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Love it ragtrade. Thank you.

danl90 - from Paul Scott who writes for the Small Cap Value Report on Stockopedia on 2 March 2021

Cardfactory is a high risk, financially distressed greetings card retailer. The share price was bombed out at about 35p until about a fortnight ago, when something very strange started happening - the share price has doubled!

Has the company successfully resolved its problem bank borrowings? No! That's what makes it so peculiar. The latest update says -

... we continue to engage in constructive discussions with our banking syndicate, who remain supportive of the Company. The banks have provided further waivers in respect of anticipated covenant breaches through until 31 March 2021, taking account of the Company's cash flow projections, subject to certain conditions.

We are engaged on a plan to refinance the Company, and will provide a further update in due course. Coupled with the expected reopening of the vast majority of the store estate during April, the Board is confident the business is well placed to deliver for the benefit of all stakeholders.

So the business is lurching from one month to the next, getting short term covenant waivers from its banks - a highly precarious position to be in. It sounds as if a placing is probably underway as we speak. Therefore the risk to anyone buying in the open market now, is that you end up getting diluted heavily in a discounted fundraising. Personally, I would never chase a share price up where a fundraising is being done, in financial distressed circumstances.

Big shareholders probably cannot sell in the open market because they're likely to have been made insiders, if I'm right about a fundraising probably happening behind closed doors (it couldn't be much clearer from what the company says above).

My opinion - we're in a very frothy stock market at the moment, and share prices are not being driven by fundamentals any more. A good story is all you need. It's exactly like 1998-99, in terms of sentiment & market froth, in my view. The danger with that, is a lot of new investors, who don't really know what they're doing, are learning all the wrong lessons in this type of market, e.g. chasing story stocks, ignoring valuation, ignoring balance sheet risk, bunching together into bulletin board (Reddit?!) story stocks, frothy IPOs going to instant premiums, and all sorts of nonsense in the US markets like Gamestop, Tesla, Bitcoin, SPACs, it's all absolutely classic bull market top type of behaviour.

In that context, who knows what story the bulls in CARD are getting excited by? Could it be that the Moonpig float has reawakened interest in greetings cards? A bear might think that CARD has missed the boat. But a bull might say that CARD has a great opportunity to up its game by becoming the next Moonpig, with a load of nicely cash generative shops too, and low production costs of cards.

danl90 - I think you need to worry more about your money in Cardfactory.

Dow Jone is up nearly 500 points at this moment in time so maybe UK market will be up tomorrow too.

House passage of sweeping bill marks a milestone in the new administration’s efforts to combat the pandemic.

ragtrade - absolutely and well said.

danl90 - as I've already said buy right and sit tight. The rest is simply noise.

Shares are about getting richer slowly and not to get rich quick.

I think you've allowed too much anxiety to control your buys and sells. It looks like you've joined the herd chasing the next big thing.

CardFactory who are up to their ears in debt and operating on a month to month basis. Speculators have gone in big thinking it's going to be the next Moonpig. No thanks.

Boohoo revenue was £600m, PLT was £500m, Nasty Gal was £100m.

Boohoo have already proved they are adept at buying brands on the cheap and making them profitable within two years. I'll stick with Boohoo and continue to get richer slowly.

danl90 - watch and learn. Buy right and sit tight. It seems to me you allow too much anxiety to determine your share buys and sells.

Boohoo is a trend leader who learn from their mistakes and put them better than right. They have driven and passionate management, loads of cash, the know how to buy brands on the cheap and make them profitable within two years.

I've ordered a copy of this book. I'm looking forward to reading it and learning from it too.

I've ordered a copy of this book. I'm looking forward to reading it and learning from it too.

Comment from Paul Scott on this book:-

I'm enjoying 100 Baggers very much, and have nearly finished it now. Literally every chapter is like a refresher course to me, to remind me of the things that matter the most, plus learning plenty of new things too. It's a very light read too, conversational in writing style, and explains concepts very clearly, and with short stories. So I think this book is ideal for investors of all levels of knowledge & experience. Very highly recommended!

I've just got to the bit where Benjamin Graham and John Maynard Keynes almost blew up their portfolios in the early 1930s, after using too much leverage! That certainly made me feel a bit less muppet-like about my own catastrophes in 2008-9. Both of them learned the lessons from their mistakes after the 1929 crash, de-geared, stopped trying to trade, and instead focused on identifying under-priced investments, and stuck with them for the long term. That's very much what I'm also trying to do these days, so hopefully am now on the right track. Like a lot of people, I've spent years exhausting all the other options, before settling on a sensible long-term investment strategy!

Book recommend by Paul Scott who writes for the Small Cap Value Report on Stockopedia.

Here's a comment about this book from a poster on Stockopedia:-

Agree that 100 Baggers by Christopher Mayer is an interesting read

I looked at the first company I joined after university, Racal Electronics, best known for Vodaphone. Racal was run by Sir Ernest Harrison, according to the Guardian if you had invested £1,000 (about £25k in today’s money) in Racal shares in 1961 they would be worth over £14m by the time Harrison sold Racal to Thomson CSF in 2000. As Mayer acknowledges these things are much harder to spot when you are in the middle of them, although to be fair Harrison had a very successful acquisition record.

Mayer makes a compelling argument (using Monster Beverage as an example) for not using stop losses (p190), basically why would you make perhaps the most difficult decision in all investing (when to sell) mechanical.

Select64 - maybe it would be better to give a balanced opinion after reading the book about how to pick 100 baggers that are not Sock Shop or anything like Sock Shop.

Select64 - would you have picked them to be 100 baggers. Hence why you need to read the book and then comment.

https://www.electronicsworld.co.uk/supercapacitors-promise-interesting-future/27401/

Comment from Paul Scott on this book:-

I'm enjoying 100 Baggers very much, and have nearly finished it now. Literally every chapter is like a refresher course to me, to remind me of the things that matter the most, plus learning plenty of new things too. It's a very light read too, conversational in writing style, and explains concepts very clearly, and with short stories. So I think this book is ideal for investors of all levels of knowledge & experience. Very highly recommended!

I've just got to the bit where Benjamin Graham and John Maynard Keynes almost blew up their portfolios in the early 1930s, after using too much leverage! That certainly made me feel a bit less muppet-like about my own catastrophes in 2008-9. Both of them learned the lessons from their mistakes after the 1929 crash, de-geared, stopped trying to trade, and instead focused on identifying under-priced investments, and stuck with them for the long term. That's very much what I'm also trying to do these days, so hopefully am now on the right track. Like a lot of people, I've spent years exhausting all the other options, before settling on a sensible long-term investment strategy!

Book recommend by Paul Scott who writes for the Small Cap Value Report on Stockopedia.

Here's a comment about this book from a poster on Stockopedia:-

Agree that 100 Baggers by Christopher Mayer is an interesting read

I looked at the first company I joined after university, Racal Electronics, best known for Vodaphone. Racal was run by Sir Ernest Harrison, according to the Guardian if you had invested £1,000 (about £25k in today’s money) in Racal shares in 1961 they would be worth over £14m by the time Harrison sold Racal to Thomson CSF in 2000. As Mayer acknowledges these things are much harder to spot when you are in the middle of them, although to be fair Harrison had a very successful acquisition record.

Mayer makes a compelling argument (using Monster Beverage as an example) for not using stop losses (p190), basically why would you make perhaps the most difficult decision in all investing (when to sell) mechanical.

Comment from poster on Stockopedia:-

I think the Boohoo (LON:BOO) factory in Leicester serves multiple purposes and the actual output of products that the workers will make is almost the least important. The main one is to be a demonstration and training centre for improving supply-chain skills, open to Boohoo (LON:BOO) supplier companies to send their apprentices and existing workforce. Then you have the value of a tangible commitment to Leicester, tidying up what looks like a fairly derelict site and showing that Boohoo (LON:BOO) is a responsible corporate citizen. If this can help to preserve Boohoo's competitive advantage while maintaining acceptable labour standards, it will have been a good investment IMHO.

Completely agree that this does not affect the US imports situation. That will be addressed by undertaking proper supply chain audits, which Boohoo (LON:BOO) have now put in place. Once you can show that all supplies are traceable and all suppliers are audited, then you have the evidence to refute any allegations of exploitation or human rights abuses.

Select64 - More from the IC link:-

The explosion of interest in hydrogen has led to some rather punchy valuations. ITM’s shares have been rocketing up since mid-2019, rising from around 35p to 523p now and translating to a market cap of close to £3bn. That’s quite astonishing when you consider that ITM is loss-making and analysts predict it will only swing to a profit in 2023 with an EPS of merely 0.04p. Meanwhile, fuel cell maker AFC Energy (AFC) has a market cap of over £500m, but it didn’t actually book any revenue from product sales in 2019 or the first half of its 2020 financial year.

Select64 - from IC link below:-

Hydrogen has a history of false dawns and the spectacular share price collapse of electric truck start-up Nikola (US:NKLA) should serve as a cautionary tale. “At one point, they were a $40bn company and yet they don't even have a truck,” says Lucas White, portfolio manager for GMO Asset Management’s resources and climate change strategies. “They don't even have a prototype for a truck, they have an idea for a prototype for a truck.”

Investing in hydrogen remains highly speculative and it is unclear how significant hydrogen will ultimately be to the global energy picture. While Toyota (JP:7203) recently launched its second-generation hydrogen-powered car, it is questionable whether hydrogen will really take off in the passenger vehicle market given batteries’ head start. But hydrogen could shine in areas where electrification is less appropriate such as steel and cement making and shipping.

Given the uncertainty, there are less risky ways of playing the hydrogen theme. Johnson Matthey's (JMAT) pivot towards hydrogen holds long-term potential, while renewable energy stocks such as Ørsted (DK:ORSTED) and wind turbine supplier Vestas (DK:VWS) will benefit from the overall higher demand for clean power.