World Careers Network: How I’ve Become Stuck With A 37% Loss

04 June 2015
By Maynard Paton

Today I’m owning up to the second of two new investments I’ve made during the last few months.

I say ‘owning up’ because this second share has so far been a complete disaster. Indeed, what I thought could have been a ‘perfect stock’ has instead rewarded me with a 37% paper loss :-(

The company in question is World Careers Network (WOR), an obscure AIM-quoted business that develops and sells recruitment software for major employers.

I purchased the shares during February and March 2015 at an average price of 320p including all costs. The bid price now is 200p and the holding currently represents about 3% of my portfolio.

When I bought, I was convinced this £24m firm offered all the hallmarks of a successful investment. Alongside claims of supplying “world-class technology”, other attractions included a blue-chip client list, generous margins, a cash-flush balance sheet, respectable sales growth and a long-time founder/entrepreneur at the helm. Furthermore, a possible P/E of just 7 suggested the shares were a bargain.

However, events have since not gone my way as I will explain in a moment. And I dare say some investors would have never touched WOR in the first place due to its humungous bid-offer spread and dominant 80%-plus family ownership.

Read moreWorld Careers Network: How I’ve Become Stuck With A 37% Loss

Electronic Data Processing: I’ll Just Have To Make Do With The Uncovered 7.2% Income

26 May 2015
By Maynard Paton

Quick update on Electronic Data Processing (EDP).

Event: Interim results published 26 May.

Summary: Another rather dull update from this rather dull software microcap. These results were a little disappointing on the revenue and profit fronts, but at least there was some useful progress on the balance sheet. One day I trust EDP’s business can advance significantly and provide some long-awaited excitement. Until then I’ll just have to make do with the uncovered 7.2% dividend yield. I continue to hold.

Read moreElectronic Data Processing: I’ll Just Have To Make Do With The Uncovered 7.2% Income

French Connection: Profit Warning Means Radical Action Is Now Required

24 April 2015
By Maynard Paton

Quick update on French Connection (FCCN).

Event: Trading update published 24 April

Summary: Profit warning — poor H1 Retail sales will mean greater-than-expected group losses this year. However, the profitable Wholesale and Licensing divisions continue to perform as expected. Turnaround possibilities remain, but the protracted wait has become just that bit longer once again. What’s needed now is some radical management action. I continue to hold. 

Read moreFrench Connection: Profit Warning Means Radical Action Is Now Required

Getech: I’ve Had To Raise An ‘Amber Alert’

24 March 2015
By Maynard Paton

Quick update on Getech (GTC).

Event: Interim results and acquisition details published 24 March

Summary: A better-than-expected set of results that was blessed with a reasonable outlook statement — a pleasant surprise given GTC serves the battered oil and gas industry. Progress was not perfect, though, with sizeable intangible expenditure and details of a substantial acquisition leaving me on ‘amber alert’. I am minded to await further results before considering any top-up. I continue to hold.

Read moreGetech: I’ve Had To Raise An ‘Amber Alert’

Pennant International: Why I Sold

20 March 2015
By Maynard Paton

Quick update on Pennant International (PEN).

Event: Annual results published 17 March

Summary: Headline results as expected, but they hid a weaker second half and some disconcerting cash-flow movements. The figures contained plenty of other irritations and worries, while the chairman’s statement was notable for what it did not say. All told, the results carried too many signs of profit trouble ahead and I sense PEN could return to its haphazard ways witnessed between 2000 and 2009. I have sold.

Read morePennant International: Why I Sold

French Connection: I Still Think The Shares Could Top 100p

17 March 2015
By Maynard Paton

Quick update on French Connection (FCCN).

Event: Annual results published 17 March

Summary: Mixed results. The Retail division was subdued, and gave a disappointing second-half performance. However, trading at the Wholesale and Licensing divisions appeared promising. There was further welcome progress on cost cutting, too. This turnaround has still to really turn, and I’ve trimmed my recovery assumptions. But the upside potential remains sizeable. I continue to hold. 

Read moreFrench Connection: I Still Think The Shares Could Top 100p

Pennant International: Why I Bought A 12-Bagger

27 January 2015
By Maynard Paton

It’s not often I look at a 12-bagger and decide it’s still worth buying.

But that is exactly what happened when I pinpointed Pennant International (PEN) the other year.

To cut to the chase, this £23m military equipment specialist had suffered badly during the banking crash and the shares had plunged to 6p. But then a succession of upbeat results and contract wins eventually caught me eye and I bought in at 74p during October and November 2013.

What particularly appealed to me was the group landing its largest-ever contract alongside results that spoke of “good prospects for the short, medium and long term”. It’s quite rare to see such ‘multi-horizon’ optimism within a company RNS!

Also prompting me to buy were management’s sizeable shareholding, the firm’s asset-flush balance sheet, a focus on organic growth and a lowly market valuation.

While PEN’s expansion looks to have paused temporarily in 2014, the group’s overall prospects remain positive and I’m pleased to say the appealing executives, financials and valuation remain in place today.

Read morePennant International: Why I Bought A 12-Bagger

Burford Capital: I’m Projecting 9.1% Annualised Returns To 2019

23 January 2015
By Maynard Paton

*** EDIT: 26 FEB 2015: I HAVE SINCE SOLD THIS SHARE. PLEASE READ THE COMMENT SECTION AT THE END OF THE POST *** 

Time now to delve into Burford Capital (BUR), a £266m litigation-financing business that joined my portfolio following some very scant research.

The basis of my investment was:

  • Litigation funding was a nascent, fast-growing industry. At the time, BUR said business was “booming”.
  • The firm was claiming fantastic returns on invested capital (some 70%!).
  • I assumed BUR’s operations would not be affected by recessions or market crashes.
  • A corporate reorganisation had aligned the main executives with shareholders.
  • The shares traded at book value.
  • Good future progress might see the shares re-rated well above book value.
  • A fund managed by ace investor Neil Woodford owned 45%.

It wasn’t in-depth stuff and luckily I’ve managed to enjoy a reasonable return. I bought between November 2012 and February 2013 at an average of 101p, and I then sold 51% of my holding at 120p between October 2013 and January 2014. The recent market price is 130p.

However…I don’t like to rely on scant research with my investments. So I’ve finally got to grips with BUR and its convoluted accounts to gauge the opportunity ahead, and in particular to understand…

…why the company’s fantastic returns on invested capital haven’t translated into fantastic share-price growth!

Read moreBurford Capital: I’m Projecting 9.1% Annualised Returns To 2019

Record: I Averaged Down Heavily And Eventually Doubled My Money

20 January 2015
By Maynard Paton

I’m still ploughing through my portfolio to give each of my holdings a much-needed thorough review.

I’ve now come to Record (REC), a £75m currency-hedging business, where you may think my past share dealings have been somewhat bold.

You see, I first bought REC during December 2010 at 37p. At first the company’s updates were not that positive, so within a year I found myself averaging down at 24p — and then averaging down even more at 13p — because my sums pointed to a significantly cheaper valuation.

In fact, by April 2012 I was averaging down further at 11p and then at 10p, which luckily proved to be the bottom. From what I recall, the market was so depressed with the share, the 10p price then equalled REC’s net cash position and essentially threw the actual business in for free.

Read moreRecord: I Averaged Down Heavily And Eventually Doubled My Money

Electronic Data Processing: This Obscure, Dull Small-Cap Should Pay Me An 8% Income

15 January 2015
By Maynard Paton

Legendary American investor Peter Lynch was always very keen on dull small-caps with dull names and dull operations. His theory was that such obscure businesses would not attract much industry competition or market enthusiasm, and so would be better investments for patient investors.

Electronic Data Processing (EDP) certainly has the dull name and the dull operations, but sadly its dull financial history has meant its share price has also been, well, rather dull.

But don’t stop reading just yet!

…because this small-cap dullard intends to pay a 5p dividend in future years — and shareholders such as me remain in line to collect a not-so-dull 8%-plus income.

Additional excitement comes in the form of EDP’s cost-saving measures, which I reckon could support an underlying P/E of just 6.

In fact, if you mix in contracted revenues, surplus assets, upfront customer payments — plus an intriguing shareholder register — then all of a sudden this £8m software supplier to builders merchants might not be that dull after all.

Read moreElectronic Data Processing: This Obscure, Dull Small-Cap Should Pay Me An 8% Income

Getech: Why I’m Down 44% And What I’m Doing Now

13 January 2015
By Maynard Paton

Time now to face up to one of my investment disasters of 2014 — and one that could very well extend deep into 2015 :-(

Getech (GTC) supplies geophysical reports and data to oil and gas explorers — and I believe the recent oil-price slump is likely to have a significant impact on this small-cap’s near-term progress.

Indeed, even before the oil price started to plunge in the Autumn, GTC had already issued two profit warnings — so the immediate omens here are not great. But for better or worse, I am sticking with the share.

In my view, GTC is a fundamentally attractive business that should have the wherewithal to survive the oil downturn. Plus, this holding could in time become a very lucrative recovery story — assuming profits can one day return to levels witnessed during recent years.

Read moreGetech: Why I’m Down 44% And What I’m Doing Now

Why I Believe French Connection Can Triple My Money

08 January 2015
By Maynard Paton

Today I am going to explain why I believe the shares of French Connection (FCCN) can one day triple my money.

Before you become too excited, let me say that my average buy price here is 31p — as compared to the recent market price of 55p.

Nonetheless, I believe there is still good upside to be had and I reckon the shares could trade above 100p if all goes to plan during the next few years.

However, this £53m fashion chain is by no means a one-way bet.

In particular, the group’s track record is extremely haphazard and I would not rule out further setbacks occurring. A quality buy-and-forget investment it is not.

Read moreWhy I Believe French Connection Can Triple My Money

SeaEnergy plc: Is This Software Gem Valued At Just 7.5 Times Earnings?

10 July 2014
By Maynard Paton

*** EDIT: 16 MAR 2015: I HAVE SINCE SOLD THIS SHARE. PLEASE READ THE COMMENT SECTION AT THE END OF THE POST *** 

SeaEnergy (LON: SEA) is an unusual holding in my portfolio for two reasons.

First, I found the idea from a bulletin board rather than through my own market trawls. Second, the business does not offer the time-tested management that I prefer to see running my investments.

So there could be danger ahead here!

But drawing me to this £20m AIM business is an attractive software subsidiary that offers high margins, great cash flow, blue-chip clientele, recurring revenues and respectable growth prospects.

In the mix also are a couple of start-up divisions that I’m hopeful can soon reach breakeven, as well as a stake in a quoted oil small-cap that might one day deliver useful upside. Indeed, my valuation sums indicate the group’s software ‘gem’ could be valued at just 7.5 times profits.

Read moreSeaEnergy plc: Is This Software Gem Valued At Just 7.5 Times Earnings?