While it’s easy to assume that private investors are at a major disadvantage to the professionals, the former still hold a few trump cards. In addition to having the freedom to take a long-term view on their portfolios, private investors also have the ability to own companies that professional money managers rarely have the time to research, aren’t permitted to buy or simply don’t know about. Here are just two that are currently on my watchlist.
In the wars
Holders of stock in £120m cap colour cosmetics firm Warpaint London (LSE: W7L) haven’t had it particularly easy of late. After double-bagging in price in just six months since listing, the stock’s honeymoon period came to an abrupt end in late June when an update revealed that sales in Europe had been nothing more than flat. No matter that overall trading had been “in line with expectations,” the market was in an unforgiving mood. Shares fell heavily on the day, beginning a downward trajectory that the stock has been struggling to reverse ever since.
I think this represents a great opportunity to climb on board, particularly as this month’s interim numbers — while hardly explosive — do suggest a rebound in the share price might come sooner than later.
In the six months to the end of June, overall sales rose 3.7% to £13.3m. Growth in its W7 brand was a highlight, climbing 8.3% and showing year-on-year improvements in all regions in which the company operates. In addition to this, Warpaint stated that its e-commerce strategy for the UK was now “exceeding expectations.” A net cash position of £2.5m at the end of the reporting period can’t be bad either.
The outlook for the remainder of 2017 looks positive with the company making reference to “strong Christmas orders” already being “significantly ahead” of those from 2016. This, combined with the launch of its Very Vegan range and the fact that Warpaint should begin to feel the benefits of growing its online presence in the US and, eventually, China should go some way towards helping it hit a recent analyst target of 300p.
Top stock for tough times
Another small-cap worth considering is business recovery, financial advisory and property services consultant Begbies Traynor (LSE: BEG). After barely moving for ages, the company’s stock has charged ahead in recent months, rising 35% since July. With the impact of Brexit still to be fully felt and consumers continuing to migrate online, I think the UK’s only listed insolvency specialist could be an interesting choice for those who think many businesses will struggle over the next few years.
Although last week’s trading update contained few surprises (Q1 trading has been in line with expectations), Executive Chairman Ric Traynor reflected that the company was continuing to “broaden its service offerings” by expanding its property valuation team. And, through its acquisition of Pugh & Co last year, he said it had become the largest regional firm of commercial property auctioneers.
Perhaps most interestingly, the update made reference to recent Government statistics showing a 2% increase in the number of corporate insolvency appointments over the first half of 2017 compared to the same period in 2016 — the first like-for-like increase since 2009.
With a 190% leap in earnings per share expected in this financial year and further acquisitions likely, I suspect the company won’t be flying under radars for much longer.
