General The Lockdown Series

The Collective Finance: 2 month birthday…update on performance

The Collective launched the blog on 27th September 2020 with a simple view “Let’s find stocks that can double in the medium term and put pen to paper on ideas that we have always enjoyed discussing as stock enthusiasts”. Experience told us the timing was apt with the western world in a lockdown slumber. So far it’s been a great success and great fun – we do our homework on our investments, the contributors are experienced, and it has paid off.

2 things if you are enjoying the blog:

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As a reminder, if you manage your personal investments and what something more exciting alongside ETF’s in your portfolio with decent quality and thoughtful write ups – you’re in the right place. We won’t always be right, but we certainly plan to be the right side of a 50% success rate and want to make twice as much on the upside than we have to risk manage on the downside.

Also, we promised at the outset we would keep you updated on performance and views on recommendations. On 29th October with market jitters, we reiterated our views and highlighted that vaccine news was likely in November – all these stocks had been priced for bad news into eternity. We were right and the “Lockdown Series” shares have done very well. We won’t always be writing about lockdown dynamics but that is where we see the opportunities currently.

Here is the update at the 2 month mark.

Performance To Date

  • Hostelworld (HSW.L) : Published 27th Sept. Closing Price 28/09 £0.55. Current price £0.81. Return = 47%. Target price: £1.50. Summary: As we stated on 27th Sept, 19th Oct and 29th Oct there was no growth expectations in the name. Also, we think the management could be more proactive and it is an M&A target due to brand, platform investment and customer/supplier relationships. Action: Add on any pull back. The youth will go travelling again.
  • Mitchells & Butlers (MAB.L): Published 4th Oct. Closing Price 05/10. £1.35. Current Price: £2.18. Return = 62%. Target Price £3. Summary: We reiterated our view on 29th October during the market weakness to add. Simple view that the company should trade at book value. It is at 0.65x book. Action: Like cruise ships, the equity was always going to move in a leveraged leisure play. Although we think a freehold pub, as a real asset, has better alternative use that a cruise ship. Add on any pull back – will get back to £3 on a longer term view. We are human, we need to socialise.
  • Headlam (HEAD.L): Published 12th Oct. Closing Price 05/10 £2.71. Current Price £3.61. Return = 33%. Target Price £5.50. Summary: We highlighted on 26th October that a significant block had traded and 29th October that the Chairman had bought stock. The company raised FY guidance in the last week. Action: Number 1 carpet distributor, insider buying and still think it can get back to £5+ and reinstate its dividend growth policy.
  • GameStop (GME.US): Published 20th Oct. Closing Price 20/10 $13.86. Current Price $12.71. Return (Loss) = – 8%. Target Price $40. Summary: We chased this expecting the short interest to reverse more. However, the bull/bear debate remains. The bulls will argue this has a significant installed based of 10’s of millions of gamers that can be marketed to, more digital deals with Playstation and Nintendo and e-commerce potential at the beginning of a new console cycle. The bears will argue their 5,000 store network is the next Blockbuster. This has just kicked off an activist campaign with its 10% shareholder Ryan Cohen ( billionaire) to go ‘more digital’. We remain in the Bull camp. If this was BlockBuster, GameStop 2023 bonds would not be trading at par, the console cycle has just started. Action: Accept the daily volatility and add on weakness. The shares have only just broke their 200 day average to the upside in October. EV / EBITDA is 4x (Jan 2022) and 2x (Jan 2023). We do think if they can get e-commerce, digital and omni-channel correct it can trade at 5x an improved Jan 2023 EBITDA.

The Collective are a panel of stock enthusiasts writing about high conviction investment opportunities with high return potential.

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