• Weekly Summary of Research Findings: 2/13/17 – 2/17/17 [PREMIUM]

    Below is a weekly summary of our research findings for 2/13/17 through 2/17/17. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list. More

  • Precious Metals as Safe Havens [PREMIUM]

    Are precious metals effective safe havens, preserving capital when stocks and bonds crash? In their January 2017 paper entitled “Reassessing the Role of Precious Metals as Safe Havens – What Colour is Your Haven and Why?”, Sile Li and Brian Lucey assess whether four precious metals (gold, silver, platinum and palladium) are safe havens relative to stock market More

  • Small Cap Value Report (Fri 17 Feb 2017) – DRV, TRCS, AVAP

    Good morning!A very quiet news day today, but I’m sure we’ll find something interesting to discuss. Also, Graham is hoping to add some comments later on a company which reported earlier in the week.Driver (LON:DRV)Share price: 42.9p (down 8.7% today)No. shares: 32.1mMarket cap: £13.8mResults y/e 30 Sep 2016 – it’s taken 4 months and 17 days to produce these accounts, and they’re not even audited yet. That’s a really bad start. Good companies don’t deliver accounts this late.Mind you, after just reading the first few paragraphs, it’s clear that things have been in a mess at this company – with changed management, and problem levels of debt.I last reviewed this company in May 2016, and came to the conclusion then that the bank borrowings looked worrying. Also I disliked the large receivables balance, and noted a bad debt write-off, and change in CEO.The highlights make it sound as if the operating loss was modest, at £0.2m, but just look at all the adjusting items below. Horrible!Balance sheet – this looks pretty dreadful too. Net assets are down sharply to…

  • Small Cap Value Report (Fri 17 Feb 2017) – DRV, TRCS, BBSN, AVAP

    Good morning!A very quiet news day today, but I’m sure we’ll find something interesting to discuss. Also, Graham is hoping to add some comments later on a company which reported earlier in the week.Driver (LON:DRV)Share price: 42.9p (down 8.7% today)No. shares: 32.1mMarket cap: £13.8mResults y/e 30 Sep 2016 – it’s taken 4 months and 17 days to produce these accounts, and they’re not even audited yet. That’s a really bad start. Good companies don’t deliver accounts this late.Mind you, after just reading the first few paragraphs, it’s clear that things have been in a mess at this company – with changed management, and problem levels of debt.I last reviewed this company in May 2016, and came to the conclusion then that the bank borrowings looked worrying. Also I disliked the large receivables balance, and noted a bad debt write-off, and change in CEO.The highlights make it sound as if the operating loss was modest, at £0.2m, but just look at all the adjusting items below. Horrible!Balance sheet – this looks pretty dreadful too. Net assets are down sharply to…

  • Illiquidity as a Stock Return Factor [PREMIUM]

    Does the original 1963-1997 study identifying (Amihud) illiquidity as a stock pricing factor hold in recent data? In their December 2016 paper entitled “Illiquidity and Stock Returns: Cross-Section and Time-Series Effects: A Replication”, Lawrence Harris and Andrea Amato replicate the original research and extend it to 1998-2015 data. As in the prior study, they: (1) each month measure More

  • Small Cap Value Report (Thu 16 Feb 2017) – ZYT, TRI, ALY

    Good morning!It’s Paul here. I arrived back in the UK at about 4:30 this morning, after a very pleasant overnight flight on an A380, from Hong Kong. I’ve been looking forward to my first flight on an A380, and really enjoyed it. It was very quiet on the upper deck, with little engine noise, so I managed to sleep for some of the journey. Hence me being sufficiently with-it to be able to do some writing about small caps this morning. Also I limited myself to only 4 glasses of champagne on boarding the plane, which means a fairly clear head today!Thanks to Graham for holding the fort whilst I was away. It was my first ever trip to the Far East, but definitely won’t be my last. I absolutely loved Hong Kong – clean, modern, marvellous service, and full of pleasant, courteous people – what more could you wish for? I’m sure many (probably most) readers here have been there too.Right, on to today’s small cap news.Zytronic (LON:ZYT)Share price: 385p (pre market opening)No. shares: 15.9mMarket cap: £61.2m(at the time of writing, I hold a long position in this share)AGM Trading update – a brief…

  • Small Cap Value Report (Thu 16 Feb 2017) – ZYT, TRI, ALY, JPR

    Good morning!It’s Paul here. I arrived back in the UK at about 4:30 this morning, after a very pleasant overnight flight on an A380, from Hong Kong. I’ve been looking forward to my first flight on an A380, and really enjoyed it. It was very quiet on the upper deck, with little engine noise, so I managed to sleep for some of the journey. Hence me being sufficiently with-it to be able to do some writing about small caps this morning. Also I limited myself to only 4 glasses of champagne on boarding the plane, which means a fairly clear head today!Thanks to Graham for holding the fort whilst I was away. It was my first ever trip to the Far East, but definitely won’t be my last. I absolutely loved Hong Kong – clean, modern, marvellous service, and full of pleasant, courteous people – what more could you wish for? I’m sure many (probably most) readers here have been there too.Right, on to today’s small cap news.Zytronic (LON:ZYT)Share price: 385p (pre market opening)No. shares: 15.9mMarket cap: £61.2m(at the time of writing, I hold a long position in this share)AGM Trading update – a brief…

  • Inflation Forecast Update

    The Inflation Forecast now incorporates actual total and core Consumer Price Index (CPI) data for January 2017. The actual total (core) inflation rate for January is much higher than (higher than) forecasted.

  • Small Cap Value Report (15 Feb 2017) –

    Good Morning,Today, I intend to cover:Tracsis (LON:TRCS)Animalcare (LON:ANCR)Hargreaves Services (LON:HSP)Qinetiq (LON:QQ.)Koovs (LON:KOOV)Cheers,GrahamTracsis (LON:TRCS)Share price: 402.5p (-13%)
    No. shares: 27.8mMarket cap: £112mTrading Update(work-in-progress)More to follow.

  • Small Cap Value Report (15 Feb 2017) – TRCS

    Good Morning,Today, I intend to cover:Tracsis (LON:TRCS)Animalcare (LON:ANCR)Hargreaves Services (LON:HSP)Qinetiq (LON:QQ.)Koovs (LON:KOOV)Cheers,GrahamTracsis (LON:TRCS)Share price: 402.5p (-13%)
    No. shares: 27.8mMarket cap: £112mTrading UpdateThis is a profit warning that’s not a profit warning – an announcement that there might be a profit miss, depending on H2, after a tricky H1.But the market’s reaction tells us that plenty of investors think that the risk of a H2 miss is now pretty big!Overview:Group revenues for the six months to 31 January 2017 were c. £15.5m
    (2016: £13.1m*), and EBITDA is expected to be slightly ahead of the
    previous period (2016: £3.2m*) as is Adjusted Pre Tax Profit (2016:
    £2.9m*).Rail Tech amp; ServicesThe key warning is as follows:Due to longer sales cycles associated with higher value products
    combined with changes in the Department for Transport’s franchise bid
    timetable, some sales anticipated to take place…

  • Small Cap Value Report (15 Feb 2017) – TRCS, ANCR

    Good Morning,Today, I intend to cover:Tracsis (LON:TRCS)Animalcare (LON:ANCR)Hargreaves Services (LON:HSP)Qinetiq (LON:QQ.)Koovs (LON:KOOV)Cheers,GrahamTracsis (LON:TRCS)Share price: 402.5p (-13%)
    No. shares: 27.8mMarket cap: £112mTrading UpdateThis is a profit warning that’s not a profit warning – an announcement that there might be a profit miss, depending on H2, after a tricky H1.But the market’s reaction tells us that plenty of investors think that the risk of a H2 miss is now pretty big!Overview:Group revenues for the six months to 31 January 2017 were c. £15.5m
    (2016: £13.1m*), and EBITDA is expected to be slightly ahead of the
    previous period (2016: £3.2m*) as is Adjusted Pre Tax Profit (2016:
    £2.9m*).Rail Tech amp; ServicesThe key warning is as follows:Due to longer sales cycles associated with higher value products
    combined with changes in the Department for Transport’s franchise bid
    timetable, some sales anticipated to take place in…

  • Small Cap Value Report (15 Feb 2017) – TRCS, ANCR, HSP

    Good Morning,Today, I intend to cover:Tracsis (LON:TRCS)Animalcare (LON:ANCR)Hargreaves Services (LON:HSP)Qinetiq (LON:QQ.)Koovs (LON:KOOV)Cheers,GrahamTracsis (LON:TRCS)Share price: 402.5p (-13%)
    No. shares: 27.8mMarket cap: £112mTrading UpdateThis is a profit warning that’s not a profit warning – an announcement that there might be a profit miss, depending on H2, after a tricky H1.But the market’s reaction tells us that plenty of investors think that the risk of a H2 miss is now pretty big!Overview:Group revenues for the six months to 31 January 2017 were c. £15.5m
    (2016: £13.1m*), and EBITDA is expected to be slightly ahead of the
    previous period (2016: £3.2m*) as is Adjusted Pre Tax Profit (2016:
    £2.9m*).Rail Tech amp; ServicesThe key warning is as follows:Due to longer sales cycles associated with higher value products
    combined with changes in the Department for Transport’s franchise bid
    timetable, some sales anticipated to take place in…

  • Small Cap Value Report (15 Feb 2017) – TRCS, ANCR, HSP, QQ., KOOV

    Good Morning,Today, I intend to cover:Tracsis (LON:TRCS)Animalcare (LON:ANCR)Hargreaves Services (LON:HSP)Qinetiq (LON:QQ.)Koovs (LON:KOOV)Cheers,GrahamTracsis (LON:TRCS)Share price: 402.5p (-13%)
    No. shares: 27.8mMarket cap: £112mTrading UpdateThis is a profit warning that’s not a profit warning – an announcement that there might be a profit miss, depending on H2, after a tricky H1.But the market’s reaction tells us that plenty of investors think that the risk of a H2 miss is now pretty big!Overview:Group revenues for the six months to 31 January 2017 were c. £15.5m
    (2016: £13.1m*), and EBITDA is expected to be slightly ahead of the
    previous period (2016: £3.2m*) as is Adjusted Pre Tax Profit (2016:
    £2.9m*).Rail Tech amp; ServicesThe key warning is as follows:Due to longer sales cycles associated with higher value products
    combined with changes in the Department for Transport’s franchise bid
    timetable, some sales anticipated to take place in…

  • Small Cap Value Report (15 Feb 2017) – TRCS, ANCR, HSP, QQ., KOOV, RFX

    Good Morning,Today, I intend to cover:Tracsis (LON:TRCS)Animalcare (LON:ANCR)Hargreaves Services (LON:HSP)Qinetiq (LON:QQ.)Koovs (LON:KOOV)Cheers,GrahamTracsis (LON:TRCS)Share price: 402.5p (-13%)
    No. shares: 27.8mMarket cap: £112mTrading UpdateThis is a profit warning that’s not a profit warning – an announcement that there might be a profit miss, depending on H2, after a tricky H1.But the market’s reaction tells us that plenty of investors think that the risk of a H2 miss is now pretty big!Overview:Group revenues for the six months to 31 January 2017 were c. £15.5m
    (2016: £13.1m*), and EBITDA is expected to be slightly ahead of the
    previous period (2016: £3.2m*) as is Adjusted Pre Tax Profit (2016:
    £2.9m*).Rail Tech amp; ServicesThe key warning is as follows:Due to longer sales cycles associated with higher value products
    combined with changes in the Department for Transport’s franchise bid
    timetable, some sales anticipated to take place in…

  • Trading Price Jumps [PREMIUM]

    Is there an exploitable short-term momentum effect after asset price jumps? In his January 2017 paper entitled “Profitability of Trading in the Direction of Asset Price Jumps – Analysis of Multiple Assets and Frequencies”, Milan Ficura tests the profitability of trading based on continuation of jumps up or down in the price series of each of four currency More

  • SIF Portfolio: I’m tempted by Rio Tinto amp;amp; Sirius Real Estate

    I decided last week to follow Jim Slater’s example and relax my valuation criteria slightly. This left me with a choice of five stocks to consider adding to the SIF Portfolio this week.
    If you missed last week’s article, I’m experimenting with reducing the minimum earnings yield of my SIF screen from 8% to 6% and increasing the maximum rolling PEG ratio to 1.3. No new stocks have qualified for my screen for four weeks, and the portfolio’s cash balance is becoming excessive.
    You can see the results of the relaxed screen here.
    Too much overlap
    One of the companies which qualifies for the relaxed version of the screen is steelworks group Severfield. Last week’s comments suggested that this is a popular pick with Stockopedia users. The shares have nearly doubled since July and boast a StockRank of 95. The outlook is still improving, but the SIF portfolio already has five industrial stocks.
    Of these, John Laing operates in the same Construction amp; Engineering industry sector as Severfield, while Flowtech Fluidpower is also exposed to the construction market cycle. I’ve had to rule out Severfield to avoid excessive duplication. Engineering services group

  • StockRanks return over 100% in 4 years… how have you got on?

    After a year of treading sideways, and mostly lagging the market, since June 2016 shares ranked 90+ by StockRank on the LSE have rocketed in price.  Brexit was the trigger for a general surge in share prices on both sides of the Atlantic… but the top ranked set of stocks has significantly outperformed.   The 90+ ranked set has risen 36% in this timeframe versus 22% for the FTSE All Share.This recent move has now taken the price return for 90+ ranked UK shares to 109.7% in under 4 years – a 21% annualised return.  These are for quarterly rebalanced portfolios, but even the annually rebalanced portfolios are up by more than 95% in the same timeframe.  While transaction costs are not included in these calculations, neither are dividends which largely offset the transaction cost lag.This is a significant milestone.  The ranking strategy behind the UK StockRanks is a simple factor investing framework that analyses the quality, value and momentum of each share. Given that these factors are well described and understood in publicly available research papers on websites like ssrn, efficient market theory suggests that outperformance like this should be impossible.  Institutional investors have certainly…

  • Small Cap Value Report (14 Feb 2017) –

    Good afternoon!I’m planning to cover a couple of today’s trading updates, plus the full year results from Spectris. Feedback is very welcome as usual – especially in helping me to understand which companies are most in demand, which will influence future reports.Cheers,GrahamSpectris (LON:SXS)
    Share price: 2500p (+0.43%)
    No. shares: 119mMarket cap: £2,980m(work-in-progress)

  • Small Cap Value Report (14 Feb 2017) – SXS, PEB

    Good afternoon!I’m planning to cover a couple of today’s trading updates, plus the full year results from Spectris. Feedback is very welcome as usual – especially in helping me to understand which companies are most in demand, which will influence future reports.Cheers,GrahamSpectris (LON:SXS)
    Share price: 2500p (+3%)
    No. shares: 119mMarket cap: £2,980mI’ll keep this brief since everything seems to be going pretty well for Spectris at the moment, after a difficult year but with an improving trend in the final quarter. Like-for-like sales finished down by 2%.This is a global instrumentation/controls business – giving exposure to a wide range of industrial markets.There is currently some change afoot:Our strategy is evolving from being the supplier of products towards the provision of complete solutions (a combination of hardware, software and services) to our customers,
    based on our deep application and technical expertise. As our customers
    focus on their core activities and seek to reduce cost and complexity,
    they have a greater need to outsource services to a trusted, reliable
    partner who is able to deliver high quality technical solutions.Project uplift: A…

  • Small Cap Value Report (14 Feb 2017) – SXS, PEB, RWS

    Good afternoon!I’m planning to cover a couple of today’s trading updates, plus the full year results from Spectris. Feedback is very welcome as usual – especially in helping me to understand which companies are most in demand, which will influence future reports.Cheers,GrahamSpectris (LON:SXS)
    Share price: 2500p (+3%)
    No. shares: 119mMarket cap: £2,980mI’ll keep this brief since everything seems to be going pretty well for Spectris at the moment, after a difficult year but with an improving trend in the final quarter. Like-for-like sales finished down by 2%.This is a global instrumentation/controls business – giving exposure to a wide range of industrial markets.There is currently some change afoot:Our strategy is evolving from being the supplier of products towards the provision of complete solutions (a combination of hardware, software and services) to our customers,
    based on our deep application and technical expertise. As our customers
    focus on their core activities and seek to reduce cost and complexity,
    they have a greater need to outsource services to a trusted, reliable
    partner who is able to deliver high quality technical solutions.Project uplift: A…

  • Small Cap Value Report (14 Feb 2017) – SXS, PEB, RWS, PDG

    Good afternoon!I’m planning to cover a couple of today’s trading updates, plus the full year results from Spectris. Feedback is very welcome as usual – especially in helping me to understand which companies are most in demand, which will influence future reports.Cheers,GrahamSpectris (LON:SXS)
    Share price: 2500p (+3%)
    No. shares: 119mMarket cap: £2,980mI’ll keep this brief since everything seems to be going pretty well for Spectris at the moment, after a difficult year but with an improving trend in the final quarter. Like-for-like sales finished down by 2% (they had been running at -4% prior to the final quarter).This is a global instrumentation/controls business – giving exposure to a wide range of industrial markets.There is currently some change afoot:Our strategy is evolving from being the supplier of products towards the provision of complete solutions (a combination of hardware, software and services) to our customers,
    based on our deep application and technical expertise. As our customers
    focus on their core activities and seek to reduce cost and complexity,
    they have a greater need to outsource services to a trusted, reliable
    partner…

  • Small Cap Value Report (14 Feb 2017) – SXS, PEB, RWS, PDG, ALT

    Good afternoon!I’m planning to cover a couple of today’s trading updates, plus the full year results from Spectris. Feedback is very welcome as usual – especially in helping me to understand which companies are most in demand, which will influence future reports.Cheers,GrahamSpectris (LON:SXS)
    Share price: 2500p (+3%)
    No. shares: 119mMarket cap: £2,980mI’ll keep this brief since everything seems to be going pretty well for Spectris at the moment, after a difficult year but with an improving trend in the final quarter. Like-for-like sales finished down by 2% (they had been running at -4% prior to the final quarter).This is a global instrumentation/controls business – giving exposure to a wide range of industrial markets.There is currently some change afoot:Our strategy is evolving from being the supplier of products towards the provision of complete solutions (a combination of hardware, software and services) to our customers,
    based on our deep application and technical expertise. As our customers
    focus on their core activities and seek to reduce cost and complexity,
    they have a greater need to outsource services to a trusted, reliable
    partner…

  • Intraday Stock Price Momentum and Reversal Trading [PREMIUM]

    Are there profitable intraday stock price momentum and/or reversal strategies? In his January 2017 paper entitled “Intra-Day Momentum”, Oleg Komarov examines the profitability of intraday times series (intrinsic or absolute) and cross-sectional stock price momentum and reversal strategies. Time series strategies involve predicting the behavior of a stock based on its own past return. Cross-sectional strategies More

  • Small Cap Value Report (13 Feb 2017) – CALL, EGS, VCP, PLA

    Hi,Paul has sent in comments on four companies, which I’ve pasted below.GrahamCloudcall (LON:CALL)Share price: 84.5p (+10%)No. shares: 20.1mMarket cap: £17mUpdate on Bullhorn Strategic Partnership(PS: at the time of writing, I hold a long position in this share)Looks a bit of  a non-announcement.
    We already know that Cloudcall (LON:CALL) has a close relationship with Bullhorn. So
    announcing that it is expanding that to cover Bullhorn’s US operations
    is no great surprise. Actually I thought this was already the case.No
    financial details are given, and no comment is made about overall
    company performance versus market expectations. Therefore this
    announcement goes into my mental dustbin.eg Solutions (LON:EGS)Share price: 49p (+20%)No. shares: 22.7mMarket cap: £11mTrading update This reads positively, with a strong H2 performance now in the bag (for year ended 31 Jan 2017);Trading
    in the second half of the financial year has been strong,…

  • Salient Past Stock Returns and Future Stock Performance [PREMIUM]

    Do attention-grabbing recent returns reliably indicate overvalued and undervalued stocks? In their December 2016 paper entitled “Salience Theory and Stock Prices: Empirical Evidence”, Mathijs Cosemans and Rik Frehen test the effectiveness of salience theory for predicting stock returns. They hypothesize that investors overweight (underweight) stocks with high (low) attention-grabbing recent past returns, thereby overvaluing (undervaluing) them, and that More

  • Weekly Summary of Research Findings: 2/6/17 – 2/10/17 [PREMIUM]

    Below is a weekly summary of our research findings for 2/6/17 through 2/10/17. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list. More

  • Currency Carry Trade Drawdowns [PREMIUM]

    How frequent, deep and long are currency carry trade (buying currencies with high interest rates and selling currencies with low interest rates) drawdowns, and how can traders mitigate them? In their January 2017 paper entitled “When Carry Goes Bad: The Magnitude, Causes, and Duration of Currency Carry Unwinds”, Michael Melvin and Duncan Shand analyze the worst currency More

  • Small Cap Value Report (10 Feb 2017) – ECM, GNK, JE., RB

    Good morning,It looks like a  quiet news day in terms of the universe of stocks we usually cover here. I’ll see what I can come up with – or let me know if you have any suggestions.Cheers,GrahamElectrocomponents (LON:ECM)Share price: 499p (-1%)No. shares: 441mMarket cap: £2,200mTrading Update (for the four month period ending to 31 January 2017)Revenue growth looks like this:This company has always seemed to have a bit of a low profile among investors, but it’s a really good distributor – “the world’s leading high-service distributor for engineers”, dealing in over half a million products.The shares have gone on a tear higher this year (they started January around 220p) so it’s not in the bargain bucket by any means, but it claims to be the leading distributor in the UK, Europe and Asia-Pac. That’s a position which is worth a premium rating, in my book. Non-GBP income means that this is one of the stocks which has provided fantastic GBP devaluation protection for investors:We continue to expect FY 2017 revenue and…

  • Small Cap Value Report (10 Feb 2017) –

    Good morning,It looks like a  quiet news day in terms of the universe of stocks we usually cover here. I’ll see what I can come up with – or let me know if you have any suggestions.Cheers,GrahamElectrocomponents (LON:ECM)Share price: 499p (-1%)No. shares: 441mMarket cap: £2,200mTrading Update(work-in-progress)More to follow

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