Weekend Rebel Review St Leger Day Special

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 the rain has killed any hope of doing anything meaningful outside today so time for a weekend review again this week.  There’s a fabulous feeling about the market currently imo, tho many may not feel it. When investors/traders sell off just because they cannot take anymore, when they just want ‘pain relief’ or 5% guaranteed from gilts looks attractive compared to fluctuating equities that may fall at times and not even pay a yield, you know there’s a lot not participating long in this market.  So why do I feel bullish (apart from the fact that I am always optimistic and often get called a perma-bull) ?

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Well it is St Leger Day – ‘Sell in  May and go away come back on St Leger day’ is the age old adage, will it come true this year? It will definitely come true for some stocks, knowing which they will likely be is the tough bit.

Looking at the S&P there’s still a whopper of a bowl in place.

The UK and Europe have all become somewhat detached from the US, particularly the FTSE 250.

If you look at the French CAC and German DAX they are both at near all time highs. The FTSE250 is 20% off its high.  This may reflect the increased corp tax to an extent but it also reflects market sentiment.  I think a lot of that is misplaced and why there will likely be some very positive surprises going forward.  CCC surprised last week.  DX. Saw a bid approach at a decent premium on Monday . GMR had strong, better than expected results and GAW had a strong update yesterday and there have been numerous others. I’m expecting a lot of beats through September to November.

One thing I have noticed in recent weeks is that the market here closes firm into the close compared to earlier in the day, in most cases.  Rather like the US closing at the highs of the day often indicates a positive trend, the theory behind it is that investors believe the mkt is going to rise so buy into the close, rather than selling into the close indicating a negative sentiment.  All of this week has been good up days for me aside from Thursday which was a tiny down day.  When you aren’t losing money week after week you tend to become more bullish. The market just feels more bullish in my opinion.  Indexes have been very sideways though which means unless you are stock picking well any positivity may be muted.

The Russell is showing great support here:

My guess would be that’s a small rounded bottom over the last month and things are turning up.  The VIX has been drifting lower, fear is declining

Fear/Greed is drifting in Neutral towards Greed so pretty balanced and similar to the VIX.

Here in the UK we have inflation figures on Weds. I expect CPI to tick up, seems that’s the consensus too now.  Inflation figures, growth figures etc are never accurate short term.  Last month CPI came in much lower than expected. The previous month it was higher than expected.  When it’s lower than expected the press and the opposition are full of despondency. When it’s better than expected the press and the opposition are full of despondency :-)

The fact is a month that is worse than expected is often followed by a month that is better than expected because the data these estimates are based on are always a bit incorrect and the correction builds into the following months numbers.  What you need to look at is the trend. Year on year CPI looks like this:

That’s a big fat rolling top in my opinion. Forecasts are now for a tick up to 7.1%

Core CPI looks like this:

Core CPI has struggled to fall but again, perhaps last month was a bit too downbeat and it may prove better than expected, it is forecast to tick down a meagre 0.1%

Considering In March last year the ‘experts’ were forecasting a recession and much higher unemployment it hasn’t materialised.  You never hear the government pushing this line though, or the fact that growth in the UK is the highest of the big European nations even since Brexit.  Gawd knows what has happened to their PR machine but not highlighting your wins and fighting your corner obviously means most people think things are worse than they are and investors are more cautious.  Perhaps the forthcoming trading updates will wake a few.

I still have heightened bullishness here and not been on the Bovril. I cannot believe there won’t be decent moves for the indexes as more and more companies beat.  CCC leapt 15% on its trading update and exemplified my point. GAW jumped 10% on its trading update.

I will be looking out for XAR interims which are on Tuesday. They need to start generating strongly growing profits soon or investors are going to lose patients otherwise.  The new aqueous print heads, Aquinox are game changer print heads and need to start showing game changing profit driving going forward.  These are unique, can print with water based inks, much thicker inks and have reduced energy use so eco friendly and good for customer profits too. FFEI and Megnajet acquisitions should be adding to profits too.   

On to what I have been doing this week. Firstly I was holding GMR when they put out stunning results that look well ahead on Tuesday.  GMR produce gaming software for the game Slingo.  Slingo is basically various iterations of Bingo with a modern twist. It is massively popular and picking up more and more traction with the US opening up to online gaming.  Gambling co’s use GMR’s software such as Bet365, Flutter, Entain and the like. They have many versions of  Slingo which are very popular.  What really interests me is that one of the directors is Mark Blandford, he is the multi-millionaire founder of Sportingbet, one of the very first online gambling companies and he has been adding to his holdings heavily.  It is well worth reading the interims here, if only the result numbers and the outlook

https://www.investegate.co.uk/announcement/rns/gaming-realms--gmr/interim-results/7749038

A 37% rise in licensing revenue and similar rise in EBITDA.

PBT up 74%

EPS was up from 0.47p to 0.84p in H1, flattered by around 7% or so of that coming from a £159k tax credit.

1.82p eps forecast for this year, 2.52p forecast for the year ahead, putting them on a 2024 PE of  13.7 for earnings growth of 40%.  That’s a PEG of 0.34, They have net cash and director buying and fit the criteria for a Jim Slater style zulu stock imo and I expect them to re-rate.  If that is the case I expect a big re-rating is a possibility with a PE in the 20’s like most zulu stocks. Have a look at their website https://www.gamingrealms.com/news/

As a holder of the shares I would say that, I am quite possibly biased and talking my own book so it’s important you do your own research, satisfy yourself regarding the risk v reward being right for you and making your own decision.

Focusrite (TUNE) put out a trading update this week. They are going to do near 40p eps by the look of things.  This is just 10p below their highest ever eps of 50p in 2021.  At that time they were trading at £18 a share, now they are just over a fiver.  They say customer inventories have fallen to more normal levels, gross margins are improving and net debt is just £1.5m from net cash of £0.3m last year, after spending £7.2m cash for Sonnox acquisition.  They did 18p eps in H1 so 20p in H2?  They also raised the H1 divi this year from 1.85p last year to 2.1p this year.  That all looks like an improving trend is now in place in my opinon. The shares rallied a little on Thursday on huge volume and vol was at 300% a normal day’s vol on Friday.  I bought a small position as I feel the bottom is in on a co that sells some great sound recording gear like Scarlet which is extremely popular.  Do your research as ever.

https://focusriteplc.com/

Lastly I bough KIE results this week.  They were pretty stunning imo.  Net cash of £64m. 20bps rise in operating margins and 9.5p eps putting it on a single digit PE.  They will start paying a divi again in H1, the CEO sounds very upbeat and directors bought right away after the results.  I won’t go into all the detail here, I’ll just say find yourself an hour and watch the web presentation, they ooze confidence imo

https://www.investis-live.com/kier/64d201c1383e901300a364b6/tyej

You have to register to watch. Fill in the registration and you get a mail sent to you, click the link, then enter your password again into the right hand box to watch.

Bowliscious

That’s it – lots to look forward to this coming week, I hope it is as profitable as the past week.

MKS enters the FTSE  100 on Monday.

Don’t bet on the St Leger – the risk v reward isn’t good enough J

Have a great weekend

Rebel