RNS Announcement Emails, Mello Presentation and NHS Politics

Many private investors like me have been using a service from Investegate to deliver new RNS announcements via email. But recently, and not for the first time, delivery of such announcements has been delayed, or they have not been delivered at all. This can be positively dangerous – for example I only realised that I had missed seeing one after the share price of a company I held rose sharply. Missing bad news can be even more traumatic.

After complaining to Investegate and getting no response I decided to change to another service. The London Stock Exchange offer a similar free service (see https://www.londonstockexchange.com under Email Alerts). It appears to work reliably so I recommend it.

Many readers will be aware of the Mello events that attract many private investors to company presentations and for networking. Mello London is a 2-day event in Chiswick on the 12th and 13th of November (see: https://melloevents.com/event/ ). I will be giving a talk on Business Perspective Investing based on my recently published book on the Tuesday at 12.55pm. So please come along and learn more about why financial analysis is not the most important aspect of selecting companies in which to invest.

I note that the NHS is likely to be a political football in the coming General Election. As a heavy user of the NHS for the last 30 years during which it has kept me alive, I consider this is a grave mistake. The NHS is not a perfect service and could do with some more money as the UK spends relatively less on healthcare in comparison with other countries. But the service has improved enormously over the last 30 years regardless of the political party or parties that were in power. One of the most damaging aspects has been constant change and reorganisation driven by political dictates and concerns to improve efficiency. It’s also been slow to adopt new technology such as IT software because it is so monolithic and bureaucratic a body. When it did commit to a major IT project for patient records and associated systems it wasted £10 billion or more on an ultimately abandoned project. More diversity and local decision making are needed in the NHS. But I see no chance of it being threatened by any trade deal with the USA or by our exit from the EU.

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

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Exchange Market Size in Stockopedia and BHP plus RIO

I noticed that the share prices of BHP Group (BHP) and Rio Tinto (RIO) jumped this morning – at least for these behemoths of the FTSE-100 they moved substantially at 2.8% and 3.4% respectively. I only noticed because I recently purchased some of the shares in each company.

These are of course very large mining companies so they are dependent on the price of metals and metal ore, particularly iron ore. The last time I looked at these companies was two or three years ago when they were laden down with debt and had poor returns on capital. But they have certainly had a change of heart since then and seem to be more focused on generating real profits and cash flow rather than building ever bigger holes in the ground. Debt has been cut substantially in both companies.

With the profits mainly coming from overseas, they are a good hedge against any form of Brexit, and yields are high for those who like dividends. I am not a great fan of commodity-based businesses where predicting future prices of the products is not easy and they typically go through boom and bust cycles as such companies all invest in new production capacity at the same time as prices go up. Soon after when all the new capacity comes on stream there is a bust of course. But I made a small exception in this case.

But why the share price jump this morning? Are investors moving from growth to value as other commentators have suggested? Have value shares such as BHP and RIO suddenly started to look attractive, as they did to me? Or has Nigel Farage’s impossible demands for a deal with the Conservatives to ensure Brexit over the weekend suddenly encouraged investors to look for Brexit hedges?

Stockopedia have released an updated version of their “New” software. It now includes the Exchange Market Size (EMS) which is a useful parameter to look at when trading in company shares, particularly smaller ones. Note that Exchange Market Size was previously called Normal Market Size.  It is the maximum size in terms of share trade volume at which a market maker is obligated to adhere to their quoted share prices. It is a very good indicator of the liquidity in the shares and how easy they will be to trade. When trading electronically on most retail platforms, this is a useful number to know as it will affect whether you can trade automatically, have to set a limit order or get a dealer to trade for you. In addition, any trade bigger than the EMS might be done at prices higher or lower than you expect.

This number can be very small for some AIM stocks. For example on Bango (BGO) which I hold it is currently only 3,000 shares (less than £4,000 in value) when the EMS for BHP and RIO is more equivalent to £20,000 in value.

The new Stockopedia software version has other improvements although I still seem to be having problems with the Stock Alerts feature that I use every day. Perhaps there are still some issues that have yet to be fixed but you can still revert to the old version.

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

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Woodford, Buffett Bot and FRC Survey

There was a very good article in the FT on Saturday on the “rise and fall of a rock star fund manager”, i.e. Neil Woodford. Essential reading for those who have lost money in his funds. A tale of hubris and obstinate conviction it seems. They report that lawyers are looking at a possible claim for investors but I cannot see any obvious grounds. But lawyers like to chase ambulances. Panorama are also covering the Woodford debacle on Monday.

That well-known phrase “Where are the customers’ yachts” comes to mind. While Woodford and his associates have made millions from his management company, the customers have lost money. That is an issue that the FCA might wish to consider but I cannot think of any immediate solution.

Another article in Saturday’s FT was on a Buffett “App” which would imitate the value investing style of Warren Buffett. Neil Woodford was once known as Britain’s answer to Buffett in the deadwood press but that is now being forgotten of course. This new App from Havelock London is aimed to imitate the investing style that is claimed to be the source of Buffett’s above average long-term performance.  They claim that App will focus on long-term value rather than short term performance which is the approach of most such “quant” investors. This was the marketing pitch of Woodford’s Patient Capital Trust in essence as you can tell from the name.

But in my view this whole approach that you can pick out sound investments by clever analysis of the historic financial numbers or of other metrics is simply misconceived. I have explained why this is so in my book “Business Perspective Investing (see https://www.roliscon.com/business-perspective-investing.html ). One reason why Buffett was so successful, which is obvious if you read about his career, is that he looked carefully at the business models of the companies in which he invested and such matters as the barriers to competitor entry. Yes you can cover some of his analysis by looking at return on capital or other metrics of a company, but that’s only half of the story. You need to understand the business from the perspective of a business analyst.

The Financial Report Council (FRC) have just published a survey on “The Future of Corporate Reporting” (see   https://www.frc.org.uk/news/october-2019/future-of-corporate-reporting-survey ). As the announcement says: “Respondents views will inform the FRC’s project which seeks to make recommendations for improvements to current regulation and practice and develop “blue sky” thinking. A key aim of the project is to challenge the FRC to think more broadly in responding to the recommendation by Sir John Kingman to promote greater “brevity, comprehensibility and usefulness in corporate reporting” moving forward”. So this is something all investors who read company reports should look at. It should take no more than 15 minutes to complete they assure us. I completed it in not much longer.

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

Company Refs Acquired

Slater Investments and Stockopedia have issued a press release saying they have acquired the Company Refs financial analysis service. Company Refs was devised by Jim Slater, the father of the current Slater Investments Chairman and was originally published in paper form as a summary of all the key financial information on public companies on one page. It was later digitised but active marketing of the service has not taken place in recent years. But it was a truly innovative solution to help both professional and private investors when first devised.

Stockopedia provides a very similar service and the press release suggests that current REFS subscribers will be integrated into the Stockopedia service while Slater will use the financial database and intellectual property for internal research purposes.

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

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Goals Soccer Centres, Renishaw, Economic Forecasts, Politics and Portfolio Transfers

It’s Friday in August, the markets and the pound are falling, the Conservative Party have lost a bye-election meaning their majority in Parliament is vanishing, and the Governor of the Bank of England has forecast a shrinking economy as a result of Brexit. It’s gloom all around which explains the falling UK stock market today. But Mark Carney is only forecasting a 33% chance of a contraction in the UK economy in the first quarter of 2020, which means that there is a 67% chance it won’t and even then for only a short period of time. That’s assuming you have any confidence in Bank of England forecasts which are notoriously unreliable. The media are not exactly reporting matters in an unbiased way. Those who support Brexit are unlikely to be worried by such forecasts and they would probably accept a temporary disruption to the economy. Remaining or leaving the EU was never a primarily economic decision so far as Brexiteers were concerned – it’s about democracy and who makes our laws.

But there is certainly bad news for investors in Goals Soccer Centres (GOAL) who have reported that the defects in their accounting go back to at least 2010. The 2018 audit has had to be suspended, there is no time frame for producing the accounts and therefore the company is going to be delisted from AIM. This looks to be another example of defective audits – the past auditors were KPMG and BDO.

I have complained about the length of time it takes to switch portfolios between investment platforms in the past. The good news today is that I finally completed one. This latest one I have done has taken from the 23rd May to the 31st July, i.e. 70 days. And that’s one where it was a transfer of holdings in a personal crest account with Charles Stanley, after they raised their charges on such accounts, to another personal crest account with another provider which was already in existance. That should have been very simple as there were no fund holdings in the account – just all direct holdings on the register.

It is really quite unreasonable that account transfers should take so long and require so much effort, including numerous emails and letters to get it completed. It’s anti-competitive to allow such delays to continue.

Well at least that’s one simplification of my portfolios. I also sold out from Renishaw (RSW) yesterday after disappointing final results – revenue down 7% and below forecasts mainly as a result of alleged economic conditions in the Asia Pacific region. The share price is down another 5% this morning at the time of writing. This may be a fundamentally sound business with good products in essence but clearly investors like me are losing confidence that the company can justify its high p/e rating when growth is going into reverse.

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

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New Stockopedia Version and Abcam Trading Update

Like many private investors, I use the Stockopedia software to provide me with a summary of key financial information on a company. I also use it to provide “alerts” on price changes and for occasional stock screening. It’s one of the key elements in my share portfolio management. It has always been quick and easy to use, without too much complexity. They have just released a new version of the software that now supports mobile devices much better – that was certainly an issue with trying to use it previously on my mobile phone.

I have spent a few minutes trying the new version and reported quite a number of issues with it to Stockopedia support. Here’s a few of the key ones:

  • Portfolio holdings and alerts only show 40 stocks when my portfolio has many more than that, so cannot easily scroll up and down the whole portfolio.
  • Not supported on Internet Explorer which is still my default web browser.
  • Printing a stock page uses more pages – for example printing a report on Abcam now uses 5 sides in Chrome, i.e. 3 pages on a duplex printer instead of one page on Explorer with the old version. Print format screwed up also at top left. As with many new software versions, testing of print functions seems to have been limited.
  • Cost of holdings sometimes shows nil.

In general the testing of the new version seems to have been too little, even if I am very experienced at picking up bugs in software. As a result I won’t be switching to the new version just yet until they sort out some of these problems. However it is very easy to switch back and forwards between the versions. Let us hope they do not abandon the old version until all the problems are resolved.

On the subject of Abcam (ABC) yesterday the company issued a trading update for the year ending June. It looked fairly innocuous to me but the share price promptly fell sharply and finished the day down 13.3%. The only possible issue mentioned was the announcement that CFO Gavin Wood was stepping down “over the next year in order to continue his career closer to his family home”. He has been with the company for 3 years.

Did that justify the investor panic? Surely not. The FT commented that the company’s expansion plans had unsettled investors, but the announcement really only suggested a continuation of the growth strategy and formulation of plans to achieve that. Perhaps it was simply that investors had realised that a prospective p/e of 40 for the current year after a strong recent share price run was a bit too high. Or perhaps it’s that summer season problem where liquidity is low and hence share prices tend to be volatile. Anyway the share price is recovering today at the time of writing and my portfolio loss on Abcam yesterday was mostly offset by the rise in Learning Tecnologies (LTG) which issued a very positive trading update. It’s share price rose about 20% on the day.

Abcam is of course a producer and distributor of antibodies. On a personal note, last week I was injected with monoclonal antibody named Prolia from Amgen to control osteopenia. If I had looked at the side effects and user reports on the internet beforehand I might have chosen not to have it, but no concerns so far. Only costs about £1,000 per shot apparently for six months. No wonder the NHS needs more money.

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

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Broker Charges, Proven VCT Performance Fee and LoopUp Seminar

The Share Centre are the latest stockbroker to increase their fees. Monthly fee for an ISA account is going up by 4.2% to £5.00 per month with increases on ordinary share accounts and SIPPs also. This is the latest of a number of fee increases among stockbrokers and retail investor platforms. The Share Centre blame the required investment in technology development and “an increasing burden of financial regulation”. The latter is undoubtedly the result of such regulations as MIFID II imposed by the EU which has proven to be of minimal benefit to investors. As I was explaining to my sister over the weekend, this is one reason why I voted to leave the EU – their financial regulations are often misconceived and often aimed at solving problems we never had in the UK.

I received the Annual Report of Proven VCT (PVN) this morning – a Venture Capital Trust. Total return to shareholders was 10.3% last year, but the fund manager did even better. Of the overall profits of the company of £18.6 million, they received £7.7 million in management fees (i.e. they received 41% of the profits this year). That includes £5.6 million in performance fees.

Studying the management fee (base 2.0%) and the performance fee, I find the latter particularly incomprehensible. I will therefore be attending the AGM on the 3rd July to ask some pointed questions and I would encourage other shareholders to do the same. I am likely to vote against all the directors at this company.

I also received an Annual Report for Proven Growth & Income VCT (PGOO) and note that of the 4 directors, 2 have served more than 9 years and one is employed by the fund manager. So that’s three out of four that cannot be considered “independent” so I have voted against them. I would attend their AGM on the same day but the time is 9.30 which is not a good choice and would waste a whole day.

Yesterday I attended the “Capital Markets Day” of LoopUp (LOOP). This is an AIM listed company whose primary product is an audio conference call service. It’s just a “better mousetrap” to quote Ralph Waldo Emerson as 68% of the world are still using simple dial-in services rather than more sophisticated software products such as Zoom and WebEx. There are lots of other competitors in this field including Microsoft’s Skype which I find an appallingly bad product from past experience. Reliability and simplicity of use is key and LoopUp claimed to have solved this with no learning required, no software downloads or other complexities and high-quality calls aimed at the corporate market.

I have seen the company present before and do hold a few shares. This event was again a very professional sales pitch for the company and its product with no financial information provided. Yesterday they also covered the addition of video to their basic conference call service which was announced on the day, plus a new service for managed events/meetings. Video addition is probably an essential competitive advantage that was previously missing. They covered how their service is differentiated from the main competitors which was good to understand.

Last year they acquired a company called MeetingZone which has increased their customer base and revenue substantially and are transitioning the customers to the LoopUp product. Revenue doubled last year and is forecast to rise by about 50% in the current year. Needless to say the company is rated highly on conventional financial metrics and return on capital has been depressed by the cost of the acquisition. But one reason I like this company is that it’s very easy to understand what they do and what the “USP” is that they are promoting, plus their competitive position (many company presentations omit any discussion of competitors).

They also have an exceedingly good sales operation based on groups of people organised in “pods” which was covered in depth in the presentation. These only have team bonuses and the key apparently is to recruit “empathetic” people rather than “individualists”. Perhaps that is one reason 60% of them are female. As I said to their joint CEO, I wish I had seen their presentation some 30 or more years ago when I had some responsibility for a software sales function.

The latter part of this 3-hour event was an explanation of how the software/service is used by major international law firm Clifford Chance with some glowing comments on the company from one of their managers. Customer references always help to sell services.

In conclusion a useful meeting, but lack of financial information was an omission although “Capital Market” days are sometimes like that. But the positive was that they had both institutional investors and private investors whereas some companies deliberately discourage the latter from attending such events which I find most objectionable.

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

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