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00:00:01
Takeovers, £100m whisky, and decoding stock market jargon
1k Plays4 months ago
In this episode of Companies and Markets Weekly, I’m joined by Megan Boxall, Graham Neary and Roland Head. We discuss:
- Their take on the news they’ve covered in this week’s Daily Stock Market Reports, including IntegraFin, Insig AI, ShoeZone, and Artisanal Spirits
- Common buzzwords and phrases you might hear in company updates or management presentations, and why companies choose to use such obfuscatory language
- The surprising results from 10 years of Stockopedia’s systematic “no admin portfolio system”
- A look ahead to what’s coming up over the festive break
If you enjoyed this, you can read daily analysis on noteworthy and hard-to-research shares with Stockopedia’s Daily Stock Market Report. You’ll also unlock award-winning investing insights, tools, and education to speed up your research process and help you make more informed decisions.
Try Stockopedia free for 14 days at stk.pe/pod.
Let us know what you thought of this episode: https://www.surveymonkey.com/r/NG3L235
Stocks discussed:
IntegraFin: https://www.stockopedia.com/share-prices/integrafin-holdings-LON:IHP/
Insig AI: https://www.stockopedia.com/share-prices/insig-ai-LON:INSG/
ShoeZone: https://www.stockopedia.com/share-prices/shoe-zone-LON:SHOE/
Artisanal Spirits: https://www.stockopedia.com/share-prices/artisanal-spirits-LON:ART/
Next: https://www.stockopedia.com/share-prices/next-LON:NXT/
Games Workshop: https://www.stockopedia.com/share-prices/games-workshop-LON:GAW/
Berkshire Hathaway: https://www.stockopedia.com/share-prices/berkshire-hathaway-NYQ:BRK.B/
Cognex: https://www.stockopedia.com/share-prices/cognex-NSQ:CGNX/
Extra Stockopedia content we mention:
Translating the market lingo (subscriber only): https://www.stockopedia.com/content/translating-the-market-lingo-1018436
How a decade of NAPS portfolios beat every fund manager in the UK (subscriber only): https://www.stockopedia.com/content/how-a-decade-of-naps-portfolios-beat-every-fund-manager-in-the-uk-1018242
Host: Lawrence Judd
Analysts: Megan Boxall, Graham Neary, Roland Head
Disclosures:
At the time of recording, Megan holds shares in Cognex (CGNX). Graham holds shares in Berkshire Hathaway (BRK.B) and Next (NXT).
Disclaimer: We do not provide personalised financial advice. None of our content constitutes or should be understood as constituting a recommendation to enter in any securities transactions or to engage in any investment strategies discussed in our content. We do not provide personalised recommendations or views as to whether a stock or investment approach is suited to the financial needs of a specific individual. It is very important to do your own analysis before making any investment based on your own personal circumstances.
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Transcript
00:00:06
Speaker
Hello and welcome to this week's episode of Companies and Markets Weekly from Stockopedia. Just quickly before we get in, I want to thank everyone for their reaction and their feedback to our first episode last week.
00:00:19
Speaker
um really, really grateful for everyone who's taken the time to ah go and rate us on their podcast platforms, leave us a review, leave a comment on the survey that is linked in the episode description. We do read every single one. um we had We had some feedback about the audio levels last time. um pointing that out, i really had some really good conversations with people about how and where they were listening. Hopefully we have fixed that for this episode. um So hopefully you have a better experience listening to us. This week in part one, I'll be joined by Graham Neary and Roland Head.
00:00:55
Speaker
Then Megan Boxall will be joining us for parts two and three. In part one, we're going to run through what was quite a sparse week of news headlines. um ah Graham and Roland are going to hopefully shed some insights onto some of the companies they were reporting on in this week's daily stock market reports.
00:01:13
Speaker
In part two, we're going to run over an article that our colleague Mark wrote on translating some of the language that's used in the stock market in trading updates in management presentations was very, very funny. So we're going to share ah some of the slightly cynical translations that he came up with.
00:01:34
Speaker
ah Part three, we're going to pick a winner of the week and then look ahead to what's coming up on Stockopedia over the festive period. Graham, hello. Hello, Lawrence. How are you? Nice to be here. Very good. Thank you. How are you? I'm all right. How are you, Rodan?
00:01:52
Speaker
Ah, very well. Thanks. It's great to be back here again. Good. Very glad. Shall we kick off part one with, I want to start by talking generally about takeovers.
00:02:05
Speaker
because in the Daily Stock Market reports this week, we highlighted a couple of companies, National World and Intelligent Ultrasound, that were subject to ah some takeover bids, but also more widely in the news. It was reported that Czech billionaire Daniel Kratinski's takeover of Royal Mail or was it now international distribution services, is what it's called, £3.6 billion pound takeover approved by the government as a very small premium, I think, to where it was currently trading before the takeover. I've never held shares that have been subject to a takeover, fortunately or unfortunately, I can't tell which.
00:02:41
Speaker
ah I know I've seen comments from our subscribers around other takeovers where they've held shares going, ah basically asking what what the process is from their perspective. Obviously, they hold shares in an ISA, a SIP, a brokerage account. um Those shares are being bought. Do they have to do anything? What's the what's the process like from a DIY investor's point of view?
00:03:04
Speaker
Okay. and Well, I would say that very little action is required, and voting on the deal. is not necessary but of course ah shareholders may wish to vote on the deal and depending on which broker you use that may be a easy or difficult ah to do and but ah I suppose the main decision is whether to sell on the news
00:03:35
Speaker
And there's a lot of different variables there. So the question would be, how likely is the deal to go ahead? How happy is the investor with the proposed a price? And what is the difference between the share price and the price at which the deal is supposed to go ahead?
00:04:00
Speaker
so You can see there's a lot of different factors there. and Nothing is mandatory. You can buy, sell, vote, or not vote as you wish. and I think many investors do like to sell. ah or at least partially sell some of their holding to cash in and take some of the risk off and get into something that's more interesting. and But that's totally um optional. and Personally, and I would hold on and and wait to receive the money because there's usually a discount between the where the share price is and the
00:04:44
Speaker
you know price, so I would hold on for for the full amount, but to every situation is different. Roland, have you had any yeah brilliant takeover offers in your portfolio?
00:04:55
Speaker
I've not had any for a little while. I did have a couple last year, but I tend to lean towards selling if the the price is reasonably close. I suppose for a couple of reasons. First, the the the offer isn't necessarily guaranteed to go through when it's initially announced, but more really because There's a time value of money to, you know, an opportunity cost to holding and it may be often I can see that I'm ready to, i you know, I've got something else perhaps in mind where I'd like to use the money. So it might work out better ah for me just to to move along, move on really. um But so yeah, there's ah there's a case for doing, for taking both approaches or either approach.
00:05:37
Speaker
and there's no hard and fast rule. If you do nothing at all, ah the the month the cash or the shares that are being used to fund the takeover should eventually just arrive in your brokerage account normally. I guess it's ah this is a point where it might be useful for people to have a an idea of their the sort target price for ah for a share and whether that takeover bid comes close to it or not.
00:06:00
Speaker
Well there's always the possibility a higher offer might emerge that's probably more likely in some situations than others but but it certainly does happen and it's not always not always predictable at all um from an outside perspective I don't think.
00:06:13
Speaker
Also this week we had ah Shoe Zone, which is a smaller UK retailer of, funnily enough, shoes. ah They issued a pretty severe profit warning. and They adjusted their expectations for profit before tax for the financial year 2025. They halved that from 10 million pounds down to five million pounds. They blamed poor weather.
00:06:39
Speaker
ah weakening consumer demand and significant extra costs due to the increases in both national insurance and the national living wage. Graham, you said in the report that we may well need to watch out for more warnings like this in the near term as companies come to getting to get to grips with some of these increases in their cost base. If I'm looking at my portfolio and I'm trying to identify sort of at risk candidates,
00:07:09
Speaker
what What could I look for to to help me identify those? Well, really anything with a lot of employees and without enormous profit margins. So typically retail, hospitality, leisure, these sorts of things are obvious candidates.
00:07:31
Speaker
and ShoeZone itself, as far as I know, did not say that they would be able to mitigate the higher employment costs, but their broker did assume and mitigation in their forecasts. However, after this profit warning,
00:07:49
Speaker
the broker came out and said, actually, we no longer expect that the changes can be mitigated. And I think and perhaps some of us, including me, have been a little bit too comfortable with the idea that higher national national insurance and minimum wage costs can easily be offset with efficiencies because if it if it was so easy to find these efficiencies, why would they not have been done already would be my question. So and maybe we do need to be a bit more careful now. What are the ways in which a company could mitigate against these increases?
00:08:30
Speaker
well and obviously very company dependent. what i mean the the The first thing that comes to my mind is is cutting back on some ah on some benefits, on some employment benefits that may have been given out. That's the first thing that comes to my mind. and you know Changes to how people are rostered, changes in terms of flexibility,
00:09:00
Speaker
I mean those are the things that come to my mind straight away. I suppose one other possibility as well is that they'll take a more critical look at their store estate at the profitability of different stores and different types of stores, because I think they have more than one category of shop, some larger formats and and some smaller ones. And I know the one nearest to me is closed um in the last year or so. And so perhaps they might get rid of more of their smaller shops. I imagine they might be more labor intensive um relative to sales possibly.
00:09:35
Speaker
We also had Integrafin reporting this week. Roland, you covered that's 1.3 billion market cap. ah This investment platform for financial advisors apparently delivered a 10% rise in pre-tax profit this year or last year, sorry, with the net inflows of around about 5% of its opening assets. Roland, you said that Their platform's got good scale. The group's quality met metrics are remaining high, but you've got some concerns about competitive pressures. Can you speak to those?
00:10:09
Speaker
Yeah, well, integrifins are relatively unusual because they've chosen to to provide their platform under their own brand, Transact, it's called, um targeting mostly independent financial advisors. Now, there are a number of other companies that have similar software offerings um in the so of the yeah UK market, but what most of them do is they they kind of offer their platform as a white label, if you like, or a service they offer to other companies who don't want to produce their own.
00:10:39
Speaker
So some of the biggest advisor groups in the UK are like Quilter and Aberdeen. ah They use another company's technology to to- do what the Integrafin does. But I suppose the difference is that for Integrafin then probably not going to be able to get into those ah they're not they're not able to target those market those markets um where the advisors are tied to a single branded business.
00:11:06
Speaker
So my feeling is it might be harder for them to gain more market share beyond a certain point, um simply because the the bulk of the competition is tied into other platforms.
00:11:18
Speaker
already. But having said that, I think you know the company says they're still about five they've got about 8,000 advisors signed up and they think there's still up to perhaps 5,000 that they could target in the UK. So there's still still theoretically plenty of potential, um but I think that could be just a constraint on growth. It might make it harder for them to outperform the wider market going forwards, but I think it's a good business. How big are these other competitors? How big and powerful are they?
00:11:48
Speaker
Well, if you look at the the company the technology provider that serves Quilter and Aberdeen and also Aviva and Scottish Widows, so four quite big names, that's a company called FNZ. and the Across those four companies, ah across those four clients, I should say, they look after ah multiples of the asset to value that Integrafin has on its platform. So they are substantially bigger and and we might argue that their costs are proportionately lower or you know that they have greater economies of scale. So it's it's something to watch, I think, but I don't see it as ah as a real pressing concern immediately.
00:12:33
Speaker
We also had an update from a much smaller company called Insig AI this week. um I noticed that and looking at its stock report, it had the unholy trinity of being classified as highly speculative microcap and sucker stock according to our ratings. Graham, you said that this was a slam dunk ah red rating according to our red and green ratings on the reports due to its weak balance sheet, a material uncertainty warning about its ability to continue ah and a potential overvaluation due to its association with the AI bubble. Do you want to stick the boot in a bit more?
00:13:15
Speaker
i don't like to I don't like to criticize ah companies if I don't have to, but um you know there wasn't a huge amount of news this week. So this one came up on the radar and I just noticed, I mean, it only has a 17 million pound market cap, but it published an RNS recently where it was trumpeting a contract win where the value of the contract was 80,000 pounds.
00:13:48
Speaker
and i even Even at the very bottom end of small caps, and this is ah this is a very small contract win to write an entire RNS announcement and about. and you know Besides that,
00:14:04
Speaker
um It has all the ah you know the other red flags, a going concern warning in the results where and you know there's an uncertainty about its ability to continue as a going concern, very low cash balance, um I think half a million pounds or so.
00:14:23
Speaker
and So yeah, and and also association with the the AI bubble. So um absolutely one that I would be ah vigorously avoiding. Boasting about an 80,000 pound contract win sounds a bit like me when I boast to my wife that I've unstuck the dishwasher that morning.
00:14:44
Speaker
Finally, we're going to finish up with ah a festively appropriate company, Artisanal Spirits. Graham, again, you took a look at that this week um and you noticed it's claiming to have some very, very expensive whiskey on the books. Do you want to chat a bit more about that? Yeah, sure, Lawrence.
00:15:06
Speaker
This is one which I had not studied before, and but it turned out to be reasonably interesting and because they say that their whiskey inventories are worth about 100 million pounds. and So there were two sector experts that they hired to value this.
00:15:32
Speaker
And it's um these experts have come back and said that it's worth 100 million pounds. and It's it's a an appreciating inventory base, which is you know not very usual. You don't usually find companies where the inventory is is growing to this extent.
00:15:53
Speaker
and Now, the market cap is about 27 million pounds. ah ah Last time I checked, they did have some net debt which they used to build their inventories. But now that they're saying that they're moving into the cash flow positive ah stage of their development. So um I think it's an interesting story. I haven't got a firm view on it, but you know somebody If somebody has an interest in whisky and thinks that they can ah agree with with the ah the statements here, it could be worth another look. It it is expected to remain loss making for the next few years.
00:16:42
Speaker
and But it's growing its membership base. It it sells membership to and this Scotch malt whisky society. And so these these thousands and thousands of whisky aficionados are are paying membership dues.
00:17:00
Speaker
in order to to access ah you know new whiskeys and events, tasting and you know new whiskeys. So it's an interesting little story. um I've no idea if it's true that the whiskey is worth 100 million pounds, but it's it's intriguing.
00:17:22
Speaker
I wonder whether or not that number was come up with after a tasting session. That would be my bet. I know I'd heard of the Scotch Not Whiskey Society before. um And yeah, it's it's a membership. You get sent miniatures of very, very sort of old rare expensive whiskeys over time. um They are all sort of own labeled, so you won't but be, yeah you'll know what distillery they've come from, but it won't be packaged as if it's come from that distillery. and It may be a really nice way of sort of augmenting the amount of revenue you could get from that inventory as well by selling it in smaller portions like that.
00:18:01
Speaker
That's all we've got time for in part one. We'll be back in part two joined by Megan Boxer, where we'll talk about ah deciphering some of the language that you might see in trading updates.
00:18:23
Speaker
Hello, we are back for part two. We're joined by Megan. Hello, Megan. Hi, thanks for having me. You're very welcome. We are going to chat through an article that our colleague Mark wrote called Translating the Market Lingo.
00:18:37
Speaker
um very, very funny article. I will link it in the episode description. ah Mark has gone through, I don't know how many different phrases that you might see in ah trading updates, company results, management buzzwords, strategy updates, broker recommendations, and analysis. um he He's applied a somewhat cynical translation to each of those, would highly recommend reading it. um But I think it speaks to maybe a bigger problem
00:19:08
Speaker
in in terms of the accessibility and the the sort of the communication style within the stock market. How how do we get around this problem?
00:19:21
Speaker
ah Well, first of all, I think Mark wants to make it. Mark, he said it a few times. He said it a few times to me. He has said it in response to a comment as well on this article. He wants to make it clear this is a tongue in cheek article. It should not be taken for educational purposes.
00:19:34
Speaker
i ah agree like it is a funny article. um There's a few little elements in it which he's he's obviously taking the mickey a little bit. I think he's got four or five different um definitions that people, various companies use for discounting. um yeah He describes when people say things like teaching, it's just presentation but more pretentious. um So so yeah it is a tongue in cheek article.
00:20:02
Speaker
But it does speak to a ah figure a bigger problem as you say, Lawrence. And um something that i I struggle with, I think from a, I don't know about Roland Graham, how you feel, but when I'm reading some company financial results, trading statements, I do so with a slightly cynical mind because I think I see a i see a phrase like,
00:20:29
Speaker
I mean, to me, actually, the work the one that really winds me up is adjusted EBITDA. I hate it. And I see adjusted EBITDA, and if that's on the top line, I think, what are you hiding? um
00:20:42
Speaker
Yeah, Mark said um on adjusted LBITDA that trading is so bad that we couldn't even make up a positive number.
00:20:52
Speaker
Yeah, I always think companies reporting have adjusted last. It's like that. it's ah It is a little bit so yeah optimistic. But when I say adjusted EBITDA, I always think what's the real profit? And more ah more importantly, um are you are you generating generating any cash? um Which is sadly not always the case. But um Why is it that companies are so keen to hide, massage ah or outright sort of obscure what's actually going on? And I think follow up question two to to all of you, are there any companies that you can think of that don't do this, that actually communicating really, really well with the market? So I would say that
00:21:38
Speaker
It's really just experience is the way to to deal with this. um as you As you spend more time ah you know learning about investing, you you realize that there's a lot of PR.
00:21:54
Speaker
And probably through bad experiences, you will realize that and PR can sometimes be be damaging if it's if it paints a picture. And and if you don't have the ah necessary skepticism, ah you can get sucked in. and I like the way Mark included ah profitable growth in in the article because that is extremely common nowadays. Even very good companies have started throwing this phrase in as if it's ah an achievement to say that they're looking for profitable growth and
00:22:34
Speaker
All it really means is that the company might grow its top line and maybe it has positive EBITDA and that that's all the company really needs in order to say ah profitable growth. and Companies that that don't do this, ah some small companies, family owned companies, companies that don't care about their share price,
00:23:03
Speaker
and they don't bother with PR. and A big company that I own is Next. I think they're pretty pretty good at at avoiding ah sort of meaningless ah PR in there in their statements.
00:23:24
Speaker
Yeah, Next is definitely the, it's often the go-to, isn't it, when people talk about ah companies that do reporting very, very well. And I think one of the things, I mean, there's a few things to talk about within what what we're talking about here, but while we're talking about Next in particular.
00:23:39
Speaker
Something that's good and quite interesting about Next is that they do tend to hit expectations. They very rarely disappoint when it comes to reporting their numbers. And I think that they are a real lesson in managing expectations. They don't fill their reporting with fluffy language like profitable growth and words that don't actually mean anything. So i feel like I feel like you're more likely to know what you're getting. There are very rarely nasty surprises and if there are nasty surprises management does do a good job at explaining why.
00:24:17
Speaker
profits may have been down, sales may have been down, margins may have been down. um And I think they are a really good lesson in in good communication with with the market. What I don't understand is why more companies don't do it. Like we always have to lean on next as an example. Games Workshop is another one. um if yeah If you're looking for a slightly different take, JD Weatherspoons, they're pretty pretty open and honest, but um maybe for different reasons. But why aren't more companies reporting like this?
00:24:46
Speaker
I think there's something there in the, ah like the under promising and over delivering. Like if you flip that around, I think that you see a lot of companies over promising and getting that capital upfront and then having to sort of manage expectations on the way down, which is where a lot of this, a lot of this language might come in.
00:25:03
Speaker
Yeah, that's probably true that they they've put, ah they've they've they've been as optimistic as possible. And then, you know, I suppose you wonder sometimes if they're optimistic in the hope that that things will go to plan and then, you know, if they do all the well and good. But sometimes, as you say, management expectations have to be managed down a bit.
00:25:22
Speaker
But so actually going back to next, one thing I like, I don't know about ah Megan and Graham, but over the years, really, reading, if you read the detail of what they write, it's really quite educational sometimes, you know, I've learned, you learn a lot about how the business works and and the finances of it. It's so rather than Sometimes you read an RNS and you have to really struggle to understand what they mean. With with Next, it's more ah more the opposite. The explanations are of a very high quality um and you know it can be a ah useful insight into business, not just into Next quite often.
00:25:56
Speaker
yeah and i mean Another company I own is ah Berkshire Hathaway. Obviously, those annual reports are are like it's like reading ah an amazing book about finance. or you know it's like and It's like a real educational lesson reading reading them. and but If you ask what Megan's question is very good, why aren't more companies you know, ah communicating effectively and properly. and Well, I would say that most ah CEOs and most management teams are, you know, they're hired, hired guns, if you like, and there for a few years, and then they leave.
00:26:39
Speaker
ah You know, and they will do what everybody else does, hire a PR company to help write the reports and the PR company will try to make things look as good as possible because that's their job. So I think the only defense against it is to have management who are really clued in and who really just want to be honest. And that is not going to be most companies probably.
00:27:08
Speaker
Yeah, i think I think that's a good point and I do think that some of the companies that do reporting well, they the chief executives that are doing that reporting well or the chairman, it um ah it's they're often i mean they're often founders or they've been at the business for a long time. I think Kevin Rountree at Games Workshop ah is ah is such a good example of someone who clearly loves the company so much. He's been there for such a long time. He's been the chief executive for a very long time.
00:27:35
Speaker
and his Financial reports are really they show the passion they show the love of the business and they're really clear they're really easy to read um there's another company in the US which i hold.
00:27:50
Speaker
called Cognex and their annual reporting. I mean i hate to say it because it's very much not the Stockopedia way of investing, but it was the annual reports that really attracted me to the company because the way that they're done is just brilliant. they're The founder stepped down a couple of years ago and they do a Cognex photo shoot every year and it's some sort of pop culture reference and then the annual report is all like set up around whatever that reference is. So one of them, I can't remember but which year it was, I think it might be 2015, it was a conversation between the founder and chief executive at the time um who had, he dressed up as Doc Brown from Back to the Future, had gone back to 1985, which was the when the year he founded the business and was having a conversation with his
00:28:39
Speaker
previous self um and how proud he was of the 30 years of the business yet must be 2015 because that was all like around Back to the Future. um it's a I just thought it was great. I i wanted to i i read almost a full annual report because it was so it was so interesting. I mean, who reads a full annual report? There are hundreds of pages. um So, yeah, I mean, it's had a shocking time, Cognix, I would say, since I bought the shares a couple of years ago. So maybe maybe picking your shares based on the layout of the annual report isn't the right investment strategy. But um i i ah i like I like companies who were which yeah which are delivering, the chief the chief executives are really delivering a good, clear message and clearly care about what they're doing.
00:29:27
Speaker
Yes, it feels like finding companies that clearly put effort into making their communications engaging and easily engaged with rather than the flip side, which is kind of including lots of language to obscure what's going on and to make people sort of gloss over it and go, oh, this this sounds nice.
00:29:45
Speaker
I generally find I think if there's something I read enough times and I can't understand it, that's almost a reason not to really consider going much further because it shouldn't be that hard. Business isn't generally rocket science. It isn't that hard to explain what's happening if you want to explain it clearly. And I tend to think sometimes I'm reading something and I think it's just been written to make it, um to try and blind the reader with buzzwords or confusing jargon or you know a convoluted explanation. And there's not really any reason for that.
00:30:14
Speaker
Well, there's not really any positive reason for that, I don't think. On that note, we're going to wrap up part two. We'll be back at part three, where we're going to look at our winner of the week and ah look at what's coming up on Stockopedia over the festive period.
00:30:34
Speaker
Welcome back to part three. Uh, our winner of the week this week. Uh, I don't know if it's quite right to say winner of the week, given that it's actually been a, it'd been a 10 year process. Uh, our CEO ed published an article this week about his no admin portfolio system, uh, reviewing 10 years performance of it because he's been running it for 10 years consistently now. Um,
00:30:58
Speaker
is compounded at a 13% annualized rate. um He says they've also beaten so so been every UK fund manager, all the UK indices and the S and&P 500 just by investing in UK stocks.
00:31:13
Speaker
The process for if you are not initiated is Ed takes the UK stock market and sorts it ah by our proprietary stock ranks. He excludes some small and hard to trade shares. um So anything below 20 million pound market cap. And I think there is a ah bid ask spread rule that he includes in there as well. um He selects the top two stocks from each of the 10 sectors.
00:31:38
Speaker
So 20 stocks in total, buys that list, holds it for one year, rinse and repeat. um And as Ed showed in his article, it appears to have been phenomenally successful over the last decade. and Panelists, what have you been your like your biggest investing lessons that you can take away from a process like this? I'm curious.
00:31:59
Speaker
ah I think for me but personally and something that I have done um more myself over the years is really about being consistent with the methodology and the decisions you make not being tempted to chase whatever might be hot at the moment or different trends in the market, but just really having a consistent approach that you understand, you believe in it, and you just keep repeating it even though at times it may not seem to be working as well as some other people's methodology. But the consistency for me, I think, and I think that's the naps has really demonstrated that.
00:32:40
Speaker
Yeah, I really like the the way that each sector gets gets a piece because you know my personal holdings and my watch lists tend to be concentrated in sectors. ah so It's nice for me to see somebody who's just buying every sector and it's doing really well. so I like that and because you know sometimes i some some sectors in the market, say commodities, I look down on them a little bit. I say, oh, you can't do so well in commodities. But actually, this portfolio is its just buying everything and doing really well. So I like that.
00:33:20
Speaker
Yeah, I agree with both both of those points. but um And I think ah another one that i I find really interesting is the ah very disciplined holding period. So ah it the the portfolio is um turned over entirely every single year.
00:33:36
Speaker
and Ed is very disciplined about that. There's no hanging on to the shares in the portfolio just because, oh yeah, I quite like that one. There's very little emotional attachment to the shares and it's something that Ed and I really, really differ on our approach to investing. Ed doesn't really have that emotional attachment to shares, which as I've just said, Cognex was not a great not a great choice. um but But I love it. um So i think yeah I think having that really disciplined turning over the entire portfolio every single year, regardless of how the shares are doing. i It has meant that there have been some stocks which have continued to win, which um the Naps portfolio has missed out on. like it It held Games Workshop for a year and sold it, obviously, because it it does sell stocks at the end of the year.
00:34:24
Speaker
but it hasn't mattered in terms of the performance of it. I think it's despite the fact that there was the odd stock that it may have sold out of too early, it sold out of many, many more ah that would have ended up losing losing the portfolio monies. That that ah holding period is is a really interesting ah really interesting ah lesson that I have learned from the NAPPS process.
00:34:53
Speaker
I think for me as well, I think this is exemplified by a subscriber comment we had underneath that article. um It's been really the efficiency in the whole process. like and the so John Smith, 68, said that he joined Stockipedia in December 2016, so he's followed the the system with interest along the way. He said he can he could never get on board with it because he's too addicted to the daily soap opera of private investing.
00:35:22
Speaker
um So the idea of setting and forgetting at the start of each year would be unbearable. But then he goes on to say, and he his past 10-year performance has been about 300%, including all dividends, which comprises apparently apparently about a quarter of that total return. ah The 250% return of the the NAPs, the no admin portfolio system, doesn't include dividends. so you can add quite a substantial amount extra onto the top of that. He says it made it's made him realise that he would have done just as well, if not better, with with a single hour of admin a year across the entire decade versus the countless hours that he has spent um generating the performance that he has done.
00:36:06
Speaker
So that I thought was an incredibly interesting comment. Thank you to John Smith for leaving that one. Before we get into- John Smith's on fire at the moment. John Smith also asked me to look at GSK, which I then did. So yeah, John Smith's having all sorts of influence in our content. It's great. Keep them coming. Excellent.
00:36:23
Speaker
Keep it up. ah Before we jump ahead to the content that's coming up from us over the festive period, it's probably worth as touching on a couple of ah macroeconomic announcements this week. Graham, you were looking into, in the UK, we had unemployment figures, inflation and the Bank of England rate decision. um And in America, we had the Federal Reserve ah rate decision as well. Do you want to speak a bit about that?
00:36:50
Speaker
I just thought i'd I'd mention the Federal Reserve because it had a really big impact on Thursday. The Dow was down 2.5% and the UK was down about 1% on the back of ah changes to what people are expecting next year. So next year We can only look forward now to two rate cuts, whereas previously four rate cuts were expected from from the Fed. and Now, the good news is that I don't think this really affects most of the companies that I cover, and but it's just sort of an insight into market sentiment that a lot of people reacted in a big way to this news.
00:37:38
Speaker
And in terms of the reasoning behind it, and it just seems that the Federal Reserve is still ah not satisfied with where inflation is. Inflation is still a little bit too high. And and and So, there's that sort of big factor. And then there's, of course, the Trump presidency, where there are elements of uncertainty there. Could tariffs ah increase inflation? And is that would that be a reason for the Fed to keep rates higher for longer?
00:38:19
Speaker
and so it was ah it was ah It had a big impact on market sentiment on Thursday morning, and but um I think in the long run, if you look ahead to 2026 and 2027, it looks like rates will be more or less on the same path that they were before this this sort of smooth move lower and from the fed. So and that's the update. and Hopefully not a big impact, but and in the short term there was there was ah ah a big impact on sentiment.
00:38:59
Speaker
So lots of uncertainty stateside. One area where there is much less uncertainty is in the content that's going to be coming up from Stockopedia over the next couple of weeks. Megan, do you want to let the listeners know what they can expect from us? How's that for a segue? That was i know very impressive. ah Yes, I can. I can let you know what to look out for. um Mark's written an article. um it It's actually quite moving um after his funny article this week. um It's about the nature of risk and I highly recommend reading it when he publishes that next week because it's so it's a really nice um really nice piece of ah speculation about the the year just gone. um Ed has also done some research. Ed's actually in Australia at the moment and he seems to
00:39:46
Speaker
be awake um all the time. um So ah he has been doing some some research into the performance of the actual stock ranks. So obviously he's he's updated the NAPS portfolio ah specifically yeah this week, but he's looked more ah broadly at the at the highest ah ranked stocks, so 90 plus ranked stocks in 2024. So he'll be publishing that.
00:40:12
Speaker
And then our main sort of Christmas feature is watchlists and the companies that ah we're all excited about in in the coming year. so um Mark Graham and I are looking at watchlists quite broadly. where sort of We've all got slightly different takes on the way we look at the market. so We'll be publishing what we're calling 12 stocks of Christmas. So look out for a a short piece of analysis on 12 individual stocks a day ah from the three of us. And we've also probably, slightly more interestingly, um I guess, is the looking at the stocks that Roland and Ed will be doing, which is slightly more portfolio based. um So I'll just speak quickly to what Ed's doing because he's not here. um
00:41:05
Speaker
Ed is looking at an iteration of the NAPPS portfolio. and He sort of hinted at it in the article that he wrote last week. It will be hopefully ah hopefully very, very interesting and still sort of similar sort of strategy, similar sort of structure, and but with more touch points throughout the year, which we hope will be useful for those of you who ah who like to engage with your stocks more regularly than once a year.
00:41:33
Speaker
um And Roland, i'll I'll let you explain what you're doing with your moral portfolio. Yeah, that's right. So I've run the stock in focus or the SIF model portfolio for about 80 years now. And the focus, it's always been a systematic ah approach where I use the screen to to create a short list of stocks that I can select to add to the portfolio. And the focus has always been on what I've called affordable growth. So really just
00:42:05
Speaker
you know a moderate moderate valuation and evidence that there's a prospect of near term earnings growth and and hopefully share price momentum. And so what we're going to do from next year onwards is just increase the weighting of that portfolio a little bit more towards income.
00:42:23
Speaker
It may sound like a big change, but actually it may not be as big as it seems because the portfolio has always generated some income. I think it's probably averaged out at about 3% annualized over the years. So what I'm going to be doing is just tweaking the rule slightly and looking at the the general approach to try and increase that the level of income um without sacrificing hopefully too much capital growth.
00:42:50
Speaker
Yeah, I found that really interesting actually read when we when we were looking at sort of the fact that we wanted to launch an income portfolio, it's what you've done is not that far really from from an income portfolio. um As you say, it's not a not a huge change, but um yeah hopefully it will satisfy the people who who are looking for for income in their in their investing.
00:43:11
Speaker
All of that, of course, will be available on Stockopedia over the festive period. and I know there's a lot of people listening who are already subscribers, so thank you very much. If you're not already subscribed and that has ah whet your whistle, and you can head to stockopedia.com. ah We do have a free trial available, and so you can ah Try it all out over the Christmas period if you have nothing else to do, of course. and On the podcast front, we are still going to be publishing podcasts over the next couple of weeks. um We're going to be publishing one next week where Megan and I take a look back at the year that was 2024, and then we are going to kick off 2025 on January the 3rd with a look at Graham and Megan's watch lists.
00:43:56
Speaker
ah That's all we've got time for this week. Graeme, Megan, Roland, thank you all so very much for joining me. Thank you. Thank you. Thank you. So there's an awkward silence there where everyone nodded and figured out who was going to speak first.
00:44:09
Speaker
um I just want to wrap up by saying, again, I started this episode with a massive thank you to everyone for for listening and and their reaction to to this new venture from us. I and wanted to share that we have spent most of the last week ah in the top five in the UK business charts on Apple and the top 10 in the comparable chart on Spotify, which is incredible. um I've had a look at our analytics. We've had listeners from 29 different countries around the world, which is awesome. and So again, massive thank you from us. If you haven't done so already, we'd really appreciate it if you could ah leave us a rating on
00:44:48
Speaker
Excuse me, whichever platform you're listening on, if you have the ability to leave a review or a comment, that also goes a really long way to helping other people discover the podcast and benefit from it as well. and We've had some lovely feedback from people, um a user called grout123, which is an excellent username.
00:45:06
Speaker
I said, he looks forward to listening regularly. Another great addition to the content offering from Stockopedia. Thanks team. ah The ox two nine zero six. Thanks for the podcast, guys. I enjoyed it. Content was excellent. And Ed 66. I don't believe this is our CEO having a shadow account. um Ed 66 said thanks to the podcast. It's sure to become a regular weekly. ah Listen, that's all from us this week. i Have a lovely week next week. However, you are celebrating and we will see you back on December the 27th.
00:45:36
Speaker
Thanks again.