Member Info for steph

I meant multiples (P/E or sales) for defense industry not tobacco.

Take your point that tech may suffer wage inflation more than rest but ability to pass on costs better too. As mentioned nominal increases in the price of sales flatters profit in nominal terms so long as the company can pass increased costs neutrally onwards.

Anyhow I think we are near bottom. Scary dip though and I wish I had your cash reserves right now. this dip has caused my overall spread positions to be 2x leveraged which is too high for me. I consider high risk to be 60% ((1.6). A 30% drop from here would cause margin call problems. surprised I am anywhere near here but never expected a 50% drop from September highs on the news we have had.

I also thought PUtin’s speech should have assured markets he is not the madman incapable of responding to real data (ie: the failure to dominate the battlefield) they make him out to be. He seemed to be resetting expectations to hold onto 2014 territory rather than some large territorial expansion. A deal to be done in the near future if the Ukrainian government willing to take it. Some ceasefire kicking the issue of who governed what provinces into the future is doable and might be acceptable to both sides. Can’t see Russia agreeing to any pathway where Crimea might have a real vote on who to align with but if Putin were bold enough that could be offered. He did hold a controlled referendum in 2014 and a real one backed by the UN might return a pro Russian majority and there would be little Ukraine could do about that if it were ever held. Whole of Donansk is probably too much territory to return a genuine pro Russian vote so as the British before did with the 1922 Irish agreeing the boundary of the partition need to count the votes before setting any new border. Putin may be too risk adverse to do that (agree to willingly give up territory based on a genuine sovereignty vote) but you never know. He has no risk free options right now and at least in the past was not stupid. Maybe there is a brain working. He did pull out of Kiev before serious damage to the city when it was obvious it would be a horrible fight -indicating he is not a Hitler in a bunker. He is adapting to the circumstances as they are and not as he thought they would be from the start. US has an intent in bleeding Russia for years on this as they did with Afghanistan just to weaken Russia (weirdly the US was funding the Taliban and Bin Laden aback them to hurt USSR’s support for a far better Afghan government than any that came afterwards). Alls not fair in love and war it seems.

Squeamish about profitable investments we are not on this BB. Tobacco a very good defense. So are armaments industries right now but I worry about the multiples.

I think the market overreacting today on what is fear of recession but the upside of a mild recession is low interest rates are here to stay (maybe a bit more money printing) and fear of 4% central bank rates is what is weighing so heavenly on the markets and especially tech.

There is a sweet spot which is a recession mild enough to naturally bring inflation expectations down without punitive interest rates but with triggering a severe recession. 10% inflation should not in itself hurt tech. They can just raise their prices 10% or more on the same sales so in nominal terms looks like 10% growth.

I do think inflation this time round is not wage demand driven and will fall back as soon as the supply disruptions clear. That may start in the fall but central banks are allowed to look ahead. As soon as they predict recession they no longer need to raise interest rates. They can claim fairly the recession will do the wage restraint job for them. Labor market not organized enough, unions much weaker than in the 70’s and staff feel insecure. Wages will lag not lead inflation this time round. Sad but for us not a problem. Just jitters as the new normal gets tested.

We seem to be holding well relative to us tech index. Maybe our decline is over.

Thanks sage, interesting Gurley commentary. Of course the pessimists come out when the market is down just as the optimists come out (or at east get noticed) when the market is up. Usually best to invest counter current. I believe that is a “sage of Omaha” saying . "Be fearful when others are greedy, and be greedy when others are fearful."

VEry little forward visibility at the moment though. THis is more substantial then the dot com boom but still very hard to sort through which tech companies are really here to stay and which ones are running on inflated valuations and a high unsustainable burn rate. For any tech company not yet making net profit Doubleday hard. SOme might easily be able to pivot to net profit if new funds dry up. Others might have an existential crisis if new money dries up.

I feel we know little of the GROW core portfolio. Yes growing in sales incredibly fast and on conservative multiples of sales for valuation purposes. Some may already be in net profit. We have not been told. Long time since we even had the gross profit on sales ratios. Hope much more detail on our finals. If all good should get a boost even in a jittery market.

Sage you were right on valuations of cazoo in September but as you say markets overshoot both up and down.

For my money I think we are near bottom and will wait for the turn rather than sell snd rebuy. A mild recession stops interest rate rises and our sp is much more affected by the threat of 5% interest rates than a mild recession. So bring it on.

Bunch of stocks looking cheap at the moment including rolls Royce which has some military spending element.

https://www.dailymail.co.uk/news/article-10782021/Britain-recession-Bank-England-CUT-rates-says-economist.html

We seem to be mostly correlated with "sub prime" us tech. This sector seems to be very sensitive to US interest rate rises or talk of. The gyrations yesterday displayed that in full. Not really war or share specific news right now. We just seem to bob around on the stampede in and out of long dated tech profit expectations. Jam tomorrow out of favor when interest rate rise. All private tech assumed to be long dated net profit earners when in practice a more nuanced company specific picture is probably what we have in GRWO portfolio. With growth rates of 60% plus may be not hard to slow down investment in sales generation and to be net profitable very quickly if need be.

For my money with sales growth on average above 60% pa across our core portfolio more fool them. Except for our 3 traded shares we never had much overvaluation of our core portfolio and no overvaluation of our SEED funds, round A's and other revenue earing activities. Whatever last round or post IPO overvaluation we had in year end March 31 2022 is dwarfed by 60% sales growth.

Bump in the road to be sure but we will get past it.

If you catch it.

If not you just have a cut hand.

I topped up a tiny bit. Just out of money to top up more.

Page 40

https://www.edisongroup.com/wp-content/uploads/2022/04/April-2022-Edition-of-Edison-Insight.pdf

Concur with all that.

My strategy is to find a share that should go up on average 20% per year and hold long term. I’d rather take a risk on a single share than diversify into shares I know less well. SO I’m very concentrated in GROW as it is the only share that credibly meets that criteria. ON top of that 20% growth annually from here I do think we have some catch up to get say at least 15% over NAV/share our historical average.

We track as much as we track anything US tech going down by 2x when it is down and going up by 2x when up. Apparently smaller tech does that as not net profitable as big tech. Thus generally more sensitive to interest rate and other concerns.

US tech futures up over 2% so our rise today is mostly based on that not our good news update. My prediction is we will rise towards the year end finals June 14 erratically but consistently. Historically we have traded at year end finals between zero and 30% above NAV/share. So I expect we will be much closer to 9.25 by then.

Low volumes so far and no registered short activity (although there is a time delay).

No podcasts and no industry commentary. News just not out in market.

A shorter would me mad at these levels and we normally drift up between interim results and finals.

Weird market but I’m happy to be all in.

Priced in is a nervousness that with the tech retrace the next valuations will retrace. So 925 a temporary high.

However that should have happened by now in this latest update and didn’t and is now unlikely to happen going forward. So a good chance to buy.

No reason for sales growth of underlying portfolio to slow. That will drive valuations higher in almost all market conditions.

The Gross Portfolio Value reflects growth driven by financing rounds at higher valuations and increased revenues. Key drivers of growth include Ledger, CoachHub, Thought Machine, and Aiven. The fall in value of our public company shareholdings has been offset by gains in the value of our private investments. The performance of our portfolio companies continues to be strong with average revenue growth rates in the core portfolio above 65%.

No wonder we can weather the slip in valuations due to grumpy market. 65% growth in sales overwhelmed the grump slump. They admitted net looses in our 3 traded shares but offset by spectacular results for unlisted portion. We were all blogging for them to get rid of the traded shares ASAP before the crash. I wonder if they read our blog. As a business model we really should exit on IPO with few exceptions.

https://www.londonstockexchange.com/news-article/GROW/full-year-trading-update-and-notice-of-results/15428726

UIPath and trustpilot still quite volatile but I suspect money to be made for the brave.

THere is a real investment risk of WW3 (I’d put it as high as 5% over the next 6 months) and no investment will be safe if it starts. NO stock is safe and even bonds might become worthless. Gold and rural property likely to retain value. Property assets in far off non-aligned places well away from the reach of tidal waves best. You can’t weigh a risk if you have no reasonable alternative. I am fully invested and leveraged on the theory the risk is depressing the markets but either we get war and it does not matter how I held my digital assets or we don’t get war and the stocks rebound form the risk.

I do think the global economic growth will naturally slow and with that the pressure for higher interest rates. At sometime in the next few months that wil be signaled and our specific sector will shoot ups. The fear of higher interest rates is probably the biggest reason we retraced form 11.82 in September to our 6.82 now.

Good luck all. I was expecting an April 26 update on our year end results with the unaudited projections. Maybe we will get it today or maybe not at all.

To boost us and what we got was a US tech retrace of 3% that kicked us. Ouch.

Looking back over the years we have not always had preminary results around this time. Maybe, as we had an update in late March, we will not get much until the finals in mid June.

Confident that when the market sees we still have forward momentum in NAV/share even with a terrible market we will shot up a bit. Our 3 traded shares doing awfully. UIPath, Cazoo and trustpilot so far down I even bought a few. Hoping we will announce we got out of most of those positions at an average price around the same as the September valuations. That will just show the strength of our business model as opposed to most tech funds who will be weighted or exclusively to traded shares and thus can not have escaped the retrace.

Must say that sage’s caution on overvaluation in the sector back in September before the retrace spot on. Hat’s off.

https://www.edisongroup.com/company/molten-ventures//

Looks like they are suggesting. NAV/share of about 980 and good times ahead for 2023.

We are all agreed long term this a gem. One for the ISA to be sure. I feel GRWO can achieve at least 15% to 20% NAV/share growth into the foreseeable future. That means at least the same SP growth from this very low starting point in terms of relationship to NAV/share. I’ve excesses before premium long term of SP over NAV/share should be 70% plus given growth rate and barriers to entry for a rival to have the same configuration. Sage has always cautioned about expecting anything sustainable above 30% premium and thus far facts are certainly on Sage’s side. My thesis to justify 70% premium is the market has no equivalent to GROW an is under paving the potential.

I expect our interim finals wil come out today or Thursday this week. I expect that will give us a lift form here but the real uplift will be the finals when all the analysts and brokers seem to pile in. Publicity alway good for us. Jittery market but I do think we will be back to around NAV/share by the end of June -which means quite a steep climb from 700 sp.

Good luck all. I am well topped up so wish me luck. ONe Russian missile hitting a western target outside the Ukraine away from big retrace but I am hopeful Putin is not quite the madman he is made out to be in the western press. SO long as the hot war phase of this goes on there is always a risk of a mistake or miscalculation that internationalizes the conflict and then all bets are off. Even in the depth of the Cold War nuclear armed nations did not directly square off with each other. Trump last night talking up the US nuclear capability as a way of discouraging Putin to do the same is just what we don’t need. It is very easy to start a war and very hard to stop one.