Performance & Background Commentary
Unfortunately September saw a continuation of this years downward trend & under performance against the FTSE All Share which I use as as benchmark as shown in the table above. The structure of the index and the bias of the portfolio towards mid & small cap names which have suffered more in the downturn in the market this year, helps to explain this reversal of some of the previous out performance that the portfolio had seen from having this positioning.

As discussed previously the on going tightening by Central banks to tackle rampant & persistent inflation have helped to start and continue the current bear market as I feared it might after what turned out to be a bear market rally in the summer. On top of this the war in Ukraine and its effects on gas prices have continued to weigh heavily in Europe and led many nations to introduce another round of big bail outs for citizens and Companies to cope with higher energy costs. Indeed the UK's efforts to to shield households and firms from higher energy bills for up to two years, comes at a cost equivalent to 6.5% of GDP in the next year, more than it spent on its furlough scheme and support for the self-employed in 2020-21 (Source: The Economist).

In addition, the recently elected Prime Minister & her new Chancellor followed through on her campaign promise of big tax cuts & reversals of previously announced increases at a cost of around £45bn, or £43bn now they have u-turned already on scrapping the 45% rate. They neglected to say how this would be paid for and as a result Sterling temporarily crashed and 30 year Gilts spiked to 5% before coming back below 4% as the Bank of England was forced to intervene to save Pension Funds apparently. This was due to a strategy of Liability Driven Investing (LDI) which has apparently also been used as a way of gearing up the funds and it is this and the speed of the move in yields which caused the problem. I must admit that I found this surprising and call me old fashioned, as I thought the whole idea of LDI was to neutralise the risks not magnify them!

Any way it does make one wonder what other unidentified risks might be lurking out there caused by clever consultants and Merchant Bankers as rumours of Credit Suisse & Deutsche Bank seem to be doing the rounds now too. As dear old Warren Buffet said "It is only when the tide goes out that you discover who has been swimming naked." So it seems there might be more pain to come before this is all over, although sentiment does seem quite extreme at the moment so I wouldn't be surprised to see a counter trend rally in the short term.

Portfolio Review
Once again I present a fact sheet on the portfolio at the end of this post which details last months Top & Bottom 3 contributors, transactions, a breakdown of the Portfolio's Sector & Index exposures together with details of the Top 10 holdings.

In terms of transactions there was just one switch in the mining space with a marginal sale of Rio Tinto on a lower score and a poor price trend into a smaller, more specialised miner that was cheaper and better scoring, although a month on this has not proved to be a good idea so far. A couple of others I gave the benefit of the doubt to or awaited results & one of those (BA Systems) at least appeared in the top 3 contributors. While S & U reported good results with a confident statement, but only managed a small out performance on the back of that.

Summary & Conclusion
More of the same unfortunately as far as the bear market is concerned. I suspect we might be due another rally shortly and if that arrives it will remain to be seen if that is just another bear rally or the start of a recovery. I have to say that it feels like this might still have a little further to run in terms of duration and declines but I wouldn't want to get too bearish down here. We just need to try and navigate our way through this and preserve as much capital as possible in whatever way you choose to do that, while it plays out. 
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In the last monthly update I highlighted four positions that had flagged up as potential sales based on their Scores. Nevertheless I decided to hold onto them all based on awaiting forthcoming news flow on three of them and on the basis that nothing had really changed on the other. 

We have had news flow on two of those so here is a brief update on that:

S & U (SUS) had a trading update rather than results that I had expected, although those will be published on 28th September. The update was positive in the main with all the right metrics like profitability, collections and debt quality all moving in the right direction. Within that Advantage, the main car finance business, was likely to see profits ahead of budget and was seen as being on track to return to previous ROCE levels, despite a bit of a shortage of second had cars. While at Aspen the bridging loan business showed strong growth despite the limited supply of second hand properties too. On the back of this there have been 16% or so upgrades to this years forecasts which has catapulted the Score back into the top decile again.

Paypoint (PAY) - where I hadn't expected any news put out an update on their outstanding OFGEM investigation. In this it seems that OFGEM are minded to accept Paypoint's suggested remedies and payment of compensation that they have already largely provided for. The price seems to have responded positively to this news rising by about 7% since then  and a couple of directors have since purchased some shares. So again so profitable masterly inactivity there although slightly more fortuitous is this case.

On Strix Group (KETL) - while there has been no news as such the shares continued to steam ahead another 5% or so on the back of a bullish initiation by Liberum in which they suggested substantial upside on a further re-rating on the increasing growth prospects here apparently. 

Finally, even dull old EMIS has managed to move up about 4% while we await their results in September. So here's to the success of masterly inactivity and long may it continue!

A quick update on the two growing small cap stocks I featured recently. Firstly on Taptica (TAP), where I was wrong to say that there probably wasn't enough in the numbers for the shares to challenge their previous high in the short term. Well they have only gone and done it just to prove me wrong. I don't think however it would be a good idea to chase them up here as I note that the finance director sold 200,000 shares on 5th October 2017 at 445p & now holds only only 94,572, although I suspect he's probably got a few options no doubt. Of course I could be wrong again as stocks around 12 month highs can go onto perform well as investors (and maybe even the FD here) make behavioural mistakes by anchoring on the previous high price, although the shares are off this morning. It does however continue to score well in the Compound Income Scores (CIS) and as such is probably still worth sticking with despite the directors sale as these tend not to be as instructive as directors purchases.

Meanwhile on S & U (SUS) I note that the shares have managed to sneak up into their previous range between about 2000p and 2500p and sustained it for now. So some modest encouragement there despite the on going weaker new car sales, although that is not so relevant to them as they deal in loans for second hand cars. I note too that there have been some modest upgrades to forecast post the results which is a good sign, so some encouragement there too. Talking of upgrades there was also a good, detailed, sponsored (?) note from Edison which also included some upgrades and in which they maintained a valuation at 2,700p per share suggesting significant upside from the current share price.

If that is of interest to you I attach a copy below. On that basis and given my long standing holdings in this one I'm happy to continue holding it even though the CIS is only average on this one right now.

That just leaves me to wish you happy and safe investing and hope you have a great weekend whatever you are up to.

We have interim results from a couple of small cap growth stocks today. First was a long time favourite of mine S&U plc (SUS) the £237m market cap. motor finance group. Despite all the talk recently of potential problems in the car finance area and in particular the PCP area, they point out that they have no exposure to that type of lending. In addition the 20% or so growth that they reported today is a continuation of the growth trend they have seen for the last 17 years in this business. See the full RNS announcement for more detail on this in the commentary from the Chairman Anthony Coombs.

Talking of the Chairman's statement there were a couple of things in there that did give me some cause for concern, although on balance I'll give them the benefit of the doubt given their track record up to now. For the record though these were the fact that bad debt provisions were up sharply despite the strong employment background that was referenced in the statement. This was explained by Mr. Coombs as follows:

"Although a return, for competition reasons, to Advantage's traditional customer mix has seen an increase in impairment to revenue, risk adjusted yield has been protected by good interest rates.  Indeed, current levels of impairment are significantly below those experienced just five years ago following the financial crisis, when the business continued to increase profits and maintained very good returns on capital employed."

Not quite sure what they mean by for competition reasons, may be they had tried to go up market & found more competition and so had to return to lower scoring higher risk customers to maintain the growth perhaps? The other thing that bothered me in this part of the statement and allied to that was mention of the fact that a refined Delphi 10 based scorecard system had been introduced. This might be a better explanation for the sharp jump in bad debts perhaps? I think this will need watching after the Provident Financial debacle recently where they messed up by changing a long standing way of doing business, although in this case the change does not seem as dramatic as in that case.

Aside from that the dividend was up by a pleasant 16.7% but the debt continues to rise to fund the growth, but remains relatively low for a finance business. Meanwhile the nascent Bridging Loan business is looking like it will be second half weighted after a slower start than expected. Assuming there is nothing in these numbers to change the forecasts dramatically this should therefore leave it on a reasonable looking sub 10x PE with a 5%+ yield with strong growth. The shares are up this morning back into the 2000 - 2600p range that they had been trading in, so it will be interesting to see if they can sustain a move back into this range in the short term. Or if they will be sold off again this might confirm the recent break down into a new lower range of 1500 -2000p perhaps, although be aware I don't claim to be a chartist.

Second up today, in brief was another Small Cap growth stock, the £213m Market Cap. Taptica (TAP) which is Israeli based and provides mobile advertising and has recently made an acquisition to move into the Video area too. In addition to this recent acquisition they have in the past made some other smaller acquisitions in their core area of mobile advertising to expand their geographic reach into Japan in addition to the UK, China, US & South Korea. In the statement they say they have ambitions beyond these areas to expand into ten hubs worldwide in the next three years to make it Russia, China, Germany, San Francisco, New York, Korea, Japan, India, South America and the UK. Thus it seems there should still be plenty of growth potential from geographic expansion in addition to their move into video advertising more recently & growth in advertising moving more onto mobile channels from more traditional areas like print and broadcast media.

Any way if it is of any interest I suggest you read the RNS and visit their website for more details and there was a conference call this morning too. The shares also look cheap for the growth they are delivering trading on about 12x falling to 10x for 2018, although the yield is lower than I normally like to see at just 1.7%.

The only other reason I mention it is that this is another example of one of those potentially unpalatable looking stocks which therefore trades cheaply and therefore scores well on quantitative systems like Stockopedia where it has a StockRank of 88 and on our own Compound Income Scores where is scores a maximum 100. So if you can get your head around the business and are not put off by it being a foreign company then it might be worth a look, but there's probably not enough in these numbers for it to challenge recent highs I suspect, although the shares are up this morning after recent weakness prior to the figures.