System1 Group – an Interesting AGM

This morning I watched the Annual General Meeting of System1 Group (SYS1) as I own a few shares in the company. This was broadcast on the Investor Meet Company platform and was certainly worth watching. The company issued a Q2 trading update on the 23 September which was effectively a major profit warning as it indicated full year results will be below forecasts.

I bought my first tranche of shares at 730p – they are now about 270p – ouch! A good job I only bought a few.

A shareholder (Maynard Paton?) present at the meeting expressed concerns about the executive management but the Chairman said the market changed fundamentally in August caused by the change to the Trump tariff regime. He still has 100% confidence in the executive team.

The directors did answer the questions from shareholders well and I was positively impressed by the responses. I will continue to hold for the moment but it could be some time before the share price recovers.

This was a good example of how useful an AGM can be.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Digital IDs and VPNs – Do We Need Them?

The FT and other media have reported that the Prime Minister is planning to bring in digital IDs. It is hoped that this will help to reduce illegal migration. Everyone in the UK would need to have a passport or other digitised identity document.

Reportedly a Government spokesperson said “We are committed to using tech to make it easier for people to interact with the state, learning from other countries on how best to deliver this for citizens”. The UK is one of the few countries that does not have a secure digital ID scheme. Most of Europe does for example.

There will undoubtedly be strong opposition to such a scheme from a minority of the population who are paranoid about concealing or protecting their identity. But what’s my view? I think it is time to introduce digital IDs. They would help to prevent identity theft and fraud and we already have numerous forms of digital identity held by different organisations, including the Government. Having a unified system would assist immigration and law enforcement operations and protect my personal identification.

A related issue that has arisen recently is the use of VPNs (virtual private network software) to conceal your digital IDs on the internet. This is not something new – I have had some VPN software on my laptop for over 10 years to hide my id when using it in a public place such as a hotel. It prevents interception of my emails and web browsing data.

There is a petition on change.org that supports the use of VPNs – see https://www.change.org/p/protect-the-right-to-use-vpns-in-the-uk?

And this quote is in it from Tom Wiersma: “VPNs are the only way in which data to and from my systems becomes more difficult to hack. That data may contain financial, health or other private data which no one has the right to access. VPNs essentially make my on-line activity safe.”

It would be a shame if the Government tried to ban or restrict the use of VPNs.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Apple’s Problems

An article in Investors Chronicle a couple of weeks ago reminded me of some of the problems Apple recently faced. It mentioned that a US legal judgement had upheld a complaint against Google for maintaining a monopoly on internet search services. Apparently Alphabet pay the iPhone maker about £15 billion per annum to keep Google as the default search software in Apple’s Safari Browser. The legal judgement could save Apple even more money apparently for reasons I don’t quite understand. But if true it shows how such cash is involved in the business of search.

Apple’s other problem is that they are clearly reaching market saturation in some of their phone markets and are seeing increasing competition in China. Although they are bringing out new models – the latest being the iPhone 17 and iPhone Air, they do not seem to have much more in capabilities than the iPhone 13 Pro I am currently using. Despite being over 5 years old, the battery life on my current phone is still good. I can see little reason to upgrade my phone.

Apple really do need some revolutionary new products rather than just minor phone improvements.   

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Jaguar Mistakes and Cyber Disruption

I am a longstanding owner of Jaguar cars, having bought my first one in 1967 (albeit a second hand one). Since then I have owned various XJ models and latterly an XE which is very cheap to run.

I am on Jaguar’s and my local dealer’s mailing list. So I now get regular emails encouraging me to buy a Land Rover as there are no new Jaguars now on sale. There is only one problem – I don’t want to buy a brick shaped vehicle which is bulky and expensive to both buy and run! Their latest advertising also featured pink cars fronted by androgynous persons and I wouldn’t want to be associated with such a product. Management incompetence is destroying a previously strong brand.

The latest mistake by Jaguar Land Rover (now owned by Tata) is to suffer a cyber attack which has caused them to shut down their IT systems. New vehicle sales cannot be registered. They say there is no evidence yet of customer data being stolen but I’ll wait to see whether I believe that. See FT article for more info: https://www.ft.com/content/ba88baca-cd59-48d3-a982-e73c9401b85a

Jaguars became reliable of late (not necessarily Land Rovers) and local servicing has been good but I’ll need to look at alternatives if I ever buy a new vehicle in future.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

FTSE Strong Run?

The editorial in Investors Chronicle this week by Rosie Carr noted that the FTSE 100 has delivered a storming performance year to date. It’s risen by 12% beating both inflation and the S&P 500.

It appears investors are looking to avoid a possible crash in US tech stocks particularly those focussed on AI solutions. Also earnings expectations for large UK companies have been rising and buy-backs have also been prominent. Does that mean that we can all relax and buy UK large cap stocks without much thought?

I think that would be very dangerous. Such stock market trends are simply a symptom of how the markets move in emotional and irrational ways.

Small and mid-cap stocks seem to be more rationally priced of late but are still not exactly cheap. I continue to look for well managed companies with a good return on equity and with some barriers to entry. So in essence, and as usual, I won’t be following the herd.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Random Thoughts on a Bank Holiday

It’s a quiet public holiday today but I have a few things to talk about.

The financial media seem to be dominated at the present time by commentators who are forecasting doom for the UK economy. Bailouts by the IMF are forecast, rampant inflation and higher taxes because the Government is spending more than we can afford, or are raising in taxes.

That may be so although I never try to forecast national economics. Certainly higher taxes are eroding confidence in UK companies although fortunately many are more reliant on overseas businesses.

There were some interesting comments by John Baron in the Investors Chronicle this week. He has been reducing his exposure to equities in his “Growth Portfolio” and had this to say: “Apart from higher inflation, ever higher government borrowing across the western world is a factor [which has encouraged diversification into other asset classes]. Politicians need to face reality by cutting spending, which is growing faster than their economies can fund – in part due to ageing populations. For example, estimates suggest UK GDP would need to rise by 3 per cent every year in the coming decades to compensate. This will not happen. And taxes cannot keep rising. High government spending crowds out the private sector and, together with high taxes, stifles enterprise and economic growth…”

That’s a good summary of the current UK economy in my view.

But I am still looking to spend money personally – namely on a new laptop to replace my very old Windows 10 Lenovo one (purchased in 2021). Apart from it not being capable of running Windows 11, the battery now has a short life. The latest Lenovo Carbon X1 looks a good replacement and gets good reviews. I have been very happy with my old Carbon X1 so prefer to stick with the same supplier if possible.

I also have a Win 11 Desktop PC and a Samsung tablet I use for web browsing and book reading while in bed, so a new Lenovo laptop should keep me in IT kit for a few years.

If any readers have any comments on the above, please let me know.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Yet Another Major Accounting Error – WH Smith

This week WH Smith (SMWH) was yet another major public company who had to announce that it could not publish accurate accounts. To quote from their announcement on Thursday: “a current financial review has identified an overstatement of around £30m of expected Headline trading profit in North America. This overstatement is largely due to the accelerated recognition of supplier income in the North America division. WHSmith now expects Headline trading profit from the North America division for the financial year ending 31 August 2025 to be approximately £25m, down from previous market expectations of approximately £55m”.

The share price promptly collapsed by over 35%.

I am not a holder of the shares but those who do are probably feeling angry. Broker Peel Hunt cut their rating on the shares to “hold” but why would anyone want to hold shares in a company where you cannot trust the accounts, or trust the management who cannot publish accurate accounts? Certainly not me.

As I said in my book “Business Perspective Investing”, financial numbers are not important when picking shares for investment because all public company accounts cannot be trusted. But trust in the competence of management is certainly one aspect to consider when buying shares.

It will no doubt take a long time to rebuild confidence in WH Smith.

P.S. The most amusing thing about this event was that Investors Chronicle published a very positive article on the company in their 22-28 August edition headlined “This streamlined retailer is going global”. Presumably they went to press just before the bad news broke.

How does one protect against such events? Don’t plunge into buying a new holding all in one go. Stagger your investment until you have established confidence in the company and its management.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

The Lawfare Problem – from Chris Philp

There were some interesting comments recently from Chris Philp, Shadow Home Secretary, on the problem of lawyers blocking democratic initiatives. They included these:

Constant lawfare from unscrupulous lawyers, using, or misusing, ECHR protections to thwart democratic mandates.

We’ve seen it with courts preventing successive governments from deporting foreign criminals and illegal immigrants. We’ve seen it with courts forcing governments across Europe to adopt stringent climate change measures that harm economic growth. We’ve seen it with the constant lawfare being used against our veterans, betraying those who’ve served our nation in uniform.

In short, we’ve seen judgements being handed down that undermine democratic mandates.

The Conservatives plan to set up a Commission to look into these issues and how UK law and the ECHR could be reformed.

This seems to be a very good idea to me. See Kemi Badenoch talking about these issues on YouTube here: https://www.youtube.com/watch?v=QGm6IBgl_M4&t=51s

But as usual the problem is being driven by money. Stop the financing of trivial legal cases and the problem would quickly disappear.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Ukraine – Turning Out as Expected

The resolution of the war in Ukraine is very likely to turn out as I expected in March this year. Ukraine will need to concede some territory to obtain peace and Russia will obtain some of its historical domination over the eastern Ukraine. See my original blog post for more background on the history of Ukraine: https://roliscon.blog/2022/03/08/ukraine-a-more-balanced-view/

There may be face-saving defence guarantees given by the USA, UK and rest of Europe but only the USA has sufficient capability to make them stick. Ukraine never had sufficient military capacity to defeat Russia and the UK and the rest of Europe have wasted bags of money on pointlessly supplying arms to Ukraine.

Donald Trump may be bullying Zelensky to accept a peace deal he does not like but there is no point in continuing the war in the vain hope of victory. Ukraine should not be allowed to join NATO to which Russia would strongly object and would weaken the NATO alliance.

Let us settle the matter and move on with less pretence that even the USA and Europe combined can impose their will on Russia.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

The Good News and the Bad

There are a couple of recent news stories worth commenting on:

Firstly Neil Woodford has been fined £5.9 million by the Financial Conduct Authority and his investment company £40 million for failings in managing the Woodford Equity Income fund which collapsed in 2019. Retail investors lost £billions as a result.

I fortunately was not invested in that fund and the result just seemed to be a case of poor risk management. Bearing in mind what Neil Woodford probably extracted from the fund in management fees during the period of his involvement he has surely got off lightly. He apparently intends to appeal the judgement of the FCA.

The other big news story was the decision by the FCA to launch a consultation on an investment scheme for those who might justify some compensation for car finance policies where the dealer’s commission was not disclosed. Drivers, including me, might get as much as £950 in compensation according to an article in The Times (I did finance the purchase of my previous Jaguar XF but not for my latest Jaguar).

But whatever is eventually agreed, it would be very damaging to those companies that provide car finance. Now I hold shares in several insurance companies so I could take a negative hit from that to offset any claim on my past car purchases. To my mind this is just ridiculous that suckers who overpaid for their car finance or insurance should be compensated.

I shall respond to the FCA consultation accordingly when it is issued.

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

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.