Weekend Rebel Review Sept 27th 2024

life is a roller coaster

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.

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Well it has been a pretty eventful week here as far as the market goes so I’ll have a bit of a run through of all the excitement of the life of a full time investor. 😊

I took two wallops this week as you will see below so that spoiled the week and also battered my UKStockchallenge lead, but then I did say it wouldn’t last.  One of the toughest things to do when you get hit by a run of bad news is to stay focused and not let it hit your confidence. Invariably, these sorts of events make you question yourself and often that makes you go into future trades or positions much more weakly and then when they come good you end up benefiting less.  If something works for you, just keep doing it in my opinion.  We all get things wrong at times, bad news happens, no human gets 100% right.  It’s how you cope with losing that makes you a better winner. If you play with money you can afford to lose then you can stay far less emotional.

As far as the big wide world goes, the S&P has trudged to a new all time high:

The Dow Jones has done the same while the Nasdaq works higher but is off the high. The Dow Transport hit a new high last week, the Russel 2000 is near the recent all time high and the VIX has slipped back to 15.6.

Fear/Greed has taken off well into Greed after the US rate cut which isn’t necessarily a good sign, it may indicate a short term reversal for a bit soon imo:

China caught my eye, it has had the nest week in years and if that’s a double bottom then things might get interesting.  I suspect this is part of the trigger for WOSG and BRBY rallies below.

In the UK, the bowl on the FTSE250 continues but it’s a slog with all that is going on politically here.

The FTSE Small cap bowl still looks like it is working its way back to a break out at the end of October as I posted last week:

On Monday, Transense Technology, TRT, had their results which were very pleasing:

Bridgestone royalties had increased and should continue to flow for around another 5 years bringing in circa £15m

The co also said: “Trading in the period since the financial year end has been strong, with revenues approximately 60% ahead of the corresponding period last year, profits showing good progress despite increased overhead costs, and net cash at 31 August 2024 increasing to £1.49m. The depth and scale of customer engagements across the Company's two trading segments is intensifying”.

The areas where these sensors are used and the types of sensor are growing pretty exponentially. In the past the company has aimed to just live off royalties but now they are creating added value by doing assistance work that the customers would have been left to do themselves in house and this will generate even greater sales and profits.  It’s all the stuff you want to here going forward. The recent contract win seems interesting in that it is government funded but many of the costs in the contract will be things that are already costed in the company’s business so there will be little cost to TRT to deliver them,

They currently have just over £20m in past tax losses to offset against tax going forward which helps boost EPS. All in all with the recent director buying and the upbeat sounding commentary I was rather pleased and continue to hold. 

On Weds Dialight, DIA announced they hadn’t won (you and I’d say they had lost) their legal claim v Sanmina.  Wednesday they confirmed it after posting a brief downbeat  RNS on Tuesday.

The shares took a 30% wallop on Tuesday and a further 10% the next day.  The circa $8m costs they will be hit with will-wipe out the debt reduction they achieved the previous year.  I bought these fully aware of the risk/reward when they could have won $200m v losing $8m.

So now it’s about the actual business rather than legal claim which is what caught my eye in the first place.  They have had a new CEO in the last 9 months, Steve Blair.  In the last results the progress he outlined sounded positive. They took a load of costs in the last results but were quite upbeat on the last 3 months trading.  In recent weeks, Blair has bought nearly 49k shares at 189p right up to a few days into the court case. I try to get into a directors mind on these things.  Buying shares when the court case had started seemed strange if it was about thinking they were going to win. It’s rare you get that sense when you are dealing with a jury but perhaps he was over confident.  A second scenario might be that he believes the business is currently improving so well that even if they lost the court case he felt that 189p was a cracking buying opportunity, a few days before the company H1end on Sep 30.  At the last results they did a bit of a huge deck clearing of costs and clean up. I would say the bit in the last results was the part from “TRANSFORMING THE ORGANISATION” headline.  Have a read, I think it is worth it.  They are forecast to do $0.21 (21 cents) eps this year now they are reporting in Dollars, that’s 15.7p eps compared to losing 60c a share last year.  I’m only interested in this as there has been a board change, were it the old board I’d not even be looking at it.  But if they are on a PE a little over 10 and a strong recovery beckons, then I find that interesting and continue to hold the full lot I bought.  I have been hit for nearly 40% here this week but then again I was already up 25% from where I bought so it’s not the disaster it initially feels and may still be a winner. If you enter into these things you have to be fully aware what you are doing. I always set myself a scenario of being hit for 50% overnight and how would I feel so something like this would never make up more than 2-3% of my portfolio.  It was rather pleasing to see CEO Steve Blair purchase a further 8,500 shares on Wednesday evening. That’s 57k share he has bought in the past  6 weeks, just ahead of H1 close, increasing my belief that he may be buying because H1 has done well despite the court case result – but then I’m an optimistic old Hector.

Cardfactory. CARD put out their interim results on Tuesday. After UBS put out an uber upgrade to their price target last week, the interims were underwhelming to say the least. While sales were up everything else was negative as far as numbers went.  There was interesting news re Aldi, a new distributor in the US wholesale for the whole of the US, and talks for an extension to the Reject Shop contract in Australia.  But posting numbers that were down on last year wasn’t guided and so punters took flight.  The co said they were inline and they reinstated the interim divi at 1.2p.  The co has a lot to deliver in the second half, if they disappoint then the stock will go lower imo.

I bought on the 115p break out after Teleios sold out and added a few last week so gave back nearly everything.  I really am not a fan of retail in general at the moment with Labour in charge, I think consumers will feel it and consumer confidence has plummeted.  M&S are an exception as they have so much self-help going on. I did watch the CARD webcast this week tho and having watched them so often I found it very positive in body language.  I think I posted on Twitter it look like they had built up around £7m in stock over last year but the presentation seemed to suggest £11m.  This is at cost level. They did this to avoid the demand in shipping and prices rising there.  I found it all rather reassuring after the fall and the weaker than expected H1 than many may not have expected. Do I want to keep holding them tho?  I think they may be a slog as IGR put a trading update out on Thursday saying that the UK had been weak. As I’m not a retail fan at the moment I will likely sell into strength and invest in something I feel more sure about but I’m not fully decided.

Shipping prices now coming down after the early rush:

I highlighted Watches of Switzerland WOSG last week and the Rolex chart.  They firmed this week and I highlighted the heavy vol on Twitter and the rise into the close on Weds.  Then on Thursday this:  DEUTSCHE BANK RAISES WATCHES OF SWITZERLAND TO 'BUY' (HOLD) - PRICE TARGET 490 PENCE.

The shares are up 25%+ since last weekend and that’s earned me back a good deal of the 3% it cost me at the start of the year so I banked it – they let me down too much in Jan.

One stroke of luck I did have this week was selling IG Design, IGR on the Cardfactory results – they duly warned on Thursday and dodging a third hit this week felt like a win.

One share I bought this week was Saga, SAGA – the cruising and insurance co.  I’ve followed these for a while and have traded a few times. I’ve left the share alone while Euan Sutherland was CEO. I had never been impressed by this guy and my low expectations from him were not disappointed.  He left the company 10 months ago and the CFO moved up to CEO.

The stock trades on a PE of 4.3 falling to 2.9. There is good reason for that with the net debt at £600m, 4 times the market cap.  Interestingly though, net debt has fallen around £100m over the past year.  Eps last year was 8p, the forecasts are for 26.6p this year and 37.6p next year.  Last year’s results posted in April were quite a pick up:

The cruising side of the business is doing well, it’s the insurance side which is the drag.

A £150.0m bond repayment in May 2024 in full and the co has a loan agreement with Roger de Haan who is a 26% major shareholder.

There is lots of risk here but in view of the year end performance and the CFO moving up to CEO 10 months ago, he has now had the time to make his mark imo.  Currently for me it is a trade that may become a hold, dependent on the results but it feels like all the sizzle since the Covid bottom has gone from the punters, they now seem bored with the stock or indifferent and that’s when I like buying.

One little bit of spice – lots of older people have been grabbing their 25% tax-free lump sums from their pension before the budget, others have been cashing in Aim stocks to avoid any inheritance tax changes in this budget – where will they spend all that money?  Will they bring forward the cruises they promised themselves?  The chart looks interesting too imo.

In the last trading update in June the company said this:

As I have spelt out, it’s debt laden, it has a really poor recent history under Sutherland, the insurance side of the business needs huge work and imagination to get it back to profitability so only people like me are going to be interested.  If they are making headway and the tide is now with them, and the new captain steering the ship far better, these could cruise a lot better on higher seas. Do your own research. Trading update Wednesday, anchors away hopefully (I think I’ve done all the cruise ship gags there). 

With Watches of Switzerland bouncing it made me have a close look at the fashion sector and couldn’t help but notice a potential bowly bottom in BRBY so might be worth keeping an eye on – a lot of directors bought shares in July above £7 after putting out what look like a worst case scenario trading update to scare the life out of the market and have little else to fear on the downside imo, when Joshua Schulman came in as the new Chief Executive Officer.  If you promise more than potential doom it’s easy to look a hero when things turn out not so bad imo.  Not saying that is what has happened, just being my sceptical self. There’s a lot that will want in on the BRBY low when it happens imo.  The shares closed at 715p ask on Friday, a bowl and on the cusp of the first major ‘higher high’ on the chart in 18 months since the top.

I highlighted both BRBY and SAGA on Twitter on Thursday for those who keep an eye there.

 Just a note - another stand out bowl I have noticed recently is Gama Communications. GAMA – these made a recent acquisition. D.Bank have a £23 target. Currently circa £17 to buy. There isn’t many bowls around at the moment so this stood out:

Just one to watch perhaps.

That was the week that was for me, bit of a roller coaster but not too bad in the end. After a 36% gain from the end of October I was targeting 47% from Jan till the end of October this year to be up 100% for the year from Oct 2023.  I was up 37% year to date a couple pf weeks ago but I’ve given 3% back this week so I’m 13% short with a month to go.  Doesn’t look like I’ll do it but 87% over 12 months will do me more than enough.  I’m still holding a lot of cash.

I hope you have had a good week and avoided the flooding, and continue to do so.

Enjoy the weekend

Rebel.

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