So, another Mello has been and gone. Already the next one is underway, with May being the likely month. It was a great event, with a wide variety of companies – some of which left many investors highly impressed.
Blue Whale Capital’s Stephen Yiu was there, who said his edge was doing his own research. I’m confused as to how that is an edge, as surely everyone should be doing their own research, and not reading paid-for pieces, but I suspect Stephen is not telling us everything!
Stockopedia’s Ed Croft gave a great talk on “What Went Wrong at Woodford?”. I didn’t attend – I watched it online instead on the train to London, and it’s worth watching if you have an hour and a half spare. It’s a highly analytical piece, and very informative.
Many of the talks were filmed by PI World, and they are available on the website. One talk that was very popular was Creightons plc.
Creightons
Creightons develops and manufactures toiletries. It’s a small business, that has been a fantastic performer in recent years, rising from around 1p to hitting heights of 50p recently.
My first buy was at 6p, which I then sold at 14p thinking I was clever. If only I’d just forgotten about them instead! My most recent buy was at 43p, for a trade, which I have now sold and gotten rid of.
The company also surely holds the award for what is the best kind of profit warning – Creightons was doing so well that they couldn’t keep up with demand, and had to outsource manufacturing, thus hurting their margins. At a lowly multiple of 10x earnings and a market cap of £27 million, I think the shares could go higher and I’ll continue to trade them.
Franchise Brands
Franchise Brands is another company that has enjoyed success on the stock market recently.
I’m long here – the stock broke out at 100p and I bought. I spoke to the CFO, Chris Dent, who thinks that the growth can continue. The stock is priced high at 37x earnings, but it also seems to be a robust and quality business. Unfortunately, in this market, quality is rarely cheap. We’re also in an unprecedented age of zero and negative interest rate returns. If you want gains, there’s nowhere else to go other than in stocks. And you’re not exactly going to buy junk, are you? Franchise isn’t a bargain, and it’s probably overvalued, but that doesn’t mean it can’t go up.
IFRS 16
Graham Neary gave a talk on IFRS 16 – a divisive topic!
IFR16 will replace the previous IAS 17 standard, which allowed discretion in determining whether a lease was either an operational or a financial lease. The former could be held off the balance sheet, and the latter could not.
In my opinion, leases are a cost of doing business. If I own a factory, and make an item of clothing, and sell it – I can’t just log the electricity costs as an asset. I get the point that some leaseholds are highly competitive, and some companies consider specific leases as an asset to the business – but they’re not. It’s a cost.
Paul Scott did tell me after the event that we’d have to have a proper talk on this when we’re not full of beer, and he told me I was wrong. Paul was CFO of Pilot, a retail chain, and I can see his points, but still disagree! Accounting is never straight forward, and so caution must always be exercised when looking at accounts.
I personally find trawling through accounts rather laborious, and thankfully as a trader I don’t much have to. Charts tell me what I need to know.
Author Michael Taylor’s website www.shiftingshares.com contains numerous tutorials on how to trade and invest as well as his free book – ‘How to Make Six Figures in Stocks’.
