Member Info for steph

But elasticity of demand is the difference. A start up tech firm offering a new product or service has very elastic demand. Can go up or down fast.

A food sector or utility sector truck driver is part of a stable sector that will make the delivery regardless of the unity price because the transport cost is a fraction of an essential good or service.

So yes salary inflation in the tech sector is an indicator of rude health. If demand was down so would salaries in the sector. Also for tech salaries can be a very high % of the cost of the product or service. Hardly and feedstock costs to pass on unlike other sectors.

I fear we are all reverse engineering the dip from 9.28 NAV/share to an sp of 5.05 when in fact it is just an irrational overshoot. All the possible solid reasons we are floating around may never see the light of day. the sub-sector we are in is still in rude health (60% to 70% sales growth on average is rude health) and maybe the market got spooked on the post IPO dip of 3 companies floated which was severe. The overvaluation was limited mostly to our IPO’d companies and maybe one or two portfolio companies. It is all ok.

Anyhow we will all be much wiser Monday.

If tech salaries up above averages (while a pain for our portfolio HR managers) is actually a positive KPI and is a forward indicator of rude health of the sector. What we don’t want to hear is forward hiring drying up and salary expectations in the sector declining.

Weird but true -if inflation stays at 10% for any length of time. Cash is not king under 10% inflation. Can park it in interest bearing accounts but that is still 3% max. I would imagine will get invested at these portfolio prices. We can buy our own shares or issue a dividend -but no sign of that.

Conversely 10% inflation (so long as GROW portfolio companies can pass it on) means 10% pa sales growth even when there has been no actual growth in sales. Must flatter sales somewhat.

roll on Monday finals.

over half our core portfolio is not last round (affected by market sentiment up and down) but multiples of sales. As our multiple uses has not changes much over the years it never got exaggerated during the good times and will not change in the bad. It was always conservative compared to USA multiples and GRWO deflated it a bit further jut for belt and braces. I have not fears here of some nasty surprise.

We have aha announcements of two last round valuations post crash and they were substantially up. Maybe all the increase is form the period stretching back pre crash but never the less they were well up on our September 30 valuation of those companies.

We have lots of cash that does not lose value and in a big dip cash is actually more valuable as the opportunities for uplift much greater. No need of fundraising or sales in teh dip to fund new investment.

Also a growing portion of income comes from our services.

5 quid on a NAV/share of 9.28 is silly. It assumes our valuations have collapsed over 50% considering a chunk (maybe 15%) of the 9.28 is cash. There is not a shred of evidence we have had any decline in overall valuations. If not now when? I believe going forward for the same reason we have not declined between September 30 2021 and March 31 2022 we will not decline in April 1 2022 to April 1 2023 either.

We have been guided that we have avoided the worst of it already but the market does not believe it.

Looking forward to our final results Monday and the inevitable publicity and marketing that comes along with that.

The known decline in our 3 traded shares is scary and I fear investors are throwing the baby out with the bath water right now. We have been credibly told that gains outweigh losses on NAV/share in difficult market conditions for the October 1 2021 to March 31 2022 period. In that half year we had a tech crash and war.

I don’t see why going forward gains will outweigh losses again and again as they did for our last half. Also as our cash gets recycled into the market this dip is a buying opportunity so some nice future uplifts for what is bought now. We have an unusual amount of cash due to cashing out and IPO cas hour. We have been selling down IPO’d shares and that is now cash. ALl good stuff.

GROW have a significant chunk of NAV in cash that can’t go down.

SO the decline below stated NAV/share on what can go down is more than the 45% below nav/share we have.

If we were heading down on the valuations I would have expected some evidence by now. Last rounds post crash have been up not down.

Companies iin our portfolio growing at 60% plus pa is our best protection plus we have avoided froth last rounds and have upstream investments at historically non frothy multiples.

Market in us spooked for share and a lot more detail on our portfolio valuations needed. The trust us approach to valuations is no longer valid. Investors are assuming the worst when little information is on the table in a sharp downturn and the situation for GROW is in all likelihood better than the dour assumptions.

Yes the market does not be live the NAV reported can be sustained or is real.

Very recent post results update says it is. They can get sued by shareholders if misleading so most likely has substance. They will have to give more detail on the valuations this time round. The black box trust us approach may work in the good times but in bad times is just a drag on SP.

The most interesting for me is the forward guidance they normally give on year end results. Any calming predictions on at least no NAV downgrades expected for September half yearly will help the SP soar. Any guidance that 10% +pa NAV/share increases are still likely going forward and they will rocket.

I am a bit spooked we did not rise with the market yesterday. Light volume though. Liquidity drained when the big funds don’t play. It is as if they are waiting for what they call as bottom in order to get a better buy back in price.

Monday it is then.

I find many analyst do not read until finals are issued so normally good finals firm up guidance and interim results.

Big NAV increases in spite of the market will surely boost our SP from here. More transparency on how we achieved that will help. Need to be less mysterious on how company by company in our portfolio our NAV methodology is applied. Need to know runway length of those not making profit yet and if any are already net profitable. Reassurance on modest multiples used as well as strategy to not invest in late round frothy prices.

Most of all some forward guidance that we will not likely have a decrease in NAV/share going forward unless there is a further sharp change downwards in market conditions. Any sort of assurance on this will make our SP really fly.

Market seems to have priced in that our NAV/share will flat line for years or experience a dip before recovering. If this is nonsense they need to say so. If we can get even modest forward guidance of NAV/share increases of 10% pa going forward for a couple of years no reason to be 5.30 when NAV/share is 9.30. Just silly discount.

Personally I think the general market for tech near bottom but am hoping GROW share specific good news will give us a boost from here even with no change in the background music. I think many lazy investors look at our 3 traded shares and assume a large chunk of our unlisted portfolio is similarly downgraded in value. Be good to have announced a substantial sell down. Even better if the average is near IPO because we were selling all along even before the big dip.

https://www.bloomberg.com/news/articles/2022-06-04/for-intangible-asset-craze-it-s-midnight-in-the-stock-market

Calling it: Stock market bottom is close, prepare for a rally

The current stock market downturn is now close to the bottom, predicts the CEO and founder of one of the world’s largest independent financial advisory organisations, and investors should position their portfolios for a rally.

The bullish prediction from deVere Group’s Nigel Green comes as global stock markets have been rattled for the past few months, over fears of persistently high inflation, aggressive central bank interest rate hikes, strict Covid lockdowns in China, and international supply chain issues.

Mr Green also said that now is the time for investors to consider diversifying into less traditional asset classes. These could include venture capital, structured products, cryptocurrencies, high dividend stock, hedge funds, managed futures, and direct real estate, amongst others.

https://pitchbook.com/items/files?eu=yQk2%2BlrYNIMauZa%2FSzm5A%2BrDx4RdHOKwIWgi8zyQMN9%2FVuNJKOBlRG9WmH%2BTxR4%2B1bx1BYO9Gj%2FX%2FtVdJmnSd7gquUsc4KFaDaTTwkqzNt79wmfgsYrKGDNxbPtAgz%2Bn14QeoSAoV%2B80jQ7dVxF6dbmd2pD81kRsezQRClJo3%2Bf%2FoFGqb4bK9Q15IjspmEoW

Sage specific=share specific

Stiles= strikes

Besides the sage specific boost we will get in finals (much good news signalled but not priced in) I thing the general market will stabilize as evidence of recessions and demand weakening consolidate and the hawkish interest rate noises coming out of the central banks. There is no established normal number for rates and not raising them into a recession a well worn path and will take precedence to inflation rate whatever it is at the time.

Wage demands and stiles to back some demands up will cause a jittery market for a year or two but underlying g trend will be up from here not down.

https://www.thedronegirl.com/2022/03/30/manna-drone-delivery/

I use IG for my spread, II for my ISA. Happy with both. I don’t trade within my ISA just add. I trade a bit the spread at the margins of my position but always have a core holding of GROW (around 80%) that I treat as a one term hold and is never traded. Wish I’d come out 100% over 11 and rebought 100% under 6 but that is 20 20 hindsight which I don’t have. I’m confident we will be back over 11 within the year and then onwards and upwards. Jittery marketers to be sure. I am for the most part a long term investor in GROW . ISA position is a 20 year horizon. Spread is a 1 to 4 year horizon so this big dip annoying as it might delay plans. Will all come good in the end.

For us and GRWO sp it is all about timing. Inflation will drop pretty fast (as it was alway temporarily supply issues) and with that the pressure to raise rates and with that this market retrace.

Longer run i agree with the thrust of your caution on companies funded whiten funding is easy will not survive a tighter capital market. I trust GROW portfolio contains none of these. Pretty remarkable sales and NAV/share up in the last 6 months so some pretty good stock picking going on.

I agree interest rates at 3 to 5% should exist or there will be distortions in the economy. There are good reasons why this is a 300 year old norm.

For my money I think we are in for at least 10 and probably 20 years of abnormally low interest rates. Governments themselves ae now hooked on low interest rates and they will consistently tilt the table in favour of low rates whenever possible. Also once the red line was crossed and printing money started in all the major G&7 central banks and above trend inflation did not happen they all became hooked on printing money. The BoE did not ask for the coupon on government held debt and in effect absorbed the cost of debt with printed money. IN theory all will be repaid but in practice it wild not.

FED in USA starting to reverse printing money by buying T Bills. Everybody has long promised to do this but FED only one actually doing it and then not forcefully. This should in theory tighten money supply and reduce inflation but is hardly the volumes necessary to do that. Very academic and posturing by a central bank that has the huge advantage of freeriding on the world by big the reserve currency of most transaction. ECB who was the most reluctant to start printing now probably the most reluctant to stop -never mind reverse the print (operation twist).

This new normal of low interest rates that destroy annuity markets and stimulate asset bubbles will eventually reach an equilibrium. The volatility today is part of that final adjustment. I suspect on the other side of this "external shock" spike in inflation we will see low interest rates and low inflation. Both too low but that will be the new normal. Real risk as we had for many years post 2009 is inflation below target and very difficult to get up to 2% with even negative ECB rates and printing money not enough to lift inflation to target. This was Japans history and they had a very permissive central bank trying to fix that one.

Effectively we have run out of investments that can comfortably pay higher interest rates and there is no demand to borrow for productive enterprise. Just for buying assets like homes. NO good but that is the new normal. Tech is a rare exception. Sector can borrow productively at higher rates but chooses to raise capital on the markets as available. Overall tech has debt of 25% and the corporate average is 55% (has been rising steadily from 1953 (circa 22%) to today. so tech much les leveraged -probably due to ease of capital raising for anything tech. Indeed todays tech has debt at 1953 levels for general corporates. SO back to the future.

Leverage and the push of returns go hand in hand. Downside of shareholder capitalism and resulting need for short term returns not long term value creation. Over leveraged banks have never recovered SP's form 2009 tightening of capital requirements. Our private equity portfolio partly protected from this negative shareholder pressure.

https://www.theguardian.com/business/2022/may/23/bank-of-england-not-to-blame-for-soaring-inflation-says-governor?CMP=Share_iOSApp_Other

Sadly that is a credible scenario -although fo my money not the middle scenario. Need to invest accepting that such a pessimistic scenario is at east possible.

I don’t worry about liquidity. I think global central banks have permanently changed on that by printing money as they did not in 2007. ALthough the yanks are reversing QE most are not and I think even the US will never fully do “operation twist”. Just unnecessary hair shirt behavior for little real gain. Indeed I think raising interest rates right now of little material difference -just posturing and politics. A mild recession is coming anyway that will deal rout inflation. Raising interest rates beyon dtoken amounts wil just deepen the recession. Wage demands not leading inflaiton and the rest just not influenced by higher interest rates.

Soft landing wil boost our share. THat is a mild recession and declining inflation rates with central banks signaling raising rates is over for now. I except ECB and JCB hooked on printing and wil give it up very reluctantly. BOE wil likely follow EU and not USA.

UPside scenario is banks say shortly they wil not be raising rates further due to coming recession. THis announcement could happen at any moment and with it our sector wil soar.

War in Ukraine hurting confidence but now fully priced in I expect. Looking like a long war as Ukraine seems unwilling to start a ceasefire until they reconquer most or all of the territory lost. Hard to see how Russia can agree that unless Putin overthrown. Hard to see how militarily Ukraine can achieve that. Defense for the Russians is much easier than offense once the Russians dig in to some defined line. So far boundaries the Russians plan to hold still fluid so Ukraine is getting a false sense of how easy it might be to recover territory. I would expect international opinion will shift a bit once a stable boundary exists with civilian populations on each side going about their business. Ukraine if it breaks through that and harms civilians on the Russian controlled side will not be considered the aggressor (just recovering what was theirs) but will not be quite the pure victim they are considered now. It will become more nuanced. Pressure for a compromise will become stronger. Some sort of fudge where sovereignty and governance will be kicked into the long grass with both sides able to claim it will swing their way in the fullness of time.