Member Info for sageoflondon

I personally think there will be a recession, primarily because interest rates will rise (only a little). Mortgage rates will hit hard given the amounts people have borrowed, even a couple of extra percent on £250k is £5k per annum. That's a lot to someone earning say £40-£60k - £415 a month roughly - more than a 10% drop in net salary. That's going to have an impact on spending, on top of which there is inflation so they can't buy anywhere near as much. Not so sure about social upheaval - people will just have to live with it. Give up Netflix, buy value food, turn the thermostat down and have a holiday less etc. Either way I don't believe there is anyway the Grow NAV won't fall - it just cannot realistically defy gravity - or at least that is what the market very firmly believes. Of course there will be some success stories in there where NAV rises - but I am not sure they will be enough to change the overall outcome re NAV. The portfolio is too broad and diverse to avoid a decrease in NAV - just no way they are so good that they avoid what is happening everywhere else. What I don't like is the fact that our share price has fallen so much already. Any decrease in NAV will likely cause a further fall - I really hope we haven't been overly optimistic in terms of valuations in the hope the market will turn in time. That could come back to bite us very hard if it's the case.

It doesn't say anything in that article that isn't realistic - it's downbeat as that is where the market is. I think Revolut will find it difficult to raise any capital at a valuation that exceeds the prior valuation, I certainly hope Grow don't participate if they do. In it's last raise Revolut raised $800 million led by SoftBank (who just announced the biggest loss in its history - $27bn) and Tiger Global. Revolut was valued at $33 billion - that was a sixfold increase on the $5.5 billion the company was worth the year before. Nothing really changed to warrant the 6 fold increase in the valuation. I could understand it if there was a paradigm shift in the business - big new territory, huge success - but it was instead valued at around 100 times revenue. To me Freetrade look like they are telling it as it is.

Personally - this looks like a good business from a product perspective - just my view but I think it will need to raise some fresh capital. I think it will be able to do this but likely to be a little dilutive. That's also one potential reason for a lack of director buying - i.e. placing, rights issue etc. I like the business but will wait a little to see what is happening in the background. Original listing was way overpriced.

That's a bit like going for a drink to him though.....!! It's more a token vote of confidence given the size of his holding which is likely multiples of that. I don't know exactly what percentage he retained.

I have a decent amount invested - most important piece to me is the brokers financial strength - not cost. Plus ease of platform use - ability to trade all shares, tax administration etc. I don't know what freetrade is like for ISAs / SIPPs - will take a look at some point.

I'm an AJ Bell client and an HL one - it doesn't look bad but a little limiting - FTSE 350 only. Probably ok for most people......but I wouldn't want to be limited as I have some overseas things in my portfolio and certainly things that fall outside of the FTSE 350......plus would be similar to what I pay now on my portfolio - depends how often you trade - not that much for me. If you trade frequently then way better for you.

Ui Path is worth more than Blue Prism - just thought the all time high got well ahead of itself. Decent company long term. But valuation still looks a little toppy.

The bank I have a current account with is good for that. It's rubbish for savings as it's rates are bad, so I have a minimal savings balance with it - but it can do that too. I have my mortgage with another provider as it's rate was better. Most of my investments are held with two other providers (as they have the best apps / wrapper (ISA / SIPP) service etc. Again I could do these with my bank if I wished to be royally fleeced on dealing and admin fees. This works well for me. I get what they are trying to do, but will they be the best at each of those. It's no burden to me having different accounts - in fact I prefer different providers as it reduces my risk and reliance on a single provider that could go under in severe financial stress - it can happen. I wouldn't bank with Revolut at present - it needs to prove it can offer me more than I can currently get from my current provider (and of course I have to need what it can provide). The revolut savings vault rate is lower than I get elsewhere.

So they can use it sort of like a bank essentially?

Cazoo is you are right, one example, some there simply isn't enough information on. Ui Path was overvalued significantly at it's peak for where it is at present. Blue Prism was sold more cheaply, roughly a third of Ui Path revenues at the time and went for just over a billion £ from what I recall. All plants is another example - it's not really a tech investment - it's a frozen ready meal maker with a website - i.e. low margin, no barrier to entry as such. There are loads of examples. In the end it's the overall portfolio that has to perform. There will be great success, there will be significant failure. Overall we will likely come out at something like a 10-20% NAV increase over a 10 year period. My view is the market got way ahead of itself and there are some valuations out there that are way over the top. I will hopefully get the opportunity to buy when I believe they are priced more reasonably.

It's not the rationale I don't understand - it's the price!! Let's come back to the Revolut price in 5 years or so. Growth opportunities are great - at the right price. Cazoo possibly isn't a bad bet if you believe it can suceed as an example - it wasn't a good bet when it was already priced for market domination despite being nowhere near that. I don't believe the market or investors were pricing risk correctly - i.e. the substantial risk that an investment will fail. There is always that risk when at an earlyish stage. It's not worth $50bn today because it might be one day. That risk has to be priced accordingly - my view is I don't believe it has been priced appropriately. For $50bn today there has to be a good risk / reward - i.e. $150-$200bn 10 years down the line - that is a big stretch.

I just want to understand your rationale. So you agree there is a good chance that markets drop another 20-30% and that VC funding valuations tend to lag those of public markets - but you don't expect any significant decrease in NAV. Why? Given significant pullbacks in publicly quoted technology valuations and the fact that private lag this why no expectation that our NAV will take any hit?

Revolut had revenues a little over £220m in 2020, even if it grows at the same rate as 2020 for 2021 I get to around £330m for 2021 but it's last valuation was $33bn - that makes sense - about 100 times revenue! I seriously think those investing in Revolut have lost the plot at the previous valuation, let alone a higher valuation, asolutely crazy with no real foundation from a valuation perspective. 'Other peoples money' comes to mind. Barclays is capitalised at £25bn with revenues of £24bn and net profit of £7bn in 2021. Citibank has a market cap of about $95 billion and revenues for 2021 of $72bn - but it's only worth 3 times Revolut!

I will believe we have the ability to withstand the headwinds on valuation in our privately held portfolio in 12-24 months, when we aren't posting decreases in NAV - I believe we will post some decreases in NAV and that is baked into the share price currently. If we aren't posting these I will be somewhat confused and a little concerned. In addition there is also the potential (and high likelihood) for complete failures as new investors fail to materialise for next funding rounds and the businesses either stop trading or are sold cheaply. Softbank posted one of it's biggest losses ever, Cathy Wood's ARK fund is down over 50%, SMT is down a similar amount etc. A relative Tortoise like Thought Machine doesn't double in value in 12 months based on fundamentals or profitability - how has the assessment of that business changed that much in a 12 month period - that's what I don't buy - it's purely what the next investor is willing to pay up - the problem comes when the next investor isn't willing to pay what is being asked - that's when the price pyramid and confidence crumbles - it's happened in the quoted market, private will lag. I think a lot of that is currently in this share price. If the Nasdaq falls further this will likely follow. Share price down 4% here as I write. That's very close to the £5 mark. I think it's wishful thinking to think this will be anywhere close to it's peak in the next 2 to 3 years. Personally - I think we have a bit further to fall, I can easily see the Nasdaq with another 10-30% off over the course of the next 6 to 18 months, maybe a lot sooner. I don't know what that would mean for our share price but it won't be positive in all likelihood.

I'm not sure we have to accept this level of volatility or just buy treasuries and get 1%. The only alternative isn't Grow. I think Grow is excellent as an earlier stage technology play with an appropriately corresponding weighting in a portfolio, but as investments go, it is relatively high risk, not for widows and orphans - it is very volatile. Private investments / VC / Private Equity etc also goes to large discounts when things don't look good and vice versa - it's less liquid (i.e. the portfolio - they can't just sell or buy rapidly). For me the whole point of a portfolio is to build something with resilience, that can perform relatively well in good or bad times. Sure big market falls will often hit everything, but a balanced portfolio can smooth out or reduce volatility significantly.

I think it was the valuation that ruffled feathers - not only that - they are likely reducing margins for the whole industry at present which the industry (given its excellent profitability this year) can likely weather at least as well as Cazoo - they won't like it though as it impacts their share price / results.

Cazoo - that's great but it costs an awful lot of money sponsoring football shirts. No point selling more cars if they can't do it a lot more profitably. Customer acquisition costs will be key to Cazoo's survival eventually. Revenue is easy enough to build given financial backing etc, but is it profitable and sustainable revenue growth, is it sticky etc. Personally - I bought my last car by visiting a dealership, that then had to shut down due to Covid 2 days after my visit. I wanted to drive the car so they drove 30 miles to me so that I could (wasn't available when I visited), then also took my car away having already agreed on a price for P ex. Process worked well. I did however like to go and have a look - that might put me off buying from Cazoo, wouldn't completely rule it out, but like to browse.

Just a thought - if you believe there is a real historical opportunity in other shares as well why not diversify a little with those funds.......no matter how bright, smart, well researched etc, we all get things wrong from time to time, even if right eventually, what harm in reducing risk. All eggs in one basket can go very wrong.

I'm not sure about that.....can't have more than £200m of cash at most and presumably a little leverage....I can't recall exactly.

GROW will suffer a half yearly, even yearly retrace on NAV/share at some point - I have no idea when. It's unlikely to follow the listed sector precisely. There will likely be a 6-18 month lag - as always with illiquid private investments. I don't think there is any definition under which this should be considered a defensive stock. I wasn't aware that we had sold down all of Cazoo either re your previous post - I must have missed that.

I think it's likely that interest rates will go further then people expect. Probably further than I actually expect. 4 or 5% in the UK is a real possibility before falling back. The Ukraine situation isn't going away anytime soon. The US market has a good 10%-30% to come off and a lot of that will be in a re-assessment of technology valuations. I don't think that is finished at all.

It's not just about the UK and EU though. If rates here rise more slowly than the US that will leave us with another problem - i.e. our FX rate which will come through in inflation - as it already is. Most of our energy / imports in dollars, some Euro etc. What happens in the US will have a considerable impact.