Gone Bowling - May 2024
UK Stocks #LIO #KIST #FDEV
BOWLING
Welcome to the May 2024 “Bowls” update.
INTRODUCTION
I am now flagging this introduction as for “new readers” only, those who have read previous articles or are familiar with my view on “Bowls” can now skip this section.
I have been looking for and often investing in “Bowls” for over 3 years or so now.
They’re a concept I picked up from Richard Crow who, as I continue developing, still discuss Bowls with on a weekly basis – Richard runs his own Substack here
For me a Bowl is a basic charting pattern which often occurs when a stock has fallen and could be bottoming. It usually has 3 main characteristics I look for…
The rate the stock was declining slowed, indicating “Sellers almost done?”
The stock put in no lower lows, indicating “More Buyers than Sellers?”
The stock starts gradually rising, indicating “Buyers paying up?”
Hard to explain, even with a diagram, but here’s one anyway…
Bowls are a charting pattern and like most charting patterns, are often in the Eye of the Beholder.
Bowls are often “recovery” plays so to accompany any good looking Bowl I also like to see at least one of the following, preferably both…
Management changes, a new CEO in the last year or two, it takes them a while to get going! Not so significant but also worth checking for a new COO and/or CFO too.
Management buying, decent sized purchases within the past 12 months by, preferably, two or three Board members, certainly no selling except partials to cover option taxation.
Bowls (recovery play opportunities) seem to be best reflected in 3 year line charts. This kind of makes sense, most companies don’t decline overnight and likewise, most of them take a year or two, sometimes longer, to recover, or show signs of recovery.
For these reasons, a Bowl can be spotted over a period of a few months or over a period of 18 months or even more.
Anyway, I usually use 3 year line charts when scrolling through “Companies In My Universe” to look for Bowls as I’ve found over time, it’s what works best for me.
COMPANIES IN MY UNIVERSE
I don’t look at all UK companies for Bowls, I limit my criteria to those with a Market Cap >£50m and <£1bn. I also avoid those in the “Residential & Commercial REITs”, “Collective Instruments” or “Holding Companies” Industry groups.
Just my personal choice, and this leaves me with around 500 “Companies In My Universe”.
THIS MONTHS BOWLS
I have picked out 28 bowls this month, I will list them all later so you can, should you wish, export the list.
As always, each month I will look at the Bowls as a Beauty Contest, looking for the best 3, as I simply have no time to comment on all of them.
Gold - LIO
This was last month’s Gold pick and remains so for the third month running. Remains a textbook bowl to my eye and the joint highest ranking (StockRank) stock on this month’s list, it and IGR have a StockRank of 93.
There was a £110k or so CFO buy in January this year. Less than 10% dilution since pre-COVID. Forecast to do 75% or so of peak EPS (76.9p (24E) vs 106p (22A)) the share price is about 711p versus almost 2,500p then. A bit of a leveraged play on money coming back into the market on a PER of 9.5 and a yield of 10%+.
Silver - KIST
This is a sector I don’t usually invest in but there’s a lovely bowl in play here.
After peaking at 600p+ in August 2022 KIST, at 173p, is now trading about 50% above its November 2000 IPO price.
The Board is mostly made up by ex-RockRose management, a company’s whose share price 40x or so from 2016 to 2020. That Board, which holds around 20% of the Shares in issue, has not, as far as I can tell, changed since IPO.
I don’t currently own this share as I don’t know enough about this sector or this company. It is however tempting to take a small position based on the bowl and the calibre of the Board. Perhaps it’s worth waiting to see some deal flow first though!
Bronze - FDEV
FDEV is new to the podium. A lovely bowl has formed here where the stock price is up 100% in the past 2 months. This is a stock which has seen no dilution (since 2018) and a management team in the past 18 months or so, that management team also bought £350k+ worth of shares in December 2023.
Previous strategy mistakes were made on strategy here and it seems like new management are finally regaining focus on what works, and what doesn’t.
Three years ago, FDEV was trading at 3,000p+ (on a PER of 60+) and was making decent profits on decent margins. Revenue has not done much since then and is not forecast to be much different. So, although there’s been many mistakes made (by previous management), with little dilution and new direction, there’s 10 bagger room from today’s 280p to the ATH’s of 3 years ago. That said, although there’s scope for margins to return to previous levels, I am not so sure the equity will ever be so highly rated again.
SUMMARY
Quite a few bowls out there (SYNT is one that almost made the Top 3 (again)).
I do still like the more mature bowls in CMCX and TRST, both I still feel have scope to move on and become even more mature.
As always, all bowls on this list are well worth a look as all have potential for a decent run up to previous highs in an improved economy and Bull market.
Remember I may hold all, some, none, of the stocks mentioned in this article.
No investment advice intended, for information only, Do Your Own Research.
Until next time!
Jon
BOWLS STOCK LIST
LIO
IGR
ANP
VLG
ENQ
CMCX
MOTR
SUS
GLE
SPEC
ANCR
TRST
DFS
HEAD
FUTR
TET
ZOO
PZC
KIST
AVON
GBG
IPO
ACSO
SYNT
DEVO
FDEV
OXB
CWR