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  • Writer's pictureMark Watson-Mitchell

Take advantage of the Black Swan and don’t say that ‘small caps’ are boring

Despite the last day’s ‘black swan event’ * effecting global equity markets, I feel obliged to advise readers that there is still a lot of action within the UK Small Cap sector.

In the last month alone one of our Profile stocks is up nearly 88%, there have been two takeover bids of Profile stocks and there were several New Highs.

The last day has seen brent crude going to levels higher than last seen in 2014, but there is still an even greater climb that is inevitable until matters calm down somewhat.

Putin’s sudden moves pushed up the oil and gas stocks, while other equities fell by 5% to 10% across the market.

Even those unlucky enough to be playing in the ‘cryptocurrencies’ saw a sudden erosion of perceived values, that is if such coinage has any value other than with gamblers.

Remember that some of the world’s leading investors have declared that their best bargains have been made when all around were selling – they kept level heads and watched the price actions of their favourite companies.

And they stood proud when all those around piled back into the markets and enabling them to take their profits.

I am not saying ‘buy the market’ but instead you have to be selective and take new positions when prices just look too attractive to be passed.

But whatever you do check your research first and don’t gamble – just take a firm view on your chosen stocks and it will inevitably turn positive.

By the way a ‘black swan event’ is when an event or occurrence is extremely difficult to predict. Was Putin’s move difficult to predict – probably not – but its instance was so rapid that it took millions by surprise.

A black swan event generally results in severe and widespread consequences, although in hindsight the occurrence causes people to rationalise the event as having been totally predictable.

Examples of ‘black swan’ include the ‘dotcom’ crash, the ‘twin tower attacks’ in September 2001, then the 2008 global financial crisis when even Lehman’s went to the wall.

Brexit was a recent example, when the UK decided to leave the European Union – the effect was felt globally.

Even that was capped by the Chinese based Covid-19 Pandemic. Two years ago, the markets collapsed as the potential horror of human losses began to be realised.

But as time passed it was seen that share prices had been oversold and that there were bargains abounding just waiting for the bold to seize.

It is never bad news for everybody – there are always winners emerging out of any such situations.

The last month in our ‘small cap’ sector – a big gainer, two bids and a new High

Europa Oil and Gas (Holdings) (LON:EOG) – without doubt this UK oil and gas exploration, development and production group has been a wonderful performer.

Its shares have risen extremely well in the last month, up from 1.57p to 3.08p at one stage.

Last night they closed at 2.95p on more than doubled dealings above its average daily volumes. That is up nearly 88% in the last thirty-one days.

With the way the oil and gas prices are moving I would suggest holders should sit very tight – they could even double from here.

(Profile 24.01.22 @ 1.57p set a Target Price of 2.25p*)

John Menzies (LON:MNZS) – after two unsolicited bids this Edinburgh-based international aviation services group has succumbed to a takeover from a Middle Eastern rival.

National Aviation Services is a Kuwaiti operator that was rebuffed by its first two approaches to Menzies. Then it went heavily into the market and whipped out some 19% of the Scottish company’s equity.

Its subsequent 608p a share cash bid resulted in the Menzies directors weakening in their bid defence and then accepting the higher offer.

NAS handles some 50 airports across the world, while Menzies has contracts with over 200 globally. It is believed that the two companies will make a very good fit.

(Profile 17.12.19 @ 450p set a Target Price of 530p*)

Air Partner (LON:AIR) – the second company on our list to be taken over is another global air services group.

It has accepted a 125p a share cash bid from the US-based Wheels Up Experience group.

The bidder, a $1bn NYSE quoted company, is a leading provider of ‘on demand’ private aviation, in fact it is one of the largest such companies in the world.

This looks to be another good fit of two outfits.

The shares of Air Partner rose from 81p to match the offer price.

It also provided this column’s participating readers a magnificent 81% gain since the Profile.

(Profile 16.12.20 @ 69p set a Target Price of 89p*)

And Finally …..

Bloomsbury Publishing (LON:BMY) – I do like the way that the shares of my favourite independent publisher have been performing of late.

The late January Trading Update for the year to the end of February was extremely positive.

The boss Nigel Newton informed shareholders that this year has been very positive.

Apart from boasting that its important Digital Resources division is achieving its £15m sales turnover and £5m of profits target in the year.

Newton also told investors that group-wise both revenues and profits for the year will be above market expectations.

We will have to wait another couple of months or so to see the final results being published – but the previous revenue expectations were for £197.1m and some £20.1m of pre-tax profits.

I have followed closely this group, known globally as the publisher of the Harry Potter series, since its market debut in 1994. It has always been a good performer, a good steady grower of a group and well manged to boot.

Its shares touched a new High of 405p yesterday, before closing off 36p on the day at 364p. At that level medium-term investors would, I believe, make a very healthy return on their money.

(Profile 28.02.19 @ 231p set a Target Price of 257p*)

(Profile 27.03.19 @ 238p set a Target Price of 270p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)


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