Look-ʞɔɒꓭ to August 2018

This rather belated look back should help me identify past mistakes (which very occasionally might consist of being dead right but unduly cautious), and potentially trigger another look companies where the circumstances have since changed.

The Share Centre (SHRE)

I commented how they looked good value from a customer perspective with the shareholder discount, but not otherwise.

I never did become a shareholder or a customer (and am most unlikely to now). The shares have risen from 25.5p at the to 30.6p today on an acquisition of customers, a recovery of profits and a short-lived approach from Interactive Investor. Core market share continues to fall. It is difficult to see why you would want to either own their shares or be their customer, although, as previously commented, there is some sense in doing both. The “share.com” domain name must have some value.

This has reminded me of some vague plans I have for an independent comparison of stockbrokers including metrics you won’t see elsewhere such as customer service, execution, opening hours, usability and speed to log in and make a trade.

Caledonia Mining (CMCL)

I commented on what I saw as poor results and a disappointing political environment.

The share price at the time was 620p, today they are 562p. So far they have managed to hold (and pay) their dividend, which I think is quite an achievement in itself. I chickened out and sold half at the lows of around 420p and the result at 550p. The clear lesson here (identified at the time of sale), is not to buy something where I have neither expertise nor long-term confidence.

GAME Digital (GMD)

A comment from Gromley on Stockopedia triggered another look at GAME Digital, then 34.5p. Increased scepticism over asset valuation led me to investigate further over a period of weeks and to re-baseline my valuation. This led to a series of profitable trades, initially selling at around 35p, before flipping them a couple more times. In the end they were taken over by Sports Direct at 30p, a significant discount to claimed assets.

Tracsis (TRCS)

Then Tracsis CEO John McArthur popped up on the Small Cap Value Report “disappointed” with the coverage Graham Neary had given him the previous day and asking what sector did he think the company operated in. I waded in quoting the details on Stockopedia and explaining why I wouldn’t value the company so highly as it was. Based on John’s reply it seems that the company’s summary on Stockopedia was and is misleading.

I have since come across the Tracsis because they operate in a similar sector to Petards. However, unlike Petards they have been less affected by rail franchising delays with results exceeding and forecasts being raised. Nonetheless the share price has given up all of the gains following those results last year, falling from 723p to 602p today and (on the face of it) looking considerable better value.

Wey Education (WEY)

I wrote an article on Stockopedia. So much has happened with the company since then it seems incredible that that was only a year (or so) ago. I was certainly right to assign no value to the overseas projects, but my expectation that WH Ireland had factored in minimal revenues was dead wrong. My main fault was not giving (or otherwise recording) my workings so that I could work out where I went wrong. These aspects were mostly covered in a comment to the article that I made on 6th February 2019.

My buys from a year ago were a serious mistake, but my current forecasts are based on a much more solid methodology.

Beeks (BKS) – FY 2018 Results

It was around this time that I started posting slightly longer comments to SCVR just before the market opened and I headed off to my then job. This was the foundation for the 7:59 cut on my website.

I didn’t spot that the revenue forecasts had been missed but I think that based on information available at the time my expectation that 2019 forecast EPS would be met was reasonable, especially as I didn’t then have the resources to do detailed modelling. Notably the chairman’s statement and strategic overview talked about selling existing services to new customers with a potential 20,000 financial institutions as customers – there was nothing about a need to go after a very small number of very large customers in order to make the numbers. My concern over the prominence given to EBITDA numbers remains to this day.

Following these results the share price quickly shot up from 84p to peak at over 140p. I took full advantage, buying on results day and then selling that purchase (and more) at much higher prices, followed by a couple more highly profitable trades.

As followers will be aware, I then posted a detailed analysis piece and then, after reading it over the next day I sold the remainder of my shares. In the event Beeks missed even the updated FY 2019 forecasts that I thought were safe a few months before, let alone the original FY 2019 forecasts that I said looked achievable a year before.

So, while my comments of a year ago were rather off, at least I modified my view through the year as the picture deteriorated and managed to make a considerable return from a flat share price.

IQE (IQE)

I complained about H2 weighting and lack of cash flow, commenting “I suspect I should be selling and buying back in a couple of months”. After further consideration and reading an FT Alphaville article I sold out a few days later, but failed to buy back around 40% lower in November or January. While this would have been a good trading move in this volatile share, whether I would have taken advantage of one of the peaks to sell out once more is uncertain. With cash now running out and the price back to its lows, I’m happy enough to have sold out and stayed out.

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