Small-cap debate at IG with Graham Neary and Chris Boxall

Small-cap debate at IG with Graham Neary and Chris Boxall

Jeremy Naylor at IG was joined for a discussion of small-cap stock picks by Graham Neary and Chris Boxall of Fundamental Asset Management.

The video has been published on YouTube:

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    great discussion Graham with Chris re the 8 small cap stocks to watch – you two shld do more such discussions together ! rob collinson

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    Yes interesting stuff and look forward more of the same. I must comment on the DUKE section as I did not think Graham was given the chance to clarify……

    1 The benefit to royalty partners is that they retain control of their business compared to the private equity route. And compared with increasing debt there is no refinancing risk, heavy covenants or FCF issues. … and they can buyback if they wish at any time during the term……. 2

    In terms of partner defaults DUKE have a rigorous process before accepting a new partner. No start ups, no oil and gas, mining, biotech. 10 years of operating history, strong management, competitive advantage, senior security over assets.Far from being ‘high-risk’ companies that could not achieve finance elsewhere as Boxall suggests, DUKE criteria ensures that only high quality companies are accepted……3
    My comments above are taken from a DUKE presentation made in May 19. Shame Boxall did not get it!

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    This was really great thanks Graham. The dynamic with you and Chris was excellent and you both managed to cover a number of shares in my portfolio. I wouldn’t mind seeing more videos like this!

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    Taking the closing prices on June 24th (in trading hours, the day before the video) and the closing prices yesterday (Friday December 6th) these are the price changes I calculate on the stocks recommended by

    Graham
    H&T -3%, Duke nc, Park Gp (now Appreciate)-31%,PCF +11%

    and by Chris Adept Tech -12%, Pressure Tech -29%, Quartix +19%, Rosenblatt (now RBG Holdings) -24%.
    I know this is a bit mean but these in toto are pretty mediocre. The best advice of the lot was Graham’s high skepticism on Burford. I would be interested to hear any more on any of these that may still be interesting, except Duke, which is why I listened to the video again and which I confess to owning.

    • comment-avatar

      Yes, that is a bit mean! You are looking at share prices after six months – who can predict what will happen after six months? Not me, that’s for sure!

      As for the specific shares mentioned:

      1) H&T, my average entry is c. 155p, I’ve more than doubled my money in it over the years. I’m a long term shareholder in it.

      2) Duke, I sold out of it in August for a small profit after holding it for a year.

      3) Park, I have certainly got that one wrong so far. But I still hold it. Maybe it will turn out ok.

      4) PCF, similar to HAT. My average entry is 27.5p, I’ve had a very good return on it so far. Hoping to be in it for a long time.

      The goal of the video was to describe a collection of financial stocks which I find interesting, not to recommend some shares which were about to go up.

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    As you know Keynes said (to misquote) ‘in the long run we are all dead’. No, I wasn’t really being mean but the performance of this group has really been pretty dire imo, six months or no. A good enough advert for doing one’s own research. What I was really asking was – which ones, if any, would you suspect are oversold or worth studying more given the disappointing price performances since the video? I thought PARK might be worth a look but really don’t understand it.

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      I can’t speak for Chris but for my own selection, over six months, two of them are close to unchanged, one of them is up, and only one of them is down materially. Which happens to be Park, the one you are interested in potentially buying. Hardly a dire performance.

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    Down 6%. Not terrible but hardly the stuff of champions. True, however, that the real problem would have been PARK which I notice receives a plug in Lord Lee’s column in the weekend FT. As you say your sparring partner’s selections considerably poorer over that period. Let’s leave it at that. I also accept, btw, that when one is running portfolio(s) you have to stick with companies you believe in and put up with some periods of relative weakness. It is part of the game. The most difficult decisions for me are when to sell and when to add into weakness.

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      For completeness – you’ve not taken dividends into account. Duke is designed to be an income stock (7% forecast yield). Park is paying out the majority of its earnings (7% forecast yield, the yield six months ago was perhaps 5%?). A decent yield on H&T as well.

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    I was afraid you would bring up divs which I consciously avoided to save myself too much work. I own Duke so know I have had an extra 1.45p from their two quarterlies since June – that adds another 3% to total return but we all have dealing costs and charges to be included in total return. In the same period – with charges and dividends – my small cap fund was up 12%. Perhaps with the old PARK, now importantly APP, your fab four would be near break-even. I had another look after the Lord Lee comment on APP but rightly or wrongly – it seemed extremely cheap, probably oversold, and I concur that the trading update seemed very upbeat. If I was a trader I would be very tempted at this level despite the poor liquidity. The whole raison d’etre just seemed a little out of date. No doubt it will rocket from here but we can’t win ’em all. I probably prefer and own Ramsdens in the pawnbroker sector I but agree that high cost lending complaint doesn’t seem a big deal at H&T, on what we know.

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