Live your life like a thrown knife

The title comes from a Todd Skinner quote, a hugely successful and motivated climber who sadly died a few years ago. The very concept appeals to me greatly, but the truth is that I've not exemplified the concept since my last posting.

In the markets it's been a fairly poor month for me, coupled with an odd sense of further positive reinforcement for both the value ethos and my potential skill as a stockpicker. The tragedy still remains that I have revisited the bearishness that I need to extricate myself from, and have done so not just with the purchase of put options, but with the sale of call options. Expiry is in September, so could all pan out in a positive way, but really I should be focussed on the search for value and the exploitation thereof. Not the search for direction, and the speculation thereon.

The most interesting move in the stocks I've been following would have to be that of HMS. From highs of around 145p (as mentioned below), the stock positively tumbled following an announcement from management that margins would contract in 2009 - something that had been clearly noted in the 2008 annual report. So not very big news, in my mind, but Mr Market voted the stock down to 110p, then 105p, swiftly followed by a low of 95p a week or so later. Supply outstripped demand., you could say. But in a small corner of France, close to the Swiss border, a rump of demand was buying as much as he could.

That particular story is still in progress. The stock got as low as 2x last year's earnings. Margins were noted as falling, but not collapsing, and revenues were reported to be up on last year. The product is strong and services a niche of the oil industry which is cash rich. All quite bizarre, and one to watch. It really looks like a $150m company to me and trades for around $60m. If it continues to grow as it has been the $150m valuation will look conservative. Definitely a value play, or I've just not uncovered why the market sees it as such an inexpensive company. One to watch for sure.

On the stockpicking front, another stock I was following last year has been having a good run of late. Michael Page, a recruitment agency, doesn't exactly sit in the recessionary sweet spot. Particularly in the UK where it services a large proportion of financial sector clients. However, my basic thesis was that demand for their services in emerging economies is set to grow as service sectors emerge to satisfy the needs of a growing middle class and increasingly complex 21st century societies. Happily they don't hedge their foreign earnings, so a falling pound is good for profits (aside from the causal or secondary effects).

Anyway, apart from the above, it just looked way too cheap for the potential growth possibilities and extremely strong management team. Essentially a value play with a potentially long-term investment horizon. So I bought. So far so good. Then, during the March rally (which continued into May!) I sold for a tidy 20% profit. This is, in hindsight, another in a string of disastrous moves during 2009 so far. Not so tragic in taking the profits, but buying at £2, with a future view of a value at around £10/12 (discounted to today to give £5/6) and then selling when the stock got to £2.40 was not exactly in-line with the philosophy of a value investor. The bearish sentiment ravaged my holdings and with the stock now over £3, the decision to sell isn't looking too wise.

Well, those are two stories of a few stocks I've been following recently. Equities are up, whilst the economy remains in the pits. There is work to be done on Nexen Inc, a Canadian energy provider with interests in the North Sea, as well as William Hill (back below where I sold my holdings in March) and Man Group (still hovering around 285p, pricing in a halving in AUM). But more interesting stocks may be uncovered during a two week stint with one of London's better investors, as I have an internship with a man at the top of the small-cap league tables planned for the middle two weeks of August. Hopefully I'll learn lots and be of some use to him. Time, as ever, will tell.