Friday, September 7, 2012

Fri 7 Sep - 888, HOME, SCO, STAF

Good morning. A little bit later than usual again today - I've decided to take my time with these reports from now on & not rush to publish by 8am, since only a small proportion of the readership reads them immediately anyway. Therefore I can get more information into them & have a more relaxed morning too. Sounds like win win to me!

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I see that 888 Holdings (888) has put on a nice spurt this morning, up 6%. Not sure why, as there's no news, but I flagged the excellent recent results here the other day, and added a few to my portfolio, so pleased with that one.

Also, Home Retail Group (HOME), a big favourite of this Blog, is up again, now knocking on the door of 100p. A decent trading statement next week (due on 13 Sept) could catapault us well through that level in my view. As a broker noted yesterday, at the moment the market is valuing the operating businesses at nothing (which is what I've been saying here since June!), since the mkt cap = debtors + net cash. However, if Argos delivers even flat LFL sales again for Q2, then it will confirm that the previous sales decline has been cyclical, and not structural. Combined with the reality that Argos is winning the internet war (around 50% of sales in Q1 were multi-channel - i.e. internet, mobile & phone), this makes the valuation still look potentially far too low.

My macro view is that the economy will bounce back at some point, we just don't know when. Every time we've been in Recession before, it has felt like things would never improve, but eventually they do because of capitalism's naturally refreshing actions - inefficient companies going under, and reallocating cheaper resources & market share to stronger growth companies.

Also, even if we only get sluggish growth, the inevitable outcome of QE is inflation. So retailers are some of the best placed companies to benefit from inflation - dissipating debt, and lease liabilities into rising selling prices & gross profit. Hence I remain bullish on HOME, and eagerly await the Tr Stat next week. It is vital that they maintain a dividend at a reasonable level, as it signals mgt confidence in the outlook. To cancel the divi at this stage would be a terrible mistake, so I hope they recognise this.

Right, let's look at this morning's results. Oh! There aren't any really, that's unusual!

I see that Scotty Group (SCO) - no connection to me, I hasten to add - has put out a rather alarming RNS stating that they are in urgent need of E350k. Doesn't look good.

Finally, I was rather surprised to see a large Director sell at Staffline (STAF), announced today. However, on further enquiry it appears that the Director in question is retiring next year, so the sale was setting up his retirement fund, which is not unreasonable. As the shares have been placed with several institutions, this could also mean follow-on buying as more deep pocketed shareholders potentially buy for their other funds, etc. This morning's 3p rise is reassuring on that front.

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