SPRP. Sprue Aegis. Investing is hard

I see that SPRP, “one of Europe’s leading developers and suppliers of home safety products” tanked today, down 26% to 140p. The problems:

the Company is in breach of certain provisions … the breach is not curable and as such BRK is terminating the Distribution Agreement

and

the audited final results … will not now be announced in late March

Delayed publication of results is never a good sign, although under the circumstances, you hardly need me to tell you that.

The company is on a PE of 15.5 or 20.9, depending on which data source you choose to belief. Well, in light of the revelations, I’d say that this is due to a re-rating downwards, and the shares will be lower in a year’s time than they are now despite the clobbering it has just taken. I’ll make a note in my diary, and we’ll see who’s right: me, or Mr Market.

I seem to recall SPRP was a bit of a darling amongst investors much savvier than me. Mostly due to “Not Invented Here” syndrome more than any insight on my part, I never did invest in it.

Trawling through the archives on Stockopedia, I noticed an article dated 29 May 2014 (https://www.stockopedia.com/content/the-best-of-aim-the-worst-of-aim-83673/) that listed SPRP as amongst the best of AIM shares. The price was around 278p.

In Sep 2017, Graham gave the opinion:

it seems like a pretty reasonable holding and a decent-quality smallcap

The price was 210p at the time.
So be warned, stock ranks are for buying on a group basis, and the endorsement of knowledgeable investors is no guarantee. Let me emphasise that I have great respect for Graham’s ability, and I acknowledge him as a better investor than me.

Stay safe out there.

140p

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Delivery drones: surely the dumbest idea ever

The Los Angeles Times reported recently (http://www.latimes.com/business/technology/la-fi-tn-amazon-drone-patent-20180322-story.html):

> Amazon patents delivery drones that can react to people screaming and > flailing

Love it!

> As described in the patent, the machine could release the package it’s > carrying, change its flight path to avoid crashing, ask humans a > question or abort the delivery. Emergency Action Message: abort mission.

> If the drones are cleared to deliver, they can release boxes with > extra padding from the air, or they can land and then offer the > parcels, the patent said. How do you want your goods: one piece or two?

I don’t know who’s taking the biggest piss: LA Times or Amazon.

Delivery drones are so 2017. Or was it 2016? I am too bored to check.

What puzzles me is how supposedly sane and intelligent people can come out with ideas that are so obviously flawed. This is politician-level dumb.

Obvious flaws include: they are likely to have sufficient lift capacity, people will bait them if not use them for target practice, they are difficult to scale quantity-wise, they use up too much energy, there’s not distribution network, there’s no economies of scale to be had, and so on.

I see that Amazon have latched onto the whole “AI” bandwagon thing. I’m surprised they are heralding that in big six-foot letters.

Sometimes I feel like I must be taking crazy pills.

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IGG – nice market reaction

Spreadbetter/stockbroker IGG issued a Q3 revenue update today, sending the shares up 5.1% to 860p.

Revenues were up 30% against comparables. Blimey.

> Following its call for evidence in the early part of the year, it is > expected that ESMA will soon publish measures to restrict the > marketing, distribution or sale to retail clients of CFDs. IG > continues to believe that any financial impact from the implementation > of such measures is unlikely to be significant in FY18.

As you may recall, I was looking for alternative brokers after IGG were introducing quarterly charges. Interactive Investor, which took over TD Waterhouse, also introduced charges late last year, so I decided to move my ISA to IGG. I do enough dealing on both my ISA and regular IG account that the dealing charges are fully offset by the quarterly charges. Just to be clear, the quarterly charges are, in effect, a no-activity fee, against which dealing charges are offset.

I bought back into IG shares at the beginning of Feb, at 765p. It had a Stockopedia Stock Rank of 97, and made it onto the O’Neil CANSLIM Growth screen. It looked a good bet, which has indeed turned out to be the case.

You may recall that I bailed out of IGG at a lower price. I can’t find details of the date or price offhand; suffice it to say that it was a boneheaded move on my part.

860p

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FXPO results

FXPO (Ferrexpo) published its results today. The share price wobbled about today, but eventually decided to finish up 0.9% to 304.6p.

Free cash-flow is £177m ($250m, $353m operating flows, less $103m captial investment). Market cap is £1.78b, so it satisfies the criterion of P/FCF < 10 (although just). PBT is $450m, against net debt of $403m, so it meets my criterion for debt safety. It has a Stockopedia Stock Rank of 93, which provides an extra sanity check.

I hold, and rate it a “buy” based on what I have just seen. Let’s see in a year’s time, shall we?

Stay safe out there.

304.6p

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IMB: P/FCF<10

Crikey. Just looking through some Stockopedia stats, and I notice that IMB (Imperial Brands) is on a P/FCF of less than 10. I’m not surprised that it’s in Woodford’s portfolio.

Debt is more than can be recommended for a “low price, low debt” portfolio, but still, less than 10.

I have this dog in my portfolio. It’s down 29%.

Magic.

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MOSB – Moss Bros – Trading Update

Mens tailors MOSB (Moss Bros) issued a trading update today, sending the shares down 28% to 43.5p as of writing. The RNS contained the fateful words:

the Board now anticipates that the Group will deliver profit at a level materially lower than current market expectations.

They cite stocking problems, difficult hire sales, and lower footfall.

The full year dividend will be lowered to 4p, from 5.89p. Stockopedia shows that MOSB has a dividend yield of 9.6%, which is an emphatic sign that the dividend was vulnerable.

Stockopedia gives MOSB a Quality Score of 90, a Value of 94, and a Momentum of 5. I think these scores are based on yesterday’s figures.

I think it’s worth pointing out that, although momentum is a contentious issue among investors, a score of 5 should have been taken as a stern warning that the market was seeing something seriously wrong.

During 2018 this market is doing my head in! Companies large and small are being eviscerated for any misstep. The broader market is not too bad, but individually, there are nightmares. Companies like MCRO (Micro Focus) AA, CPI (Capita), IRV (Interserve), and on and on, all being ripped to shreds.

I am actually wondering if all this is actually the early stages of a bear market, and that we’ll begin to see less “breadth” in the market, shunning the poor performers, and concentrating on the winners.

Dunno. But things aren’t pretty. It’s like treading through a minefield.

Stay safe out there.

43.5p

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BMY – a little note

Book publisher BMY (Bloomsbury) announced an after-hours RNS yesterday, stating:

> revenues are slightly ahead of expectations, profits will be well > ahead of the Board’s expectations. … net cash balance is now > expected to be around £25m, significantly ahead of expectations. The shares are up 8.5% (as you might expect!) to 181.7p.

Stockopedia reports that Its P/FCF (price to free cashflow) is 9.1, it has net cash, and its dividend yield is 4.3% and its Stock Rank is 99.

I had tweeted yesterday that I thought an easy way of making money would to be to buy stocks of a P/FCF, PBT < net debt/3. A high dividend yield (say above 3%) is also a bonus.

BMY meets such criteria. It’s nice to see a welcoming market reaction from news, too.

I hold this (at 190p), and this looks a pretty solid buy.

Let’s follow this up in a year’s time, see how we’re doing.

182p.

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