Cube Midcap Report (13 March 2020) – Enjoying the bounce #BT.A #PMO

Cube Midcap Report (13 March 2020) – Enjoying the bounce #BT.A #PMO

Good morning!

That feels more genuine today as the FTSE is up 1.7%, giving us a little bounce after a week from hell.

The FTSE fell by almost 11% yesterday, its worst day since 1987. The number of points lost was an astonishing 639.

In the US, the Dow Jones fell by 2,350 points or 10%.

The New York Federal Reserve responded to the chaos with a package of funds. $1.5 trillion will be injected into the repo markets, “to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak“.

I continue to avoid buying or selling anything. I remain long the FTSE.

These are trying times, but in some ways, they are also the best of times for an active investor. An investor who navigates this situation without a major mishap can set themselves up well for many years to come.

My plans are to stay fully invested and to buy shares when it is possible to do so. I believe the value in the FTSE is exceptional at the moment (for long-term investors) and there are even a few US stocks which are popping up on my screens now as possible buys.

Joel’s latest update is here, for our Gold Members.

There is little FTSE-350 news today. I will take a look at:

  • BT Group (BT.A) – Covid 19 Update
  • Premier Oil (PMO) – trading update

BT Group (BT.A)

  • Share price: 110.2p (+3%)
  • Market cap: £10.9 billion

Covid-19 update

It’s an unusual day when the boss announces he is sick and the value of the company increases by £300 million.

Philip Jansen, CEO has tested positive for Covid-19. He got tested because he felt “slightly unwell”.

BT is now working closely with Public Health England to undertake a full deep clean of relevant parts of its Group headquarters and will ensure those employees who have had contact with Philip are appropriately advised.

The schedule of meetings for someone in his position must be extraordinary. That’s probably how he got the virus in the first place – and it probably means that he has spread it to others. He now needs to self-isolate. There will be “no disruption” to BT, as he will be able to work remotely.

My view

There are two major takeaways here.

Working from home

Firstly, if it’s true that the CEO of a major corporation can work remotely without causing disruption to his business (albeit temporarily), what does that mean for the wider workforce of screen-based professionals? Shouldn’t it be even easier for us to work at home, without causing problems?

As I said in a recent report, the trend of working from home is only going to accelerate as a result of this health scare. While face-to-face meetings and real-life contact will remain important (they build trust and do enable high-quality collaboration), there are many tasks and activities where it is simply unnecessary.

And the benefits of remote working are enormous. Less time wasted commuting, less expensive desk space needed in city centre locations, and less bureaucracy as workers focus on getting the job done. Distractions at home are real but they offset by the fact that when you’re working from home, you are judged entirely on your output rather than anything else (there is nothing else for your customer to judge you on).

I welcome the trend and I’m part of. Not since 2015 have I worked in a traditional office.

The virus gets around

Secondly, on the virus itself. I note that Jansen says his symptoms were mild and that he got tested “as a precaution”.

The official virus count in the UK is, I think, 590 as of this morning.

I wonder how many hundreds (or thousands) of other people have it in the UK, and haven’t bothered getting tested? If the symptoms are very mild, or if you are completely asymptomatic, then there is a good chance you won’t get tested and you will be left out of the official statistics.

The scale of infection is why the UK is now in a “delay” phase. This means trying to slow the spread of the virus, as stopping it from spreading is unrealistic. Instead, the goal is to make the spread more gradual, so that health services aren’t overwhelmed and a range of counter-measures can be developed.

On the bright side, my understanding is that it’s almost impossible to get the coronavirus twice. The human immune system is a remarkable thing.

This fact alone means that the eventual slowdown of new cases is inevitable. As the virus works its way through the human population, there are gradually fewer and fewer humans who are susceptible to it.

I’m as optimistic as ever for long-term economic and societal progress.

And I say all of this without wishing to downplay the real human tragedies that are occurring because of this terrible disease.

In addition to the deaths and terrible discomfort, there are financial consequences on the real economy (at home and abroad) which have real-life costs.

But as an investor, it’s important to keep a view on the bigger picture. The world is not so radically different to last year, and the prospects for the future aren’t so different either.


Premier Oil (PMO)

  • Share price: 22.015p (+74%)
  • Market cap: £185 million

Trading update

Venturing outside of my comfort zone to take a look at the short-covering rally at this oil and gas producer.

According to the most recent numbers from, 19.3% of PMO shares were sold short (it was probably higher than that, since only short positions above a certain size must be disclosed).

While a 70%+ rally in a single day might in other circumstances be considered a short squeeze, we can’t use that word for a stock which is actually down more than 70% compared to the start of the month.

Judging by the contents of this RNS, shorters might be giving up on further profits from these levels. There might also be some new speculative longs.

Key points from the announcement:

  • 30% of 2020 oil & gas production is hedged at $60/barrel (nearly twice the current oil price).
  • within this, 40% of oil production is at $64/barrel.
  • Significant liquidity” – cash of $135 million and undrawn facilities of $330 million.

This bit is important:

 Assuming a $100m reduction in planned 2020 capex and $35/bbl oil price for the remainder of the year, the Group would expect to be broadly cash flow neutral in 2020. 

I still wouldn’t touch this stock, as I don’t know enough about the oil and gas markets and Premier has an intimidating debt load to overcome ($2 billion). Its place in the FTSE-250 will be short-lived at this market cap.

The only obvious merit that I can see in PMO shares is their potential use as a vehicle for leveraged short-term speculation on the oil price. Whether there is any material equity value left, I don’t know.

Right folks, that will be it for today.

On a personal note, this is the second day I’m working from my new home. Holding a decent chunk of equity in bricks and mortar certainly helps to put a perspective on the chaos in the financial markets – I recommend it!

All the best




Wordpress (1)
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    Or 100s of thousands. From the press conference yesterday it sounds as though it’s going to be very hard to get tested going forward, and the number of tests so far are very very small – whether that’s because of pressure on the system or the government’s desire to not scare the populace any more than necessay I don’t know.

    But, as you say, it will eventually work through the system, the world will not end and everything, eventually, will return to “normal”.
    PMO – still one for the gamblers I think. I already hold plenty of ENQ1 which are in a similar boat so no great desire to double down.

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