It’s Definitely the Silly Season

It’s that time in Summer when the sun has come out and media staff take their holidays. The stock market is just bouncing around with no clear direction of travel although large tech stocks are going up while small cap stocks remain in the doldrums.

Politics are just getting to be ridiculous while media stories have nothing better to talk about than what will Boris Johnson do next? Write for the Daily Mail is one new job apparently.

The hot weather encourages quick decisions but I think Boris would do best to ponder his future at some length. One commentator suggested Boris was trying to emulate Winston Churchill by becoming a famous writer until called back into politics when the country needed him but being in the wilderness for a while may be a good sabbatical for Boris I suggest.

As an example of how impulsive the current market is yesterday GB Group (GBG), in which I have a holding, fell about 10% but rose by 7% this morning. The fall was due to a large write down of goodwill apparently as a result of over-paying for a recent acquisition. This will be a non-cash charge in the accounts of course but it does not inspire confidence in the management while there are the usual several explanations for the poor results. Is this a temporary blip which is bound to happen when a company chooses to make a big acquisition for strategic reasons? Or is it a management failing?

Is this company faced with slower growth in what must be becoming a crowded sector for identity verification? Revenue still grew last year by 8.6% but free cash flow was down. I am beginning not to like the financial profile of this company and the share price chart over the last 5 years looks horrible but I will give them time to fix things. In the meantime, I suspect this is a sector where consolidation may soon be taking place.

Instead of spending money on holidays or putting it into the stock market I have bought a second-hand car and some other “mobility” aids. I got a surprisingly good trade-in value for my ten-year old Jaguar XF so I bought a newish Jaguar XE. Should last me as long as my life expectancy according to an optimistic doctor I saw recently.

But the vehicle is so complex you need to read a 130-page manual to figure out all the controls. As a former IT professional, I am not in the habit of reading the manual first for any new product but just like to dive in.

Roger Lawson (Twitter:  )

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