Physical Mello is by far the leading conference for serious private investors. As well as keynote speakers and panel discussions, around 40 companies present at each event.
The last time it ran in November 2019 I briefly summarised every company attending in this article. This proved very useful to help me prepare and I hope it was useful for others also. It also helped me trade the “Mello Effect” sometimes seen when investors buy after a good presentation.
Note: Overwhelmingly my interest is in small-cap shares. It has been very quiet in October but I am expecting six announcements from my significant holdings over the next two weeks. In the meantime, today there has been some fund news.
The write-down of Industrial Heat, known for its research in cold fusion, should not come as a surprise. The 5p NAV reduction announced today corresponds to 2/3rds of the value as at 30/6/2019, which, according to my model, now only leaves a further 2.5p write-down to reach fair value.
The valuation write-up of another holding following a successful third-party fund raising is however excellent news. There has been widespread and justified concern that any company touched by Woodford, regardless of merits, would have problems raising follow-on capital and so this news may have read-across to other holdings.
For close followers of the trust today’s news is positive, however the effect on the share price will be dependent on the view of retail investors which in turn will depend on press coverage.
The Chairman’s statement starts by referring to a poor investment backdrop as background to the underperformance of this trust, but in truth cheap markets create opportunities as well as challenges and in the investment game you need to make your own luck. While the chairman’s statement then goes on to show some humility, it remains in contrast to the fund manager’s statement which strikes the appropriate tone right from the start.
Irrespective of the journey that got them here, as a portfolio I now consider their current investments to be exceptionally strong. Investors will need to form their own opinion on a fair valuation of the loan notes held.
Given the historical performance of the fund the current discount of 10-12% is relatively modest, but this reflects the high regard with which the fund manager is held and their engagement with the investment community.
Note: This article assumes knowledge of the fundamental differences between open-ended and closed ended funds. To the uninitiated, this article should be useful background reading. I also assume everyone has some knowledge of the Woodford fiasco.