[SharePad] Small-Cap Spotlight Report: BEEKS FINANCIAL CLOUD

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23 April 2022
By Maynard Paton

Every share has a bull case and a bear case.

Our job as investors should be to consider the arguments from both sides, and decide which is the stronger before buying or selling.

Beeks Financial Cloud is a good example of a company with distinct pros and cons:

For the bull case, the cloud-computing specialist offers:

  • A strong competitive position in a fast-growing industry;
  • A wonderful revenue history created by recurring customer payments, and;
  • Shareholder-friendly management led by a ‘thin cat’ entrepreneur.

But for the bear case:

  • Past growth has required substantial investment and extra funding;
  • The underlying economics of the business remain unclear at best, and;
  • Plenty of future expansion is already priced into the shares.

Let’s take a closer look.

Read my full Beeks Financial Cloud article for SharePad.

Maynard Paton

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

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25 March 2022
By Maynard Paton

The market continues to wobble and I have therefore kept with my ‘back to basics’ filtering.

Applied the other week to identify James Halstead, this screen short-lists companies that have strong balance sheets, robust margins and dividends that have defied the pandemic.

This time SharePad returned 22 matches and I sorted the results on year-to-date share-price performance:

(Source: SharePad)

I selected Focusrite because it was among the year’s worst performers, had not already been subject to my SharePad microscope and its operations were not obviously linked to stock-market volatility.

Read my full Focusrite article for SharePad.

Maynard Paton

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

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23 February 2022
By Maynard Paton

Recent market wobbles have prompted some ‘back to basics’ filtering.

Hence a new screen to identify companies that have strong balance sheets, robust margins and dividends that have defied the pandemic.

The exact filter criteria I applied for this ‘safe haven’ search were:

  • Net borrowings less total leases of no more than 0 (i.e. a net cash position excluding IFRS 16 lease obligations);
  • A trailing 12-month operating margin of 15% or more, and;
  • A minimum five-year record of annual dividend improvements.

I ran the screen the other day and SharePad returned 23 matches:

(Source: SharePad)

I added an extra column to the screening results to sort the 23 on five-year share-price performance.

I selected James Halstead because its shares had improved only 9% since February 2017. Of the three weaker performers, two had already been subject to my SharePad microscope while the third — an obscure Kenyan agricultural business — did not quite fit the ‘safe haven’ approach.

Read my full James Halstead article for SharePad

Maynard Paton

[SharePad] Small-Cap Spotlight Report: CAKE BOX

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21 January 2022
By Maynard Paton

Oh dear. I had expected this article to celebrate a dynamic growth company that had commendably prospered during the pandemic.

I find myself instead relaying some unusual financial reporting after digging deep into a few annual reports.

Read on to discover:

  • An erroneous £2 million entry within the cash flow statement;
  • The inconsistent disclosure of related-party transactions;
  • The delayed reporting of a website breach to the auditor (and customers);
  • Historic errors” with stock control;
  • The auditor resigning after becoming “concerned about the robustness of the Company’s control and governance frameworks“;
  • The peculiar disclosure of trade payables and receivables, and the level of receivables versus revenue, and;
  • Bookkeeping curiosities such as overdue tax, R&D tax credits and regular revaluations of distribution centres.
(Source: SharePad)

Let’s take a closer look.

Read my full Cake Box article for SharePad.

Maynard Paton

PS: I have provided more Cake Box observations on the Quidisq forum.

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

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15 December 2021
By Maynard Paton

Shares offering ‘Quality At a Reasonable Price’ have been hard to find during the last few years. But recent market conditions might be presenting a few fresh opportunities.

Specialist fund manager Ashmore could meet some QARP-type criteria. At present this £2 billion mid-cap offers:

  • Impressive financials, including a majestic 66% margin and ‘surplus’ capital of more than £600 million;
  • A reliable dividend history, with the payout never being cut during the banking crash and pandemic, and;
  • A reasonable P/E of 12-13 alongside a dividend yield of 5%-plus.
(Source: SharePad)

Let’s take a closer look.

Read my full Ashmore article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: AQUIS EXCHANGE

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21 November 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.

One company that could be a genuine disruptor is Aquis Exchange, a £180 million small-cap trying to revolutionise share trading and taking on the likes of the London Stock Exchange and Euronext.

(Source: SharePad)

Let’s take a closer look.

Read my full Aquis Exchange article for SharePad.

Maynard Paton

[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