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Nice to see sage posting
for sure with the benefit of hindsight reinvesting immediately the circa 500m in realizations has hurt us in this downturn, no way we would be below 70% of nav if we had 200m of cash and no debt.
still we are where we are. minor debt and a modest credit line to invest in support of portfolio. realizations pushed further out as portfolio not entering as many funding rounds as normal. those that have have been good but mostly a mexican stand of cash preservation vis slowing sales growth .
we are so far away from at the grow trust level running out of cash silly to talk about going to zero. just scare mongering. portfolio will always have significant positive value. . it is 5% or so of the uk/eu tech start up portfolio and that is going to always exist. valuations will vary. failure rates will fluctuate but at no point in history have been much lower than now snd now is still pretty normal looking. tighter money is not the same as no money and in a competitive environment headwinds slow your competitors at the same rate do good well chosen firms will slow growth but come through. this seems to be what is happening
good luck all .
I really do think of all the emerging and developed markets (and sectors) unlisted geographically and sector diverse tech (real tech not just some on line marketing like Kazoo) will be the best performing asset over any long period of time. Volatility along the way is clouding the long term fundamentals of the sector. Sector is not experiencing an unusual number of firms going under. Valuations stalled as they come off 2021/2022 rush but even the rush was not by any means a dot com bubble and only needs a couple of years to correct at 50% + sales growth per annum. .
Unlisted tech will outperform listed tech as that already has much future potential priced in. Even at current high P/E’s I’ll still put something into listed tech that does new battery technology , AI and others that have so much future potential that P/e’s of 40 or more are not unresonable.
Deflation and a recession may be bad for retailers but has historically good for us through the mechanism of the lower net present value of new bonds. Money bombed out of long term bonds pivots to shares that are also long term through the mechanism of a much lower “safe” rate of return. In a 2 year horizon that is not much but for a 30 year bond it is massive.
As the blog optimist I’ll give a view. Be nice if Sage posted the contrarian view as well.
1) it is difficult to give a relatively short term view given the volatility. As with all stocks on any one minute, day or week 50% chance of up or down or the SP would already be something else).
As to when we start a sustained march up (which I passionately believe will happen sooner or later) is hard to say. 12 months ago we had a rapid boost up from 2.40 to 4.80 in 2 weeks and then fell back down to new lows. It was not sustained.
Sustainable boost up might start today. Latest for sure is within 12 months as interest rates start to drop as recession fears go up and inflation continues to fall. US elections and global angst on government debt means central bans will reduce interest rates as early as they can in spite of the tough rhetoric at the moment . talk is cheap and there are real costs to government debt for interest rates to be circa 5%.
5 years out we will return to our long term averages of sp related to NAV/share. Basically sp modestly above NAV/share reflecting forward potential and difficulty in buying the same growing assets in any other way. So given organic growth of our portfolio (don’t forget we stuffed circa half a billion in profit form 2001 and 2002 upstream so those tiny companies will be coming of age) we will be well above our current NAV/share. Maybe NAV/share 2 or 3x what it is now. Lets say 2.5. So an SP of between 20 and 25 quid 5 years out. WOn’t go strait steadily up. Will be volatility around an upwards trajectory.
Good luck all. I did get my remortgage fully approved but will it take a few days to get it into position to buy more shares. I’ll buy about 20,000 shares more in my spread bet and hold my isa shares until 12 quid before I diversify but always leave at least 30% in grow due to it’s fabulous longer term potential.
Biggest black swans at the moment is war the UK and USA get dragged into. Bombing Iran will cause a global stock even very hard to predict but nothing will be a safe haven in that storm. Russia bombing the western suppliers of Ukraine (mostly ships nearing a Ukrainian port) might trigger a crash as well. Ukrainian conflict seems to have settled into a stalemate but that can change on a dime either way. Ukrainian economy grow 9% this ear so Russia letting Ukraine economy exist when It could quite quickly blow up all the ports , electricity,, water rail and highway system. They have their reasons not to do so -probably only wanted a limited war in the first place (which did not go to plan) and are hoping for a settlement sooner or later on the lines now drawn of annexing 10% of Ukraine. Still poke them too much and that might change.
Abrupt halt to Nvidia AI chip exports to China; Lloyds profits up
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The US has ordered the immediate halt of exports to China of hi-tech computer chips used for artificial intelligence, chipmaker Nvidia has said.
It will be exciting once we get past our previous high of 11.82.
For the moment it is just terrifying.
I’m all in though. Even added 5,000 shares in anticipation of remortgage money coming in. 2.40 for this I think will prove to be the bargain of the whole exchange. Nothing else can credibly go up 4x or 5x over 18 months. Downside risk there (wars in Palestine and Ukraine spinning outwards mainly) but great odds of upside potential exceeding downside risk by a wide margin.
I’d put the odds of this being less than 3.00 in 18 months time as under 5% or less and the odds of over 8.00 at 80% or more. Volatility along the way to be sure but you don’t get big upside potential without volatility.
We should have an update on our half yearly results within a week. If NAV/share up even a tiny amount we should go up as a couple of years of moderate losses fully priced in. Wonder what the value of Graphcore on our books will be. Was 37m year end. Maybe some secondary sales they can go on.
PitchBook’s Q3 2023 European Venture Report shows that startups have raised €43.6 billion in the first nine months of this year—nearly 50% lower than in the same period in 2022. While the drop is significant, this year’s annual deal value figure is on track to reach pre-2021 levels, signalling that Europe’s venture market has still experienced long-term structural growth
Yes. Any consistently optimistic blogger would have been right up to Summer 2021. Any consistently pessimistic blogger would have been right after Summer 2021.
I have a lot of respect for Sage. He was cautiously bullish until 2021 and then worried openly that valuations in the sector were getting away from reality. He had some influence on me setting my worst case scenarios for spread bet margin call avoidance. However not even Sage predicted the depth of this dip. Indeed the March 2020 covid dip was sharp but not this deep and the economy looked like it was at a standstill.
It was well beyond any bloggers foresight when we were above 10 that we might dip to 2. The underlying assets in our sector (unlisted tech) do not change fast and normally are a store of value on a short sharp dip. What seems to be hurting us is a possibility that the sector is permanently and substantially changed by higher interest rates. I have doubts on both counts but time will tell. I think the unlisted tech sector will outperform big near monopoly listed tech -which itself will still outperform the market in spite of already high P/E ratios.
SO GROW is the best play on the best sector for me. Especially at this SP.
best blogger is someone who is sometimes bullish and sometimes bearish and gives evidence or at least their rationall.
a consistently pessimistic or consistently optimistic blogger will be 100% right half the time. that is the nature of the market.
i am guilty for sure of not seeing the downside risk clearly at any one point in time. sadly i topped up a bit between the double peak 2 years ago buying gat 11.2 thinking it was just a short dip below 11.8. how wrong i was.
i really have kicked the tires on this one now and looked at all the downside scenarios and tried to understand the sector valuations. yes it can go down and on my spread i have pencilled in a quid possible maximum low which i think might happen with a sudden 30% general market dip due maybe to spreading war. however the odds of 1 quid is low on my books. less than 2%. even below 1.40 i put as under 5% risk.
on the upside i have 80% to 90% chance of doubling within 12 months and *****upling within 24. good enough odds to be fully in so long as i can take a dip to 1 quid without a margin call.
rough seas to be sure but lots of money to be made for the brave.
I am near 100% into grow which with hindsight was overcocentrated to be sure. I though as a braod trust in across 4 tech sectors across whole of UK EU and in a growing area but with future not fully priced in potential it was the “goldilocks” long term holding. Not too volitile but with sp growth much faster than listed index.
Sadly the retail wrapper and the black box of info on valuations mean we are more volitiel then the market.
I get stuctred notes form Devere I wil invest in. OIl sector yes for stuctutred note. I would short oil right now if I had funds.
Longer term any good ai listed sector. Yes p/e ‘s look silly but they will grow to justify.
Some interesting movments on carbon capture and use, synthetic fuel and green amonia. If i see a way to play I will do so. Seems to be all big boys like aramco but if I cn find a more specialized vechile wil be attractive. I see a big future for direct co2 air capture for localities with cheap storage, good grid infrasutcture and potential green use.
Stil think GROW best play on the market right now and will wait for our sp recovery to 12 quid before diversificaion.
One thing that is hurting us is the fact we invested almost all of our 2022 cash realizations immediately upstream. Hindsight, which is always 20/20, says we should have held back half that cash. We are not out of cash but don't have the investable cash it would be nice to have in this market nor do we have lots of cash to aid our portfolio if they need it.
Fortunately our portfolio hare weathering the storm nicely and (graphcore excluded) have been able to extend runways without fresh cash. Last fiscal year sales growth of portfolio slowed due to cash preservation tactics and we may see a bit of that this year as well. I'd be surprised if we really do get 70% weighted sales growth but we shall see.
NO good reason for 70% discount to NAV/share but we are where we are. Opportunity for the brave. My remortgage almost compete and I'll happily top up at this levels and then hunker down for the 18 month to 2 year wait for us to get back to summer 2021 highs ( presume). Don't need valuations at 2021 comparable levels to achieve that with the organic growth of our portfolio (as measured by sales growth). 60% sales growth pa is 1000% over 4 years when compounded. So we can be in a tough market in summer 2025 yet still get back to previous highs quite credibly.
If the market not so tough we will fly higher.
Https://files.pitchbook.com/website/files/pdf/Q3_2023_PitchBook-NVCA_Venture_Monitor.pdf
Note page 7 for price to sales. Currently 5x for average IPO pricing. Was 13x during 2021/22 peak and has been generally between 4 and 8 over most periods. IPO pricing not necessarily GROW portfolio as no weighting by sector. GROW portfolio more weighted to the “serious” tech than consumer facing tech so has higher sales to price ratios.
True ui path on 8x earnings. But Trustpilot on 3.5 so it all depends on the sub sector and maturity. Post IPO companies are in theory more mature and thus should have higher earnings ratios.
That said we have a lot of core companies that are pretty large, in the hot sectors and even breaking into profitability (REvolut).
Rato higher than we have had historically and in a rougher market. Of course our portfolio is amore mature as well so maybe the two cancel each other out.
Anyhow even if a bit high our SP overcompensates massively so lots of upside. The 462m of NAV (that was an estimate based in part on revenue multipliers by sector ) will face price discovery sooner or later by fundraising, IPO or b to b sales and the proof will be in the podding. Estimates in a sour market will always be open to cynicism -probably excessively so.