Category: Companies

Company Webinars, RIP David McCallum and Lord Harris Donation

I attended the Mello Trust and Funds webinar yesterday where a number of such organisations presented. That included Impax Environmental Markets, Ocean Dial and the India Capital Growth Fund, Polar Capital Global Financials Trust and JP Morgan UK smaller companies (JMI). I can’t say any of them excited me. When the market is trending down there is a tendency to switch holdings but usually to no advantage. The JMI holdings might have been interesting but their holding in Aston Martin Lagonda, a consistently loss making business, is enough to put me off.

I also attended a ShareSoc webinar on CQS Natural Resources Growth and Income (CYN). This company provides diversified natural resources exposure through smaller companies. It’s a closed end fund. Manager Robert Crayfourd said there were further legs to energy while ESG policies were constraining supply. These have blocked the capitalist response function.

But he confirmed the energy transition was happening and they have been focussing on battery materials. They are also keen on precious metals due to central bank demand.

With 36% invested in oil/gas and 7% in uranium which they are bullish on as demand is exceeding supply I asked why we should bother investing in smaller companies when large oil/gas companies are on high yields at present. Not sure I got a clear answer to that.

The historic financial record looks fairly boring with dividends flat-lining but it was mentioned they will have surplus cash in their investment account so the directors may decide to increase the dividend. In summary I was positively impressed by the presentation and it may therefore be worth further research.

Actor David McCallum, star of the Man from UNCLE, NCIS and other popular TV series, has died. I once landed at New York’s Kennedy airport after a transatlantic flight to find a long queue for a taxi. Confusion reigned as numbered tickets for your place in the queue had been cycled around so there were two people holding the same number. Then David McCallum rolled up and he was clearly in a hurry because he attempted to bribe the queue organiser – to no effect. A memorable occasion! 

Another blast from the past was the news report today that Lord Harris of Peckham, one of my former bosses, has donated £5,000 to Rachel Reeves, Labour shadow chancellor. He has previously been a big donor to the Conservative Party and an active supporter. He is quoted as saying: “Tories don’t deserve to win the next election” and there is a big profile of him in the Telegraph here:  https://www.telegraph.co.uk/business/2023/09/26/thatcher-donor-lord-harris-tories-dont-deserve-power/

He has made many charitable donations to schools and hospitals from the fortunes he made at Harris Queensway and Carpetright but I doubt this donation will win him many friends.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Three Webinars Today – Eleco etc

I attended three webinars today. The first was a presentation by Eleco (ELCO) on their interim results on the Investor Meet Company platform. They reported “revenues slightly ahead of expectations”. They seem to be successfully transitioning to an SAAS model from one-off software licence sales.

Annualised recurring revenue was up 18% and the company seems to be making the right decisions but I wish the CEO would sound more enthusiastic about future prospects. My view is that the financial profile is OK but not good enough to excite anyone at present.

Small cap software companies except in high growth sectors are not popular at present.

The second webinar was with Leicester University to discuss how they can improve their fund raising for IGAN research to which I have been contributing. They have ambitions to raise many more £millions. See https://le.ac.uk/igan for more background. I suffer from this kidney disease and have done so for over 25 years. The research is certainly worth supporting.

The last webinar was on interim results from MyHealth Checked (MHC) who sell a range of home testing kits (for Covid-19 and other diseases). Revenue was down as expected but Covid is now spreading again and panic is rising also. Too early to say whether this business is going to be successful or not. The CEO seemed a bit defensive about the prospects.

You can watch a recording of the webinar on the Investor Meet Company platform.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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How Did Silicon Valley Come to Dominate?

Many people have wondered how and why Silicon Valley companies came to dominate several sectors of the modern technology world. Companies such as Google, Oracle, Intel, HP and Apple were all founded in the valley south of San Francisco.

I have just finished reading a book by Ashlee Vance entitled Geek Silicon Valley and it gives you some of the answers. It’s primarily a tourist guide to the sights but it also covers the company buildings and the history of the companies that have built the modern economy in the towns of Palo Alto, Stanford, Menlo Park, Mountain View, Santa Clara, Sunnyvale and San Jose.

I formerly spent some time in the area and the author clearly knows the valley well and its history. If you are visiting the area on business this book is highly recommended and there is more to see in the area than most tourists will know about. Most visitors to the area may stay in San Francisco but that would be a mistake.

The author amusingly points out that some people attribute the success of silicon valley to the fact that William Shockley’s mother lived in Palo Alto near Stanford University. Shockley moved back there when he founded a semiconductor business. Spin-offs from that business were Fairchild and subsequently Intel and it was those offspring that made the area the base for new technology companies.

But it was the development of venture capital businesses that funded, and continue to do so, these new world-beating companies that were the real innovation. This book gives you a good idea of the culture that has made silicon valley such a success.

The presence of Stanford University and the attraction of a good climate and relatively low land and housing cost (at least early on) no doubt helped but there have been a number of factors that helped make silicon valley so successful, as the book helps to explain.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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BP CEO Departs

BP has announced that CEO Bernard Looney has notified the Company that he has resigned as Chief Executive Officer with immediate effect.

Why you may ask? It seems that he has had some personal relationships with colleagues in the past, not all of which he had disclosed to the company. No breach of the Company’s Code of Conduct was found after an investigation but more allegations have been received.

As an investor in BP, could I care whether Looney had some personal relationships? I do not. I am only concerned whether he has been doing a good job or not. So far as I can tell he has been. BP needs to manage a transition from being a big producer of oil and gas to a more mixed and lower carbon energy provider. This it seemed to have sensible plans to do.

This looks like a political witch-hunt of some kind. It’s not the first time that BP has lost its CEO due to inappropriate relationships. See the case of John Browne (now Lord Browne) in 2007 and his homosexual relationships. See Wikipedia for details.

The Telegraph had some amusing comments on the latest news. It said: “Mr Looney’s personal life was thrown into the spotlight last year when his ex-wife Jacqueline Hurst, a life coach, wrote about her marriage difficulties in her self-published book, How To Do You: the Life Changing Art of Mastering Your Thoughts and Taking Control of Your Life. In a chapter on anxiety which is understood to reference her marriage to Mr Looney, Ms Hurst claimed that her husband only married her to get ahead at BP. Ms Hurst, who has been married twice, wrote: When my husband ended our marriage suddenly and without warning via a WhatsApp message, I was naturally devastated.”

It seems life at the top of this FTSE-100 company is like any good soap opera.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Sondrel – Another Disappointing IPO, and Grant Shapps Appointment

This morning saw the share price of Sondrel (SND) collapse by over 60%. It only listed in October 2022. Revenue forecasts are shot and losses will no doubt be substantial. This is what Camtab had to say on it on Stockopedia: “I am just amazed that people wonder why the City of London is losing credibility in the world. Sondrel are a fantastic example of the duplicity, stupidity and greed inherent. Float October 22 mentioning semi conductor (oh must be good then!) lots of prospects (brilliant) loads of opportunity (great!!). Less than a year later a profits warning on this scale. I gave up investing in IPOs years ago recognising that you only list on UK markets now if its a sh&tshow. Sorry to be so down about but it is so depressing and I don’t think people do hit brokers or markets enough for devaluing one of our main income providers in this country. Still keep devaluing it on this scale and we can always fall back on our resources (oh!) well we have some fantastic multi-national businesses (didn’t we sell those to someone)…………oh, well perhaps we could bottle fresh air then”.

There are several key messages here: 1) never trust a company with a volatile financial history; 2) recurring revenue is very important; 3) the semiconductor market is particularly tricky due to rapid obsolescence; all IPOs are risky as it’s easy to spin a good story about future prospects.

This was a company lined up to fail in my view and could well now be taken private again. Why do people invest in such dogs? Because there are lots of people who are suckers for a good tale is the reason.

The other surprising news today was the promotion of Grant Shapps to Defence Secretary. Someone who had made a hash of his previous job of Transport Secretary by promoting LTNs and then backtracking when they proved so unpopular (and impractical), a supporter of the impossible Net Zero policy and managed to change jobs so rapidly that his mistakes never caught up with him. His profile on Wikipedia also makes for interesting reading.

UK politics is beyond salvation if Rishi Sunak could not find someone better to take on the job.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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AI Tipped for Rapid Adoption by PCT, and Understanding Business Models

It’s summertime and the stock market continues to drift downwards with little share trading. It’s certainly not the time to be trading small cap stocks.  So I decided to catch up on some reading. I always like to read the Annual Report of Polar Capital Technology Trust (PCT) and that’s not just because I hold the shares but because the commentary on the technology market by Ben Rogoff is usually well-informed. This year is no exception but he is betting on AI to be a new growth phase stimulant.

He says: “After decades of unrealised hopes around artificial intelligence, we believe that generative AI is likely to prove the technology’s so-called ‘iphone moment’”, with mass adoption to follow. I am not so sure. There is no doubt that software such as ChatGPT might enhance search engines such as Google and Bing but will they enable lower cost or faster production of products? It might be just another over-hyped technology that will find a place in the market but not cause a revolution.

The latest book I have read is entitled “The Business Model Navigator” by three business school academics Gassman, Frankenberger and Choudury”.

Understanding a company’s business model is very important. I said this in my own book entitled “Business Perspective Investing”: “A company’s business model describes how the organization creates, delivers, and captures value via its adopted business processes. The accounts are only a good pointer to the future if the world, and the markets in which the company operates, are in stasis, i.e. nothing about the market and the company is going to change”.

The Business Model Navigator covers how companies can and have transformed their operations and profitability by adopting new models and includes many examples. It’s full of useful ideas that can be applied to any business.

The book is not light reading so might best be studied by those with an academic bent or business management background but there is certainly good content to fill up your summer holidays.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Babylon Healthcare and WeWork Collapsing

A report in the Daily Telegraph has suggested that Babylon Health is close to collapse. Babylon have developed an innovative software product for diagnosis in a GP environment and has been used by the NHS. The company listed in the USA in 2021 and was one of the UK tech hopefuls for which a bright future was foreseen. It was even backed by the Government as it might relieve pressure on GP services. But the party is over it seems. I am not clear why it is failing – lack of cost control may be the problem.

I have been using the NHS a lot of late due to declining kidney function (25-year-old transplant is failing) and had a fistula added in readiness for dialysis last week. Am apparently not fit enough for another transplant at present. I am receiving lots of advice about improving mobility and health from an “elderly person’s review” at Guys Hospital and from local social services (albeit 3 months too late). My short-term memory is clearly declining not helped by the drugs I am taking but I can cope with that. If we meet don’t be surprised if I can’t remember your name!

Another past shooting star that has fallen back to earth is WeWork which I commented on in previous blog posts – see https://roliscon.blog/?s=wework. The FT has reported that “substantial doubt exists about the Company’s ability to continue as a going concern”. This is a property company in essence, renting out short-term office space with a dubious business model particularly when New York and other major cities are now awash with empty office space.

Bearing in mind I am averaging two hospital appointments per week at present, you may find my blog posts become less frequent. Just had another call to arrange a heart scan.

The NHS, particularly Guys Hospital, are generally efficient and do not deserve all the criticism they get although they could certainly use more technology.

Can’t say the same about other hospitals or GP services.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

See https://www.telegraph.co.uk/business/2023/08/08/babylon-tech-nhs-digital-gp-app-faces-collapse/

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Elon Musk Biography Book Review and Comments on Twitter Takeover

It’s summertime and with markets quiet it’s time to look for some holiday reading. One book I can recommend is “Elon Musk” by Ashlee Vance. Published in 2015 it covers the early life of Elon and his early business ventures at Zip2, X.com/Paypal, SpaceX and Tesla.

It reveals a lot about his personality and will to revolutionise the space exploration and banking sectors. Like Bill Gates and other successful entrepreneurs he clearly has a forceful manner and does not suffer fools gladly.

The subtitle of the book is “How the billionaire CEO of SpaceX and Tesla is shaping our future”. If you want to know how to become a billionaire and the richest person in the world (roughly $250 billion at the time of writing) then this is a book well worth reading.

Elon’s career was not without its problems and failures. SpaceX rockets blew up repeatedly and technical problems with the first Tesla car delayed its public launch (over-heating batteries and breaking transmissions). But despite consuming most of his fortune from the sale of Paypal he persisted and eventually they were successful products.

The book also provides some interesting background on the VC world in Silicon Valley in the 1990s and 2000s, which I was familiar with from running a software company in the period and having an office in Los Altos.

Why was Elon so successful? He was willing to take risks and focussed on revolutionising sectors such as space exploration with low-cost launches, the banking world with internet banking and the automobile industry with electric vehicles when other people just said the goal was impossible. But he was not a one-man band and made sure he hired the best people as employees.

He could clearly be persuasive in raising capital when needed helped by the availability of funding for new ventures at the time.

In summary one of the best books on Elon Musk and a New York Times bestseller.

The latest gamble by Elon is paying $44 billion in cash for Twitter. As a user of Twitter it has always seemed to me to be an essentially simple software product that should have been low cost to develop and maintain. Since Elon Musk took the reins at Twitter as its CEO in October 2022, its workforce has dropped by 80% and reportedly hovers at around 1,300 employees, according to CNBC.

There was certainly an opportunity there to massively reduce costs. But other people have seen that also with the launch of “me-too” products that have imitated Twitter functionality. Will they be successful? I doubt it.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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City of London IT and Intercede Webinars

I have attended a couple of company webinars in the last 24 hours. These were from companies at two extremes – a large investment trust (City of London – CTY) mainly invested in large cap UK companies, and Intercede (IGP), a small AIM listed software company.

I have held CTY since 2011 and according to the Sharescope software my annual return to date is 11.2% per annum. I consider that a satisfactory outcome. At least they have been beating inflation which is not falling as expected and is now still at 8.7%.

The long-standing manager, Job Curtis, spoke well and is clearly very familiar with the portfolio. He is over 60 years old but does not intend to retire soon. This webinar was organised by ShareSoc. I do not know if a recording is available, but there were no great revelations.

The smaller company, Intercede, has been held since 2010 and I have been very patient with it. Overall annual return is 0.0% per annum with the share price ranging from 20p to 240p while I have held it (currently 52p). The company focussed on digital identities. A change of management took place 5 years ago which was well overdue but only now has that improved matters so far as results are concerned.

Revenue was up 22% last year and EPS up 83%.

They made their first acquisition last year (of Authlogics) which has expanded their product portfolio to cover additional security methods and they are clearly looking for others to cover the Zero Trust Standard.

I asked the following question: “You seem to be doing well with expanding your sales to US Government agencies and other government bodies but little news of commercial customers when surely organisations such as banks need the technology. Why is this?”. The answer was not exactly clear but the Authlogics acquisition should assist.

This webinar was on the Investor Meet Company platform and I recommend you watch the recording on there. It gives a clear picture of likely future progress.

I was positively impressed by that and the results. I think I will stick with this company and may buy some more shares, particularly if growth looks like it will continue.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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: https://twitter.com/RogerWLawson  )

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