Interest in the penny share market is high – and rising. That was the conclusion I drew from last Saturday’s Master Investor Show in Islington, north London.
Private investors see this annual event as a chance to meet small company bosses and market gurus face-to-face. This year was exceptionally well-attended. What’s more, the mood was distinctly upbeat. The vagaries of the election campaign were forgotten for the day as investors focused on business and business alone.
Whatever the official statistics tell us, business seems to be pretty good at the moment. Unemployment may be high and the banks may not be lending, but businesses large and small have had time to adjust to the economic downturn and are now forging ahead.
As I discovered at the show, this is even happening in the housing market. Builders have come to terms with the pricing environment. They have set their budgets at the appropriate level. Now they are starting to buy land again.
That was the message from Inland (INL), a company that buys brownfield sites and takes them through the nightmarish acquisition of planning permission…
Five penny share stars to watch
Inland’s Stephen Wicks was just one of several company bosses to give me a positive steer. Here are a few other titbits that I picked up.
Cinpart (LSE: CINP): This manufacturer of energy-saving devices that regulate the voltage passing into a building is looking to move into the United States. It may need to raise more money to finance its growth, but with the support of its UK marketing partner, Scottish & Southern, this should not be a problem.
Alliance Pharma (LSE: APH): The integration of the recently acquired portfolio of drugs from Cambridge Laboratories has gone well and the business is going “unbelievably well”, says the management. Alliance was singled out for commendation by Nigel Wray – one of the UK’s most successful small company investors. Wray drew attention to Alliance’s low price/earnings ratio, powerful cash flow and longevity of the drugs that Alliance sells to the NHS. “It is like collecting rent for 40 years,” he explained.
Belmore Resources (BEL): Belmore, whose shares are traded on PLUS markets, has a 100% interest in ten mining licences in Ireland’s County Clare. In 2008 it discovered a high-grade lead and zinc resource near the old Kilbricken Silver Mine. Last year, it struck a deal with Canada’s Lundin Mining Corporation. By spending €14.7m, Lundin can acquire the right to earn up to a 70% interest in Belmore’s licences and now has four drilling rigs on the prospect. Results should be coming through in the next few months. The message from Belmore’s managing director, Patrick Mahoney, was “watch this space”.
Symphony Environmental (LSE: SYM): This manufacturer of oxo-degradable plastic – plastic that simply vanishes when exposed to oxygen – seems to have overcome scepticism about its technology and is now powering ahead. With distributors covering the global map, Symphony is enjoying a rapid rise in sales. It is looking to expand the use of its plastic additive from the staple supermarket carrier bag or refuse bag to the whole range of plastic packaging. All of the world’s leading consumer businesses are under pressure to respect the environment and Symphony is attracting the attention of some of the biggest names. Analysts at Allenby Capital expect profits to double this year.
Forbidden Technolgies (LSE: FBT): Most bullish of all was Stephen Streater, founder of Forbidden Technologies. Streater has already made one fortune out of video games console maker Eidos. He has now embarked upon a second stock market venture. Forbidden is developing methods of editing videos over the internet. Streater gave me a demonstration of the technology. He clearly believes that this system is ahead of any competition and could be very widely adopted. As to the share price, this is currently just 16p, but Streater described a scenario in which it could reach £100!
How you can become a ‘master investor’
So the show left me with plenty to reflect upon and to follow up. It served as a useful reminder that while politicians come and go, business adapts and moves on. The various speakers also offered some very useful wisdom which could help you to master the art of investment…
• Pay attention to earnings and cash flow.
• Beware corporate arrogance.
• Back companies where the directors have substantial shareholdings.
• Great rewards come from taking risk – little acorns will become oaks.
• And perhaps the most significant of all, do not underestimate the importance of compound interest.
Don’t forget that a seemingly modest return of 10% a year turns £1000 into £2600 over ten years and nearly £6,700 over 20 years.
You don’t need to be greedy. So long as you do a little research, back good companies – and persevere, you can expect to be a pretty satisfied investor.
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This article
was written by Tom Bulford, and is taken from his free twice-weekly email
The Penny Sleuth