The beauty of small company research and investment is two-fold: they are often thinly followed by the professional circuit which results in readily exploitable gaps between recognition of quality and appropriate pricing of that quality; and the turbo effect on price (beyond immediate worth) of the multitude of share tippers in the media.

Three companies previously mentioned here - Ascribe plc, Interquest plc and Empresaria plc – have benefited from one or the other of these tendencies. Now comes another, Adventis plc, this morning featured ("Buy at 62p"!) by mass pulp finance publication “Shares Magazine”.

It so happens this firm is another followed carefully by the scribe displaying, as it did until very recently, a profile closely matching what he generally looks for in any potential equity and business investment. Moreover, it operates in a market requiring some expertise to enter, has significant third party backing (equity placements) and has previously demonstrated excellent mass media contacts (ie exposure to potential investors). For the interested, the Adventis website contains a temperate and well-constructed analyst report from Robert Sanders of Arbuthnot Securities.

The point, however, is that in this case “Shares Magazine” is tipping a strong business but a share already extended by investors who did the thinking themselves, and a while ago. If previous tip trends hold, come next Tuesday retail investors will have pushed the price up to a point at which it becomes difficult to see further value in the equity until the business itself catches up with the enthusiasm.

Exhibit 1: Adventis plc 3 month price & volume chart

On the other hand, in these liquid times anything seems possible.

Usual disclaimers.

NB: The scribe owns equity in Adventis plc, Ascribe plc and Empresaria plc

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  1. "Cassandra" // 4/05/2007 08:21:00 PM

    Anyone can be a hedge fund manager!! Many in fact are! Retail price and volume accumulations would tend towards the random or adjacency to the "tout date". This one stinks to high heaven of someone with an "axe" goosing the price of a holding (block acquired at end of in Nov) into the Feb month-end valuation date and more importantly the March end of quarter performance measurement period. Of course it could be "retail", and I could be suffering from "See what you want Bias" in the data, but let's see who shows up in the reg filings. Right now it appears that F&C (8% owners increasing in Mar) and west-end hedge fund Oceanwood (fmr Tudor toffs?) hit the share reg with the block trade in Nov. of near 4% leaving them room to play before further filings.

    Entry when it is inexpensive and cheap is the easy part, and ramping in a thin market is hardly more difficult (note how there are few verititble sellers). Disposing of one's large position in an illiquid overvalued security at an average price HIGHER than the average acquisition price in an illiquid market is a far greater challenge. ....

    Am I being TOO cynical, Rawdon?

  2. RJH Adams // 4/05/2007 09:58:00 PM

    Too cynical? Is that actually possible with tipsters, small caps and fund managers?

    Oceanwood (ex Tudor indeed although I know nothing of Chris Gates at all) have more than doubled their money in 4 months - they took equity in a £1m placing at 31p (or something like that) along with M Stanley and another "existing investor".

    Quite mysterious this other "existing" party. However, thanks to the bureaucracy of "transparancy directives" it appears this is possibly F&C (in the guise of ISIS, their private equity arm).

    It helps both (for distribution purposes if that is what is underway) that Adventis has had decent announcement/results since they acquired and that at least some of the volume appears to be by a number of very, ah, "knowledgeable individuals". The additional media is icing. Still, there is exuberance and exuberance.

    On the other hand, when the stars align and a sound company is the vehicle there is, perhaps, some justice in the world after all (up to a point anyway).

    But that's what a holder (albeit trimmed) would claim.

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