Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
In 5 years or so, with rates at say 3.5% this will look like a much better investment. It's just the cycle. Would likely be nearer the 120p mark at that sort of rate, but it might take a while to get there. Obtaining a yield of 8% will look very astute in say 3/4 years. I don't think we are heading back to 0%-1% anytime soon, if ever, but can easily see things looking more normalised once rates have started to bite - which they will.
Steph - I cannot help thinking that you are way too optimistic on this. Back in November 2022 you said 'we are heading for a trading range of 5 to 6 quid (2/3rds conservative NAV) by next week' when we will have final half year results. Then upwards only as the general market improves due to decreases in inflation taking pressure off interest rates and then a GROW specific boost with our year end results in may. I expect the panic on valuations will be mostly over and our conservatively calculated NAV will start looking a bit overdone on the downside. I think we will get back to 11.8 within 18 months and 20 quid by 36.' - today 6 months or so have passed and this is at 265p. There is virtually no chance we will be anywhere near £12 within 12 months. Inflation in the UK has surprised on the upside and the BOE rate rises are now likely to peak later than originally anticipated, the NAV has gone down from where you expected 6 months ago. This will likely gyrate between £2 and £5 (more likely £3-£4) for the next 6-12 months, with significant downside risk if there is a big blow up at one or more of the portfolio - Revolut has the potential to drop significantly, Graphcore is also in that category - no one has a clue what it's actually worth. Most of the upside looks like it has been reflected - any fundraise gets reflected immediately. I think we will see NAV move down a little more in the next big update as market conditions adjust to normalised rates of 4-6% for a bit longer than originally anticipated.
Ps I had a significant holding in Wickes (for me at least!) - this will defintely impact sales - you only need to read the Twitter posts to see that. How big is the question - I guess we will know come the next trading update.
I'm out. Not prepared to invest in a company that makes grand political / activist gestures at the expense of investors / customers etc. Insulting customers is never a good idea full stop. It's not about a person buying a pot of paint - it's about those customers doing a big project that feel strongly about things shopping elsewhere. Good luck to those that remain. Very disappointed with management here - I didn't sign up or buy these shares for political excitement or involvement.
I just wish I had shorted Cazoo!!!! That is a serious miss on my part and would have been very very lucrative indeed, even with say a mere £5k invested in the short position at the float price. I have no idea what such a position would have netted me, but it would be significant.
It is an embarrassment. For me it came down to the valuation initially, compared to the listed car dealers who have done online for years. The valuation was absurd. You don't acquire or take over a marketplace overnight, where physical presence is actually very important to many customers - even Amazon didn't happen overnight. Cazoo thought it could do it overnight, but take up for online purchases of vehicles was always going to be a lot lower than it is for books / CDs etc. It's the second biggest purchase most people make in a lifetime after a house. I also have reservations about Revolut - they have qualified financial statements which is a big red flag to me. They are struggling to obtain a UK banking licence and have had multiple senior executives depart the company over the course of the last couple of years. It doesn't read well at all particularly given the size of it's valuation. I respect Alex Chesterman for persuading investors that Cazoo was indeed worth $7bn only a couple of years ago - those persuaded included some incredibly bright, rich and successful investors.
Look at Cazoo's latest filing. Material weaknesses in it's financial reporting over past two years, losses of £839m last year on revenues of £1.24bn. $630m of convertible loan notes it issued to investors that it is liable to repurchase should its shares cease to be listed on NYSE. It's already merged its share capital once and now has a share price of $1.20ish - very close again to the $1 limit to be listed....market cap currently $46m. Only going one way. Very little chance of outside capital coming in. That loss is colossal.
And the Bank of England tells the Treasury is plans to reject Revolut's bid for a banking licence.....
I have never known of anyone being sued for an investor presentation without making completely fictitious statements - I know of one example of the latter - and even they were not sued (in the US!). Rather than were fined / censured by a regulator. That presentation is based on their current view - that can change based on anything - interest rates, prevailing market conditions, war escalation, SVB etc. There will also be a healthy dose of optimism in the presentation. I have a very small holding, but won't be toping up at present. I think I will still be able to buy cheaply if I wish after a little more is known re some of the larger component portfolio companies. Certainly in no rush and can collect dividends or interest at the moment at a decent rate on the capital parked elsewhere.
Big tech stocks are trading at 20 to 70 times 2023 earnings whilst growing at single digit rates - that's not great at all for future returns. It's about the price you buy at!! Nasdaq has rebounded 20% from it's 2022 low, but remains 24% below it's 2021 high. Looks like 2000-2003 again - lots of little rallies, but Nasdaq didn't get back to its March 2000 peak until 2015!! It's also unlikely the leaders from the last big run-up will be the leaders in the next one. That's growing at single digit rates in an environment where rates are normalised.
Opportunity cost of holding here also considerable with inflation at circa 10% and cash returning circa 5% if you look hard enough - risk free.
Valuation metrics change as a company approaches the point at which it should start to be profitable - growth does not mean a higher valuation. It's much more about likely profit trajectory - it's no longer based on the hope or story, but the reality. That's why Cazoo is where it is - the story was just that and bore no resemblance to the reality. There will be a lot more of those. Graphcore is likely worth zero - not sure what valuation we have assigned that in the books. Revolut likely about $3-$5bn in reality, again not sure how that correlates to what we have in.
Pause in rates or no pause - the share price here won't be advancing significantly in my opinion. I didn't expect it to on the recent update / results. I expect a further decline in NAV at the next update as some of the more problematic investments crystallise decreases etc and valuations fail to increase / gain further traction. Muted returns here for the foreseeable future at best in my opinion.
Steph - I know you expected a big jump post results. I don't think you will be getting that. So about a 15% drop in NAV on prior year. I think we will see the same in the next update - it's less dramatic than recognising in one go. I will be looking for values assigned to Graphcore and Revolut to guide me etc. If Graphcore is zero with other investors why is it more here? Have we really taken enough red pen to the valuations. I fear we haven't and as a result they are betting on a market turn prior to having to recognise in full. Time will tell. Could easily see another 15-25% at the next update etc. That's why we have the discount we have!
I (personally) think Revolut needs cutting further than it has been. In reality it's likely nearer is prior valuation of around $5bn and that's if it succeeds in what it set out to. $33bn was crazy and $18bn is almost as crazy. Whether they need money or not is irrelevant to what they are really worth - regardless of the last fundraise. It's a bit like avoiding opening your exam results - the results are still real whether you open the letter or not....it won't change anything.
The time to short oil was definitely not at $22 per barrel - $120-$140 maybe....!! That's easy money if you have a long enough time horizon. Problem is it costs money to maintain a short making it unprofitable without a big movement.
The problem I have here is that a number of the companies high in our NAV list I don't believe in. Graphcore could easily go to zero - Sequoia has already written off per The Times. I believe Revolut is in for a considerable mark down at some point. Both of those companies make up a considerable portion of our NAV. Aiven and Coachhub look vulnerable to the same fate at some point as well. That's why I am negative. The smaller companies I have no visibility over, other than assuming it's a representative portfolio so will perform in line with that. There are some others that look likely to hold etc, but I don't think it is realistic to assume that they will support maintenance or even an increase in NAV given the likely detractors. My view obviously.
It might be possible to suppress the share price of say a £10-£20m market cap stock - not something of this size, not in the amounts a PI has to spend as a general rule - sure if it's fund managers talking yes. I have never shorted anything - the closest I get is not holding something, or selling it. Shorting a mugs game unless it's a dead cert. The time to short (if at all) is when the market is flying high. Could have made an awful lot of money shorting Cazoo, WanDisco etc. Not for me. I don't short, don't use leverage etc.
I believe Revolut will also be in for a large valuation haircut at some point. Completely unproven in terms of how it will justify the current valuation. Likely worth only a fraction of what it is included in the books at. Sequoia backed Apple and Google in the early years - considered heavyweight and no fools. Graphcore has no revenue to speak up - just a cash burner at present.
Not sure how accurate - but Sequoia Capital has written down the value of Graphcore to zero - that was reported in the times around 3 or 4 days ago........that will be quite a write off here....around 4% if it is required.