Member Info for sageoflondon

Looks like £5 is the floor for the moment here. 5% down a bit of a shocker. Nasdaq is down around 3.5% at present. SMT down around 5%, so similar to Grow.

I have always seen drones as quite niche - not needed in higher density areas, but ideal in rural areas (providing the base is close enough for the power to last). Will be interesting to see the actual economics.

I'm not assuming the market falls much more at all with my price estimate for this. That has the market at about evens.

I don't share your confidence that this will be back over £11 within the year. That is a long way off in my view. I think we have the potential for £4 to £8 by the end of the year, but I see somewhere towards the £4.75-£6.5 range as much more likely. A 30% discount to NAV is perfectly normal in times of market stress or even just a more subdued market. Therefore a 10% fall in NAV with a 30% discount gets me to that figure, with an allowance either side. That's based on the market not crashing completely.

HL are currently the biggest in the UK - ultimately they grew fast and big, but not everything grew with it - i.e. they didn't keep investing. They will catch that up. I wouldn't invest (I still think they are expensive). Personally the platforms AJ Bell and HL aren't even comparable - HL way more user friendly - I use both. I put my real long terms holds in AJ Bell as it's not as easy to navigate / access etc - in the hope that I won't be buying and selling as much in there. I never trade as such so don't need a trading account. Pretty much everything I have in SIPPS and ISAs, LTIPs/work accounts.

I also want everything in a couple of places (for safety) - I want to manage my childrens JISA's, wife's SIPP, LISA, ISA etc. A lot of providers don't offer all of those things. It's also really difficult to switch LISA providers etc. It's painful. I want somewhere that deals with transfers effectively - I regularly transfer from my work pension to my SIPP, emptying is once every year or so.

The main thing I want is a provider that is financially stable - I'm not talking about share price but overall solvency ratio etc. A broker going bust is painful at best, catastrophic at worst. I also want someone I can talk to when required a couple of times a year. Freetrade is a bit opaque as it isn't listed - I'm not worried about saving £500 on my annual transactions really. Irrelevant to me.

I use HL. I use them because their platform is good. It's way better than AJ Bell which I also use. I want something that works well - the HL platform is second to none. If you can show me a better one I will trial it. I am probably ageing - well about 10 years away from retirement (early) - but it's that group of individuals and those who are already retired than generally have the higher balances. I'm not interested in crypto, betting on markets etc. I want a really solid dependable platform, no financial advice (but HL do offer this - they certainly contact me often enough and I politely decline).

Hargreaves Lansdown have to be the biggest in the UK? I am an investor rather than a trader - it's the SIPP offerring, ISA offerring, LISA offerring, ability to pay dividends gross in a pension using a W8 etc. Their admin is excellent I have found. Out of interest what do you believe they haven't invested in? I don't use Freetrade as I don't believe it is capable of offering me what I currently get?

Agree - but I don't think Grow has the scale at present to really fufill that role. You do have to be in it to win it. But it's precisely that - there is a huge gamble bettering on earlier stage companies. That's what it's about - I was just saying it's very unrealistic to assume there won't be failures to - that's the model. It's also really hard to invest when the market is hot. It's almost better to have a really depressed market providing you have plenty of dry powder / liquidity. The market probably isn't quite there yet, but it's only going to take a couple more pullbacks for it to get there.

It doesn't have to be a publicly quoted fund that gets us to where we need to be - lots of private equity around as well - there always was some government investment in this.

The Grow portfolio will likely contain a number of those types of companies - a virtual impossibility for it not to. The returns from a portfolio like this will have a considerably bigger range than say an investment trust with mature cash positive profitable companies. It's part of the model that there are those that fail - there won't be one fund out there where all investments succeed. A relatively high proportion will fail - cheap access to cash and over enthusiastic funding rounds and investors mean they are likely to keep running for longer. All plants is a prime example - I see that going in a similar direction to Parsley Box - could be wrong.

Whilst I agree with most of that I am not sure I agree that we have run out of investments that can comfortably pay higher interest rates - there are plenty of these, but they aren't risk free. There is also plenty of demand to borrow for productive enterprise - well in most instances semi productive. Leverage levels in parts of the economy verge on extreme - a great example is the AA - loaded with PE debt even after de-listing. At normal rates it will find things very difficult - it already is. Buying assets like homes isn't just down to rates (although those have driven prices) - government support for the housing market has also driven prices. The market would have tanked long ago without that. Once technology companies are judged on the same metrics prices will likely look very different - not all technology is equal and there are still an awful lot of overvalued companies out there - funded at the peak of the market with no real competitive edge or realistic possibility of becoming net profit and cashflow positive when all of the relevant costs are included. It's really easy to grow revenue and gross profit when this is funded via capital raised with investors ignoring the overall return profile. More realistic valuations will make investors much more aware of this - a lot won't get funding as a result. The easy times for average ideas are gone. A lot of what is currently out there will turn to dust, with a handful of big winners that actually advance society and the economy - rather than just an overinflated share price that buys an almost infinite amount of time to keep telling investors they will be profitable one day, almost, next three years etc....

It's still a bit of a moot point anyway. Interest rates, regardless, need to get back to something resembling normality rather than a permanent state of very low. Why reward borrowing large amounts, support 'zombie' companies etc with abnormally low rates. That just forces investors and retirees into higher risk areas to get a return on their savings. Normalised rates are in reality much healthier for a well functioning economy. The reason house prices have turned into a feeding frenzy is because of abnormally low rates - it's not a healthy situation and rewards those with excessive leverage as such. There are an awful lot of companies who only exist today because of low interest rates - a lot of which don't add a great deal to the economy, particularly when labour markets are so tight (one of the main drivers of inflation). These employees could likely be more gainfully employed elsewhere in the economy. The bank took too long to indentify tightness in the labour market. A 1% rate is absurd by historical standards - an outlier. Eventually interest rates will revert to something a bit more normal. Likely 2.5% to 5% in my view. Probably towards the lower end of that in the UK, a little higher in the US.

I should add I love Ocado to use - but wouldn't invest. Had to use another supermarket when the warehouse caught on fire late last year I think - painful. The app is nowhere near as functional etc, range nowhere near as good. As a customer I like it, but I value not having to go to a supermarket as I have young kids - saves me 2/3 hours at a weekend!!!

Interesting write up in the Telegraph at the weekend. Basically it said that most of Britain's loss-making start-ups raised money recently enough to continue with business as usual. It said they are likely to get nervous if the downturn continues for months, leaving them with the choice of losing staff, raising funds at a lower valuation and disappointing existing investors , or selling out. It states 'those companies aren't silly enough to go into the market and take the risk of a down round. There will however be those that don't have choice, because they have to - they need the money. It mentioned

Some of those companies can buy time, but they can't buy infinite time. This time next year they might have to then be forced to go out into the market and go through it. Most of Britain's tech unicorns have never seen anything but good times, They are about to find out what a downturn looks like. It mentions Revolut ($33bn) - a value higher than Natwest. It was then surpassed by Checkout.com with a $40bn valuation. It also mentions Graphcore - which is understood to be in talks over raising new funds, but may have to do so at a lower valuation or similar valuation to the $2.8bn it was valued at 18 months ago. It also talks about the trickly through from public markets to private valuations.

I forgot about the Robot energy cost - hadn't even thought about that!

Even the robots require lots of human intervention - i.e. regular maintenance, repairs, replacement at periodic intervals as you outline - all of that is very capital intensive, requiring huge investment. A customer assistant in tesco say £20k, engineer / progammers repairing robots etc £60-£100k, plus capital outlay, financing etc. It's fine with high value products - e.g. car manufacturing. Profits per car are large, profits per delivery are relatively small. What I would love to know with Ocado is whether anyone has actually done the calculations - surely they should be able to calculate some sort of breakeven size for an operation to be profitable? or even how many 'adopters' they require to license their technology - it looks like they are picking up a lot of the capital outlay - that's intensive and unlikely to ever produce decent ROCE. Could be wrong. Ocado was founded 22 years ago and still it can't make money. How much longer does it need? If something is going to be profitable then 22 years should be long enough. Don't buy it - as I say love the UK shop window as a customer - but Ocado is niche as a supermarket. We will still be here in 25, 30 years post Ocado starting (Hopefully!) saying it's getting there etc. Just doesn't stack up to me.

ps I don't think it looks bad for freetrade at all - so it's worth less than the last round - that's not a problem, unless you invested in that round. A price is only valid at a specific point in time. If it becomes profitable and can generate free cashflow that will be re-assessed. Softbank made investment losses of £22bn which means that almost half of the cumulative gains of the Vision Fund (since it's inception in 2017 have now gone) - not the end of the world if you invested in 2017 - big problem if you invested right at the top. Again it's price.

I'm yet to be fully convinced by the RPA piece - I think Ui Path could be worth what it's valued at further down the line, but given the risks I don't want to pay that price now. That's what investing is about though ultimately - price. It's not what you buy a lot of the time, it's what you pay. Can be a great company, but if you overpay...

My fear is that whilst a small number of tech companies will go on to have great success a bigger proportion won't go anywhere at all. I remain unconvinced by Ocado. I love the service I get and use them weekly - great product, but I'm not convinced that using very expensive robots and expensive grid technology enabled warehouses isn't more expensive than paying a person to shop in a supermarket. They guy that programs, repairs and maintains those robots earn high salaries, the shop assistant doesn't. Plus the capital outlay is immense - I am yet to be convinced that it's not always jam tomorrow because the model doesn't and won't ever make money, similar to Uber. If you have to pay large tech salaries for C-suite, large below c suite salaries and to maintain the app, can it really compete with say a Black Cab in London when you are competing on a level playing field - i.e. VAT, holiday for drivers, sick pay etc - I'm not convinced. Whilst having a long financial credit line or runway gives you the opportunity to grow to scale whilst still unprofitable at an operating level, it also means those companies that should be effectively stopped in their tracks don't get stopped. It's basically a confidence game - how long does the market give you to produce real cash flow / net profits - a lot won't ever make it. But that's the game, we might see 10 companies go to the wall for every company that 20 bags. That's the game we are in all told.

US valuations have, for a while, lost touch with reality and are very out of step with UK / European markets. I think anything that has a strong value bias will hold up much better in any crash that may come. All will be hit, but toppy valuations will be smashed. I think we are in for a bit of a reset overall - I am not sure what that looks like though. It could provide an opportunity to buy some great companies with future growth potential at more reasonable prices.

The other bit that worries me re what Freetrade were saying is that this method of funding avoids a valuation at this time - primarily as such a valuation would not be helpful - i.e. would be less than the prior valuation. If that's the case for a lot of what we have then that is not a positive. Valuations should be up to date as part of valuation process - i.e. downgraded if they need to be. There is likely more latitude on private valuations - ultimately though, the multiple utilised to value should be coming down.