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Small Cap Value Report (9 Nov 2016) – STAF, ACRL

Wednesday, November 9, 2016 12:09
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Good afternoon!

What an extraordinarily exciting US election night last night. Trump has won! It felt to me almost like a re-run of Brexit, the way things panned out. Early on, the commentators on lots of TV channels were all saying how Trump would struggle to win key states. Then, as the evening progressed, Trump suddenly pulled into the lead in the key state of Florida, and bemused talking heads on TV had to start eating their words!

It had looked as if Trump was doomed a few minutes earlier, and I’d prematurely closed out most of my hedges against a Trump victory, seeking to limit the losses. So I scrambled to put those hedges back on, as quickly as possible, and thankfully scooped up a nice haul by the time I flaked out at c.4:30 am.

My thinking by that stage was that the market had reacted adversely to the shock of a Trump victory, but would probably stabilise quite quickly – as it did with Brexit (well, that took 2-3 days to stabilise). Putting aside the dreadful, divisive things Trump has said in this campaign, he’s likely to be a fairly business-friendly President, I imagine. Also his more extreme ideas are probably (hopefully) just bluster, rather than firm intentions.

Therefore, I really don’t see any reason for a major market sell-off now. More likely the opposite actually – a  relief rally that the uncertainty is over. Plus Trump has made a conciliatory speech today that seems to have calmed nerves.

After Brexit, America is now the latest country where voters have stuck two fingers up to the political elite, and rejected their pro-globalisation agenda. You can see why too. Globalisation has just hollowed out manufacturing in the west, and sent the jobs to China. How is that a good thing for working class people who previously enjoyed stable, and relatively well-paid jobs?

Globalisation is great for the affluent middle class of course – a much higher standard of living from all the cheap consumer goods we import. Plus a plentiful supply of service sector staff from abroad, to cater for our every need – be it low paid waiters, gardeners, maintenance people, drivers, etc.

I can see why the working class are rebelling against all this, and to a certain extent wonder why it has taken so long?

Here is the link to yesterday’s report, which I updated further in the evening to have a look at bog roll manufacturer Accrol Group (LON:ACRL) .

That was a new issue in Jun 2016, and I’d been meaning to look at it for a while. I  looked through the admission document, uncovering some interesting points. Also I reported on the latest trading update published earlier this week.

As an aside, admission documents are weighty tomes, but actually you can skim through them quite quickly (say 10-20 minutes is usually enough). Large sections can be skipped. I might do a video demonstrating this, when time permits. There are lots of vital pieces of information in admission documents, so it’s remiss to not have read them for shares we hold.

Overall, it may be trading well now, but I see significant risks ahead with ACRL shares, so it doesn’t appeal to me.

Staffline (LON:STAF) – (at the time of writing, I hold a long position in this share) - I am preparing for my next CEO interview, later today, with Andy Hogarth of staffing group, Staffline. It should be interesting to hear his perspectives re Brexit.

Tracsis (LON:TRCS) – my annual interview with John McArthur is also looming, so I’ll be asking for your questions for this one too shortly.

Profit warning analysis

A team of analysts at Stockopedia HQ have been working very hard, for months, to analyse what happens after profit warnings. This is something I wanted to analyse myself, but couldn’t handle the sheer volume to workload, so had to abandon it.

So I’m delighted that the project has been completed by the guys at HQ. Ed has given me a sneak preview of some of the results, and it’s very interesting indeed. I won’t spoil it by revealing anything now.

If you haven’t already, why not sign up for Ed’s free webinar, where he will present the findings of this original research project. The webinar is a week today, 16 Nov 2016.

Here is the sign up link (thanks to Gus for finding the link!)

Flybe (LON:FLYB)

Share price: 36.8p (up 5% today)
No. shares: 216.7m
Market cap: £79.7m

Work in progress – I just published the first draft to catch the 1pm email deadline.

Company news will follow later.



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