say Michael Tobin purchased 5k shares on Monday. With the final results 6 weeks away, that was his last chance to buy without being in the closed period, so nice to see him keen.

This week, broker forecasts have been hiked up dramatically.

Now forecast to do 29c eps this year and 37c for this coming year or 30p eps – at a share price of 390p that’s a PE of just 13 for astronomical growth potential. A bowl to die for in the making at the moment. The upgrades never surprised me, they had already said this year will be a record year and they did over 40c eps in 2021. Having lost so much developing the business they must have £50m-£60m to offset against tax going forward, and a market cap of £69m so I’ll be surprised if they have to pay tax for some time.

The steep deep bowl shows the high operational gearing here and the steep earnings growth.

Filtronic, FTS, the RF technology co that is being rapidly adopted by Elon Musk’s Low Earth Orbit (LIO) posted interim results on Tuesday.

You can read the reast wherever you get your RNS news.

There was strong order inflow from SpaceX in the period and two new production lines installed in the period to increase manufacturing capacity to support revenue growth.

The stand out in the numbers was the growth in EPS to 3.08p from a 0.24p loss in H1 last year. Sales were £25m in H1, equal to the entire sales last year. They are already 2 months into H2 and say the strong sales growth and moment have continued into H2. With £48.1m sales forecast for the year, they are well over the half way point in H1 so sales for the year look like walloping forecasts. Also having done 3p eps in H1 the 4.8p eps forecast for the year look like getting beaten too. This company is prone to guiding low then beating by some way. Last year the shares raced from 21p to 41p I Feb then went sideways till April, when they took off on the April trading update, to double again nearly to 80p.

The company already had great stats on Stockopedia

H1 operating margins were 26%. If they maintain those margins and do sales higher in H2 than H1, the forecasts look way too low imo.

So why such a muted response? Forecasts for next year haven’t been raised much and are below this year. I think this is just caution as they are moving to their new larger modern facility in the summer and there is scope for some delays I would expect. If there are not much in the delays or hiccups in the move then I suspect they have a lot of upgrading to come. Most investors would likely look through any delays with some big earnings upgrades likely down the line from such fast growing sales. Probably trading on a PE not much more than 12 or so for this year, if these were on the Nasdaq they would trade at triple the rating. The potential here is huge and not priced in imo. I suspect on this rating, one decent bit of new will drive a very significant price uplift in pretty short order, there’s potentially lots more increased business with Starlink and there are other satellite co’s that may likely need the world leader in RF to supply them to avoid latency. With so many other areas in space satellites needing to reduce latency, this co looks like an under estimated rocket ready to leave the launch pad, to use a close related analogy. I added a few more. I really like this co and of course I hold the shares. While I don’t grasp the detail of RF technology, I understand how it is unique and a world leader in FTC, so it easy to imagine how big the demand could be. I would say that though, so don’t trust me blindly, do your own research, it’s you that makes the buying/selling decision.

FTC has one of the most fantastic bowls long term – which is part of my influence that these could have a big sharp move up at some point not too far away but we will see – it’s only a chart isn’t it 😊

FTC have a busy month ahead:

Funding Circle, FCH, has been covered here a number of times and has been a great performer, one bagging in short order last year for me. It dropped a mini bombshell on Tuesday after a story broke in the Times. Directors who had guaranteed money borrowed via Funding Circle claim that payment is not due to Azzurro, despite its acquisition of loans from the platform. Tis had been tested in a couple of cases and the directors who owed the money seem to have been ruled in their favour. Funding Circle sold on the loans to Azzurro but it seems the wording in FCH loan agreements left Azzurro unable to chase and enforce the loans. I don’t really know where this leaves FCH. Buyer beware surely? If Azzurro bought the bad loans book and never read through the loan agreements they had bought then I’d have thought that’s their problem. I don’t know if they can come after FCH for the money but doubt it. FCH’s problem, I would guess, is what do they do about future bad debts? Also, I thought their proprietary machine learning software meant they had a low default rate but Azzurro has bought £500m of these loans which seems quite a lot. FCH doesn’t lend the money out themselves, they put the loans out to 3^rd party lenders. All sounds a bit of a mess even if FCH are not on the hook for the loans and how the business moves fwd. It might not do heavy long term harm but until the uncertainty is cleared up then it’s likely to weigh on the shares.

FCH came off 15% on Tuesday. Fortunately for me I banked all my FCH profits a few months ago as it looked more up with events. I kept a tiny few to have them on my main watchlist that are not worth even worrying about. Holders need to decide for themselves what they want to do. Had I had any meaningful amount I’d have likely sold into the bounce after bottoming off the 25% intraday fall. It may be when a bit more detail comes out it isn’t so much an issue for FCH as they don’t provide the loans themselves, they get third party lenders to make the loans. More Azzurro’s problem I suspect but in these situations, if it were me, I’d prefer to play safe and find a better place to make up the losses in all likelihood – a bit of better luck for me this time to offset IGR last month. These are the things no matter how much research you do it is difficult to avoid. No knowing the precise wording in the contract either, it is hard to know who is responsible for what so for me personally I’ll just watch from the sidelines.

On Thursday, Warpaint London, W7L posted their trading update:

Everything sounds fine by that statement although the numbers quoted in it were a tad under the consensus on Sharescope and Stockopedia. On those numbers W7L sound up with events possibly for me but the question now is what will Brand Architects add to the party here out? Could be very good but there’s also execution risk to consider. Punters have got used to ‘aheads’ so only just ahead (in fact slightly under imo) wasn’t going to get a screaming lot of buying, even on a dip over recent months. For me, W7L look unlikely to one bag in a year from here though growth could be good still. I decided to sell the last few I was holding and put the cash to use elsewhere but I may be making a mistake. There are a lot of opportunities out there for me though. I have to say though that the subsequent fall of 20% in the morning came as quite a surprise. As yet I don’t know if brokers reduced forecasts or why the reaction was so extreme, I thought it might come off 5%. It’s a shocking drop when the chart looked like making a bowl but everything has been rather muddied by the acquisition too.

Watches of Switzerland. WOSG posted a trading update on Thursday, inline they say.

Once bitten here, I will leave it alone. As a retailer I think I understand it but it has had the ability to surprise me too the bad side too often. I struggle to have the confidence here while Rolex prices continue to plunge. I know they are not all about Rolex but a lot is:

Last weekend the Defence Dept released this:

Avon Protection Ceradyne LLC, Salem, New Hampshire, has been awarded a maximum $39,911,250 modification (P00045) exercising the third one-year option period of a one-year base contract (SPE1C1-22-D-1516) with four one-year option periods for second generation advanced combat helmets. This is a firm-fixed-price, indefinite-delivery/indefinite-quantity contract. Location of performance is Ohio, with a Feb. 6, 2026, ordering period end date. Using military service is Army. Type of appropriation is fiscal 2025 through 2026 defence working capital funds. The contracting activity is the Defence Logistics Agency Troop Support, Philadelphia, Pennsylvania.

This hasn’t yet been RNS’d by the company but I’m pretty sure it will soon, last time the Dept. of Defence put a contract out for Avon the co took a few days to RNS it.

You can see all the daily Defence Dept procurement news here:

https://www.defense.gov/News/Contracts/Contract/Article/4056671//

you can have them sent daily to you online to.

Quite low on news this week but it has been manic through January so nice that things slow a little. Lots of results in March and April.

Have a great weekend.

Rebel

Twitter @rebelHQ