[SharePad] Small-Cap Spotlight Report: GOODWIN

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20 October 2021
By Maynard Paton

This quote from Richard Beddard caught my eye the other week:

If something truly special is incubating, we may profit from our investment for decades.”

I am always up for profiting from an investment for decades.

Richard was writing about “pivots” — companies that are adapting to change by “incubating another better business“.

He highlighted four examples and today one of the quartet — Goodwin, a £277 million market-cap engineer — goes under my SharePad microscope.

Richard described these pivots as “decent but humdrum” businesses, but do not let that put you off. Goodwin has 30-bagged during the last 20 years and a heritage of family management could indeed lead to decades of further profit.

(Source: SharePad)

Let’s take a closer look.

Read my full Goodwin article for SharePad.

Maynard Paton

[SharePad] Screening For My Next Long-Term Winner: CURTIS BANKS

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22 September 2021
By Maynard Paton

Shares offering ‘Quality At a Reasonable Price’ have been hard to find during the last few years.

But specialist SIPP provider Curtis Banks could meet some QARP-type criteria.

At present this small-cap offers:

  • Predictable income, with approximately 60% of revenue said to be recurring through annual fees;
  • Respectable financials, including 20%-plus margins and an ambition to reach 30%;
  • A history of growth, although future prospects have admittedly moderated, and;
  • A reasonable P/E of 14-17 depending on which projections you believe.

Let’s take a closer look.

Read my full Curtis Banks article for SharePad.

Maynard Paton

[SharePad] Screening For My Next Long-Term Winner: SDI GROUP

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08 September 2021
By Maynard Paton

Everybody loves a share that keeps going up.

SharePad lists 168 names that have delivered 15% or more annualised turns during the last one, three and five years:

(Source: SharePad)

SDI Group is ranked tenth of the 168 and its shares have certainly kept going up. They have surged 146% during the last twelve months and 12-bagged since 2016:

(Source: SharePad)

Let’s take a closer look.

Read my full SDI Group article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: PURPLEBRICKS

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28 August 2021
By Maynard Paton

Investors love disruptors. Find a pioneering upstart that is stealing market share from industry dinosaurs, and your portfolio may enjoy a huge stock-market winner. Amazon of course is the textbook example.

But not every disruptive idea actually works. In some cases the old way may still be the best way.

Take estate agency. Despite vast amounts of investment and marketing, online estate agents presently handle only 8% of UK property transactions.

Let’s see what can be learned from Purplebricks shares, a company which has led a high-profile challenge against traditional estate agents — but has yet to prove truly disruptive.

Read my full Purplebricks article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: HORNBY

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22 August 2021
By Maynard Paton

Turnarounds can be tempting.

You find a business that has hit big trouble with a stock price at rock bottom…

…but you believe your contrarian instincts will yield a huge return as the company enjoys a full recovery.

Mind you, distinguishing genuine turnarounds from shares heading for the graveyard is never easy. And even if the company does recover, the journey typically involves multiple false dawns and takes far longer than anyone ever expects.

One potential recovery worthy of consideration is Hornby. Although the manufacturer of the famous model trains has suffered numerous setbacks during recent years, the following bull points may attract the turnaround investor:

  • The company owns a collection of celebrated old brands that could be hard to replicate;
  • Customers include enthusiastic hobbyists, with the recent success of wonder-stock Games Workshop showing what is possible with such committed purchasers;
  • A previous company recovery led to a 10-bagger share-price gain;
  • One institution seems very keen on the group’s prospects by owning 75% of the stock;
  • The limited free float, £78 million market cap and absence of broker forecasts keep the company off many investors’ radars, and;
  • The latest results showed a return to profitability and a net cash position, which may negate the chance of further major problems.

Read my full Hornby article for SharePad.

Maynard Paton

[SharePad] Screening For My Next Long-Term Winner: ASOS

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28 July 2021
By Maynard Paton

One of my favourite screening strategies is to hunt for attractive growth companies with unloved share prices.

The criteria I use for these searches are:

  1. A negative share-price performance since the start of the year;
  2. A compound 5-year earnings growth rate of 10% or more;
  3. A forecast 1-year earnings growth rate of at least 0%, and;
  4. Net borrowing of zero or less (i.e. a net cash position).

The other day the filters returned only 14 matches:

(Source: SharePad)

I selected ASOS because the company:

  • Had the largest market cap on the list;
  • Boasts an incredible growth story, and;
  • Recently issued a trading statement that wiped 18% off the share price.

Read my full ASOS article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: CALNEX SOLUTIONS

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15 July 2021
By Maynard Paton

Warren Buffett admitted the other year that he had not bought shares at an IPO since 1955.

They’re picking the time to sell to you; I like it when I am picking the time to buy“, the investing master warned when asked about flotations.

Mind you, every great share went public at some point… and who would not want to have bought, say, Microsoft, at its IPO? (a 3,717-bagger since).

SharePad shows 47 companies joined the UK market during 2020:

(Source: SharePad)

I suspect Mr Buffett’s warning would apply to the majority of those 47 names. But maybe not to small-cap Calnex Solutions, which at first glance appears to be one of the more appealing new issues of last year.

Immediate highlights include:

  • A track record of profitable expansion;
  • Prospects of future double-digit growth;
  • A founder chief executive with a significant shareholding;
  • A competitive position based on in-house technical research, and;
  • Accounts that display high margins and net cash.

Could Calnex become a long-term IPO winner?

Read my full Calnex Solutions article for SharePad.

Maynard Paton

[SharePad] Screening For My Next Long-Term Winner: IMPAX ASSET MANAGEMENT

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14 June 2021
By Maynard Paton

Everybody loves shares that keep going up.

SharePad lists 167 names that have consistently delivered 15% or more annualised returns during the last five years:

(Source: SharePad)

The shares of fund manager Impax Asset Management have certainly kept going up; they have almost tripled during the last twelve months and have 20-bagged since 2016.

The winning combination appears to have been:

  • Impressive profit growth driven by favourable long-term trends;
  • A ‘scalable’ business that could service extra customers without a commensurate increase to the workforce;
  • A shareholder register dominated by company insiders and a key client, and;
  • A modest valuation that gave scope for a significant P/E re-rating.

Let’s take a closer look.

Read my full Impax Asset Management article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: WANDISCO

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21 May 2021
By Maynard Paton

The market is home to many companies with ground-breaking products that boast credible growth stories told by persuasive management…

…but which also need a bit more money from shareholders to see them through to profitability.

Sometimes they get the money they need and things work out.

And sometimes they get the money they need and, well, keep coming back for more.

WANdisco is one of those companies that keeps coming back for more.

Investors have handed $217 million to this software specialist since 2012…

…and yet customers, sales and profits remain extremely elusive.

But could WANdisco finally come good during 2021 after signing milestone deals with Microsoft and Amazon?

The directors are naturally optimistic, although they appear reluctant to help fund the company themselves.

Read my full WANdisco article for SharePad.

Maynard Paton

[SharePad] Screening For My Next Long-Term Winner: VENTURE LIFE

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23 April 2021
By Maynard Paton

I like companies that boast significant net cash. My reasons include:

  • Limited risk of funding difficulties should trouble strike;
  • Management might be sensible by holding ‘rainy day’ money;
  • The cash position may have resulted from superb profit generation, and;
  • The share price could be less volatile (especially if the cash position represents a large part of the market cap).

I therefore applied the following filter criteria within SharePad to identify some reasonable cash-flush businesses:

  • Trailing twelve-month net borrowings of no more than zero (i.e. a net cash position);
  • A market cap of at least £50 million;
  • Net cash of at least 10% of the market cap, and;
  • A trailing twelve-month operating margin of at least 1% (to include only profitable companies).

I found 38 matches, and Venture Life attracted my attention because the company:

  • Carried a significant 28% of its market cap as net cash;
  • Operated within the generally favourable healthcare sector, and;
  • Published impressive results last month.

Read my full Venture Life article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: NORCROS

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24 March 2021
By Maynard Paton

Let me start by confessing this article covers pension deficits.

What follows may not be that thrilling and does require you to concentrate. But please stick with me, especially if you have ever fallen victim to a ‘value trap’.

A burdensome pension scheme is a common reason why companies trade on permanently low ratings. The market essentially believes too much of their future profits will have to plug a retirement ‘black hole’ instead of being paid out as dividends.

A good example is Norcros, a £214 million manufacturer of bathroom showers, taps and tiles.

This share has stubbornly traded on a single-digit P/E for years…

Source: SharePad

… and studying the group’s pension situation goes some way to explain why.

Read my full Norcros article for SharePad.

Maynard Paton

[SharePad] Screening For My Next Long-Term Winner: BEST OF THE BEST

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10 March 2021
By Maynard Paton

One of my favourite SharePad screens identifies good-quality companies that have grown without acquisition. The screen uses the following filter criteria:

  • Positive five-year turnover and operating profit growth;
  • A minimum 15% for both return on equity and operating margin;
  • Net borrowing of no more than zero (i.e. a net cash position), and;
  • A five-year acquisition spend of zero.

I ran the screen the other day and found 28 matches. I studied Best of the Best — or BOTB as it now calls itself — because I was already aware of:

  • Some very remarkable financials;
  • An extraordinary share-price performance, and;
  • Management deciding not to sell the business despite “extensive talks with a range of parties”.

Read my full Best of the Best article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: ARGO BLOCKCHAIN

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24 February 2021
By Maynard Paton

Let’s start with a wealth warning:

  • This article covers bitcoin miner Argo Blockchain;
  • I am not a bitcoin expert;
  • The bitcoin price is highly unpredictable;
  • Argo’s share price is highly unpredictable, and;
  • Argo issues frequent updates.

Still, Argo is a company worth studying… not least because the shares have soared 25-fold in just two months:

(Source: SharePad)

Let’s find out what is happening.

Read my full Argo Blockchain article for SharePad.

[SharePad] Screening For My Next Long-Term Winner: IG Group

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11 February 2021
By Maynard Paton

For some time now IG Group has been flashing on my SharePad filters.

According to my screens, the spread-betting firm offers:

  • High margins;
  • Decent returns on equity;
  • Cash-rich accounts;
  • Attractive five-year growth;
  • A lack of past acquisitions, and;
  • A modest P/E.

Those characteristics are an unusual mix in a market presently bereft of obvious quality bargains.

Let’s take a closer look.

Read my full IG Group article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: LoopUp

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29 January 2021
By Maynard Paton

I have started a series of occasional articles for SharePad in which I shine an investigative spotlight on particular small-caps.

My aim is to demonstrate how to analyse companies in SharePad and beyond to help you become a more informed investor.

I start with LoopUp, a £44 million developer of software for remote meetings and conference calls.

The other month the company issued a sales warning that caused a 50% share-price crash.

LoopUp should have been a pandemic winner last year selling its remote-meeting systems… so why has the company disappointed?

Read my full LoopUp article for SharePad.

Maynard Paton