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Some readers may recall that we featured ‘Buckinghamshire Bill’ in our Meet the Players column in February. Bill, who does not wish his name to be published, is a successful private investor specialising in microcap stocks. We recounted in our first article how Bill got his investing career off to a flying start by borrowing £125,000 at 0% on credit cards to fund his share purchases. This debt was paid off in short order and several years later, Bill is still prospering from the small cap markets.

Bill and I met for lunch at a pleasant village pub on a glorious October day. When I arrived, at our appointed time, Bill was already there polishing off his starter. He had walked the 12 miles to this pub across the fields and had arrived early with an appetite that could not wait.

Over lunch we spoke of little other than shares and the markets. We must have compared notes on dozens of small companies and like fishermen we each had tales of really great successes that we just missed and shares that we had been unable to buy in any size – ‘the big ones that got away’.

Spreads and Liquidity

The ability to buy and sell AIM shares in reasonable sizes is a recurring topic amongst small company investors. Bill frequently invests in companies where the opportunity to buy and sell any quantity of shares is limited. He recounted a recent occasion when one morning he had been satisfied to sell a significant portion of a particularly successful investment at a good price. Later, at 4:20pm on the same day, he had a call from his broker who offered to purchase the remainder of Bill’s holding at the same ‘good’ price. Thinking that there must be a healthy demand for these shares, he declined the offer expecting to see further increases in his remaining investment.  Sadly these shares have subsequently declined and the selling opportunity has passed.

Explaining that “this happens all the time” he said that in his early days of investing he used to get most annoyed at missing the best price, but with experience he has learned that it is unrealistic to expect to always achieve the best price with illiquid small cap shares. You need to be happy with a good profit and not constantly fretting about having missed more.

it is unrealistic to

expect  to always

achieve the best price

2009, A Good Year

Bill has had a very successful 2009 so far, although he has been somewhat disappointed by two of his longer term investments in Spiritel and Formula Telecom which we mentioned in our February edition. However, his successes elsewhere with shorter-term trades, has more than made up for these laggards.

Compared to my own cautious investing strategy, Bill is absolutely fearless in his investing style and is not afraid to invest in seemingly very risky propositions. This has paid off handsomely this year with 2 particularly good performers in Provexis (PXS) and China Western Investments (CHWI). Provexis, which is developing an anti-thrombotic functional food, was the best performing share on the market in August showing a staggering 15-fold gain during that month. By comparison, China Western’s 300% gain in September was quite modest, but still most impressive.

a staggering 15-fold

gain during that month

Outlook

Bill is optimistic about the future for the markets although he would not be surprised to see a major shakeout in the FTSE 100 at some point. He believes that there are still a significant number of greatly undervalued small caps and although these might fall further during a market correction, their potential in the longer term is excellent. 

As an example of an undervalued company, he says that he is very interested in events at an old favourite of his, First Artist Corporation (FAN). The Company announced at the end of June that they were looking to sell their football business to focus on the core media business. He believes that this media business is worth much more than the shares suggest and that a sale of the football business, were it to occur, would be a very positive move.

After a most enjoyable lunch it was time to move on. I offered to give Bill a lift home as he had walked such a long way. He declined and I left him debating between the bus and a 12 mile walk home.

a significant number

of greatly undervalued

small caps

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Written by: Michael Crockett

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