Small Caps Podcast with Paul Scott – Episode 21
A very busy week, juggling report writing, with the wonderful Mello Chiswick investor conference, which I enjoyed very much. Thank you to the many Stockopedia subscribers who took the time to chat to me at the event, giving really useful views, ideas & feedback.
This podcast covers lots of ground as always, from the UK small caps reporting this week. We have 4 mildly mysterious shares (held back for subscribers only), all on Wednesday, so that’s the key report to focus on if you’re looking for ideas to do your own research on (they’re never recommendations, remember! We just throw loads of ideas at you, for you to select your own for further, more detailed work).
Thanks for the shout-out Paul. I’m really glad that you enjoyed Mello and the StockSlam. I had a great couple of days and would heartily recommend Mello to any private investor. The only downside is that you’re usually pretty shattered by the end of it.
For interest these were the companies covered in the StockSlam:
DX Group (DX)
MPAC Group (MPAC)
AssetCo (ASTO)
Baker Steel Resources (BSRT)
MP Evans (MPE)
Trident Royalties (TRR)
Wickes (WIX)
Literacy Capital (BOOK)
Gulf Keystone Petroleum (GKP)
Made Tech (MTEC)
India Capital Growth Fund (IGC)
MJ Gleeson (GLE)
Paul, I saw you comment/question about the IP protection for Cambridge Cognition, in respect to the strategic partnership they have just announced in China. I think there is a bit of a misapherhension about the importance of IP in protecting their moat.
The real value is not so much the software itself but in how it has been validated and accepted by the global research and clinical community. Their products have been developed over 20 years, used in over +2,500 research studies and as a clinical endpoint in over 250 clinical trials. Additionally, they have 300 research customers that subscribe annually to CANTAB and 40 of the global top 50 Pharma (with a CNS program) as clients.
There are other software products, including some free on your phone that can approximate what they do, but very few have been through even a basic validation process. This is a hugely time consuming process. From CamCog’s clients point of view, if they were given the choice between an identical product with limited validation and one which has been validated 1,000s of times and been used to gain FDA or EMA approvals, even if it is cheaper you would still go for the validated product. The US$ 200k/300k saving a client might make in taking a cheaper unvalidated product is nothing in the context of the 10s of millions a trial phase might cost and introduces a certain risk in to your program.
To my mind this is the real beauty of the Cambridge Cognition model. If you look what they are doing with their voice product for example. They have released it to their academic network and in the first year they have had 20 research group use the products in studies. This is a phenomenal rate of validation, it would take many of its competiors 5 years or more to reach a similar level. Their moat is deep and wide it is protected by validation and network effects more than it is by IP.
A.CORN
All good points. My understanding is that western pharma (almost certainly) just wouldn’t use a Chinese company for this work regardless. Cheers.
@Zaq – I agree completely, the FDA have been pretty clear about what they think of the quality of clinical trials conducted in China, even when conducted by major global CROs. I suspect this deal is more to do with allowing the State Drug Administration (Chinese FDA) to ensure the use of globally repreducable clinical endpoints but to rebadge them and thus meet localised content objectives.
That said I think there might be some interesting product and revenue opportunities once they address the healthcare segment. The growth in and acceptance of digital healthcare platforms in China is signficant and worth watching, as it directionally signposts the future for the NHS.
A. Corn
Really enjoy your podcast Paul. Always have a giggle and it is an excellent resumee of the previous week. I rarely like to buy against good news so need to wait a few days in which time buyers enthusiam recedes, and your podcast often reminds me of companies and situations i need to revisit.
Hi Paul
I really enjoy the podcasts despite reading the daily reports almost every day. Sorry to miss you at Mello on Wednesday: a great day as always.
Wincanton interests me a lot (not yet a holder) and I hope you are successful in getting the CEO to engage in interview
Best
Mark
Hi Paul – great listen again – keep up the good work. Even though I read the SCVR each day, it’s still interesting to hear a review of the week.
Couldn’t make it to Chiswick, but if I had been there – and made it to the bar – would have loved to swap notes on two companies we both held that had takeover bids at the same time (2018?) – Revolution Bars and Lavendon. The reason I remember this ? Basically because we acted in oposite directions and both of us got one right and the other wrong !
On Revolution Bars, I sold out around the offer price after there was very slow newsflow – and an eventual vote down. In hindsight I’m glad I got out, even though this was done on gut feel as opposed to evidence of an event. I believe you held and continue to do so. So strange that the offer (at a decent premium) was voted down.
On Lavendon, having been underwater for a few years, I sold out soon after the offer was made as I was fed up with the share/company. Acting on emotions cost me though – competing bids meant the eventual sale price was 30% above the initial offer price. Following the general investment rule [if a takeover offer is made, stick around to the bitter end – which you did] – would have netted 30% more than I walked away with. Well done to you. Wish I had’t sold in hindsight. Just shows how investment rules are fine to start with, but need some extra judgement / situational awareness as well.
3 Takeovers in my personal portfolio this year – Air Partner (a John Lee favourite over the last 20+years, read about in the FT but took ten years before investing), Clipper Logistics (covered by SCVR/came to my attention in 2018) and Homeserve (annoying adverts in everyone’s water bill mean that this didn’t need any introduction !) but Stockopedia’s data system helped on the investent side on that one. Interesting comparison with WATR that effortlesscool often comments on so well.
Hope that’s helped make the case for both the investment and social side of both Stockopedia/SCVR and Mello [and as you so often say “and I’m not getting paid for this” !] as well as all the other resources out there (PI World, IMC, Rearch Tree etc)..
All the best
Geoff
Great as always. I understand some people moan about some of your info being given out free but it doesn’t happen till the weekend. Being a member I get it straight away. I don’t always agree with you but I love your methodology. Also it takes 2 to make a market.