I believe that life goes in big circles. Two of the keys to investing for me are i) anticipating long term trends which are likely to reverse, and ii) developing the relevant knowledge network to take advantage of the reversing trend. The downside of this approach is having to be prepared to spend long periods of time during which fellow investors view one's investing activities as a quaint distraction from how real investors think and act!
An example of the above was pawnbroking when I invested in Albemarle & Bond in 1988. I expressed the view to colleagues that there would be an increasing section of the population whose disposable income would shrink and to whom the clearing banks would become increasingly unwilling to lend. For many years, it was considered inconceivable that people would become poorer but today, regrettably, it is becoming only too apparent.
Turning to a more appealing trend reversal, readers will be aware that LCFR has had an unfashionable focus for years on UK manufacturers which are net exporters. The reason for mentioning this today is that I anticipate that the trend of shrinking UK manufacturing will start to reverse and I was encouraged by a speech given by Sir Philip Green at London Fashion Week rallying retailers to rebuild the UK's dwindling manufacturing capacity.
Many people would say that Sir Philip was responsible for a lot of textile manufacturing moving offshore in the first place. I think that this move was inevitable (with or without Sir Philip) because of trade becoming increasingly global and the huge pay differentials between UK workers and their counterparts in emerging economies. However, Sir Philip is nothing if not streetwise, and is, I imagine, motivated by the financial benefits to be derived from UK manufacturing through a combination of increasing wages in the emerging economies, the costs of managing a very distant supply chain, the challenge involved in achieving with Far East manufacturers the levels of quality required by the consumer, the emergence of manufacturing plant which facilitates personalised manufacturing at low cost, significant weakening of the pound, and increased availability of labour in the UK.
If the UK manufacturing bandwagon attracts supporters such as Sir Philip Green with the ability to get media exposure, then I believe that manufacturing may well become a larger component of the UK economy quicker than most forecasters would have predicted. If this does transpire, it will have a beneficial impact on the three underlying imbalances within the UK economy, namely trade, unemployment and PSBR, which have prevailed over at least the last thirty years.
In the Weekly Update issued on 24th January 2012, I wrote about how the City's share price formation process throws up interesting opportunities for long term investors with a tested investment template. I used Immunodiagnostics as the basis of the article, since it had seen its share price fall from 800p in August 2010 to 291.5p at 23rd January 2012. As you will see below, the company last week announced that it had obtained FDA approval for another of its assays for use on the IDS-iSYS instrument. At close of business on 17th February 2012, the Immunodiagnostics share price was 457.75p - for the dispassionate, a 57% return in less than a month!
News on LCF Research Covered Stocks
Immunodiagnostic Systems (LON:IDH), the Newcastle based niche diagnostics company, announced that the Intact PTH automated immunoassay kit has received approval from the US Food and Drugs Administration (FDA), enabling the product to be sold in the USA.
The Intact PTH assay is used in the diagnosis of calcium metabolism disorders, and will enable, for example, doctors to monitor patients undergoing renal dialysis. The assay complements IDH's automated 25 Hydroxy Vitamin D assay and will further facilitate the placement of IDS-iSYS systems.
The IDH share price has decreased by 44% over the last year.
Immunodiagnostic Systems Holdings Plc is currently graded B by LCF Research. To learn more, follow the link.
Intercede (LON:IGP), the Leicester based supplier of identity and credential management software, released an update regarding the final results to March 2012. Intercede reported that whilst they will show profitability and cash generation, the ability to book further orders before the year end is dependent on a small number of projects in the pipeline receiving customer approval in sufficient time. The order book stands at £6.2 million (the same as a year ago).
A number of large prospects have transitioned within the last six months from wishing to buy perpetual software licenses to specifying the Software as a Service (SaaS) rental model. This has affected the revenue recognition. Infrastructure investment to support growth has continued and net cash at 10th February 2012 was £7.0 million (September 2011: £6.6 million net cash).
The IGP share price has decreased by 17% over the last year.
Intercede Group Plc is currently graded b by LCF Research. To learn more, follow the link.
RWS (LON:RWS), the leading patent and technical translations service provider, reported in an AGM update that trading for the first four months of 2011/12 was on line with board expectations. The broker's forecast for 2011/2012 is a pre-tax profit of £17.5 million, EPS of 29.8p and DPS of 17.7p.
The board anticipates delivering further progress in 2011/12.
The RWS share price has increased by 42% over the last year.
RWS Holdings Plc is currently graded A by LCF Research. To learn more, follow the link.
This note was prepared by LCF Research Limited using information provided by the subject company’s management or publically available news sources. No representations are made nor warranties given (express or implied) in relation to accuracy and completeness. This document is not an invitation to invest in the subject company and does not purport to contain all the necessary information that a prospective investor might require. LCF Research Limited recommends prospective investors to conduct their own thorough independent analysis of the subject company and the information contained in this note or referred to above.