“Amazon’s Big Brother” from Red Hot Penny Shares

Quick look at a small UK company teased by Tom Bulford

By Travis Johnson, Stock Gumshoe, March 19, 2014

Irregulars Quick Take Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? Log in)

This is going to be a quickie for our friends across the pond — according to the info we receive from the Google overlords, the UK edges out Australia for being the land where Stock Gumshoe is most popular outside of the US and Canada, so we do like to look at the occasional pitch from the Fleet Street flacks every now and again.

Like a few of the London pitches we’ve seen in the past, this one’s from Red Hot Penny Shares, a letter that’s published by Fleet Street Publications, the UK arm of Agora, and uses overhyped pitches that clearly are torn from the same cloth as Agora’s stuff here in the US (though the regulatory environment is different in the UK, so they actually use footnotes and put their disclaimers above the headline … don’t know if that depresses the money-lust among their readers or not).

This letter used to be headlined by Tom Bulford, but he has apparently moved on and is writing a biotech tip sheet now … the ad is signed by David Thornton, the new editor, who has lost none of Bulford’s flair for the ridiculous.

Including, of course, the headline — which refers to the tiny stock they’re touting as “Amazon’s Big Brother.” I will share a bit of the ad with you in a moment and get our answer for you … but I have to tell you up front that this stock can really only be traded in the UK (I don’t think there’s even a “grey sheets” listing) and it has a market cap of well under $100 million and sales last year of less than $5 million. Amazon is not quaking in their Wellies just yet.

They call it “Amazon’s big brother” because it addresses a (very disjointed and decentralized) market that’s far larger than the global consumer market: Business to business sales. And specifically, it’s supposed to be the pioneer for online sales in the b2b space. I am trying (struggling, really) to keep an open mind, so I’ll let you read some of Thornton’s words:

“Sixteen years after Amazon revolutionised the way we shop, a new business is replicating the same approach – but in a market twice the size…

“Just like Amazon, this forward-thinking firm enables people to bypass ‘regular’ shops and buy things online, at a vastly reduced price.

“I won’t pretend that it’s doing something radical. This firm is essentially doing something companies like Amazon have been doing for years – seeking to profit as more and more business is done online. The difference is, it’s doing it in a much bigger market.

“Nonetheless, I believe this move could be incredibly lucrative.

“Just consider the frankly mind blowing amounts of money Amazon has made investors over the years…

“When Amazon first began trading on the stock exchange in 1997, each of its shares cost $1.50. They now cost $372. [This figure is past performance and past performance is not a reliable indicator of future results.]

“That means that over the past 16 years, Amazon’s shares have risen by 24,000%.”

So yes, if this little small cap company, one of thousands in the ecommerce business, turned out to be as good as the best company ever in its business in the history of the world, it could be shockingly lucrative.

Also, if Stock Gumshoe becomes as large and successful as News Corp. we will immediately begin having lavish parties for our readers featuring wall-to-wall dancing supermodels and fountains of Johnny Walker Blue Label, and will promptly install solid gold commodes here at Stock Gumshoe HQ. Plans are in place.

Here’s a bit more from the ad:

“In the U.S., Amazon’s core retail market is worth approximately $250bn. But for the same region, this company’s market is worth $550bn – over twice the size of Amazon’s market.

“And in global terms, the business market is worth $20 trillion.

“But here’s the surprising part – the vast majority of this trade is still done in an outdated and old-fashioned manner. Office managers visit trade shops, place orders down the phone, or dust off an old direct order catalogue to make their purchases. In fact, of that $20 trillion global market… only 7% of activity is online.

“That’s right – 93% of businesses don’t use the internet to make their purchases.

“This is a real anomaly. The business market is one of the only markets around that has resisted the move online for so long.

“But in my opinion, this just can’t go on.

“Sooner or later, the business market has to go the same way as every other market has – online.

“Which leaves a huge amount of growth for the ‘Amazon of the Business World’ I’ve been telling you about.

“Now all a company need do is visit one website, search for what it needs… and it’ll get the best products at the lowest price sent directly to it.”

That 7% number, by the way, is pretty comparable to the consumer market — somewhere between 4-10% of retail sales are done online now, depending on who you ask and what country you’re talking about (the UK is near the top of the list at about 10%, more than the US though obviously in a much smaller market). So that’s not a shocking disparity.

And what’s setting this B2B company apart, according to Red Hot Penny Shares? Here’s some more of the ad to get your juices flowing:

“The breakthrough that this company needed

“In March 2013, this company signed a 3-year exclusive contract with Visa.

“Not only is this deal a strong endorsement from a major company…

“But Visa is also going to act as a kind of sales force for it. In an effort to help it grow, Visa will use its affiliated banks to market this company to a large array of businesses….

“… if a business makes a purchase through this company’s platform… and pays using Visa… then Visa takes a cut… and passes some of this on to this little firm. So essentially Visa has a stake in helping this little firm make as many sales as possible.

“And of course, Visa has a working relationship with many of the world’s top companies – banks, insurance firms and other major multinationals. These are all businesses that need office equipment… a fact the ‘Amazon of the business world’ is seeking to profit from….

“Visa is going to give this small company a global roll-out. In other words, it’s going to help it expand beyond the UK, into markets across the world….

“over the coming months and years, they plan to roll out in:

“New Zealand.

“Hong Kong.

“Singapore.

“The U.S.

“And Canada.

“This global roll-out is a big, long-term plan which shows Visa’s confidence in this small company.

“And already, some investors have sat up and taken notice…

“In August 2013, the shares rose from 10p to a high of 58p by mid September. That’s a five-fold increase.

“And that was triggered merely by the excitement of what Visa was going to do with this business. In other words, before any real profits had been made.

[This figure is a forecast. Forecasts are not a reliable indicator of future results.]

“But soon, money could start pouring into this firm from various countries. And I expect the share price to rise accordingly.

“The director of this business has high expectations for the partnership with Visa. He believes it will transform this from a company with a £2.2m turnover – into a £50m turnover global business.”

What should a company that has annual sales of £50 million be worth in the business-to-business marketplace?

Well, first I can answer the question for you: this is a little firm called CloudBuy, which used to be the awkwardly named “@UK” … ticker is CBUY in London. They have a market cap of just under £46 million at the current share price of 42 pence … which is roughly where they were about a year ago after the initial announcement of the Visa deal helped to spike the shares up (they hadn’t changed their name yet back then), this analyst report that CloudBuy shares on their website does a decent job of explaining that, so if you’re convinced of the value then you can at least buy it for about the price it carried when that analyst note was published. The press release with the company’s 2013 results is here if you want to read up on them a bit.

It’s hard for me to guess what it might really be worth after my quick glance at the company, and I’d never heard of it before today. The big tech service companies like IBM and Xerox trade for somewhere between 0.5-2X sales, Amazon trades for about 2X sales, eBay for about 4X sales. They’re all obviously huge compared to this little company, whose biggest segment is web & ecommerce sales, so they can’t have the same growth potential, at least mathematically speaking, but I’m having a hard time finding an established business to business services or marketplace company that trades for much more than 3-4X sales… unless they’re really going to profit from selling unique software, their margins aren’t likely to have any room to grow because the expenses of providing actual services rise along with the revenues. Companies that provide a marketplace or enabling software for online sales would have to expect that their cut would be minimal if they’re getting a piece of transactions — particularly if they’re a reseller themselves and are trying to drive prices down, so unless they provide a lot of other services I can’t see high margins that would generate a lot of income … which means even the projected £50m turnover doesn’t sound like all that much for a company whose market cap is already about as high as sales.

So that was my impression when looking briefly at the company — I know most of my readers can’t even trade it very easily, and, frankly, it didn’t exactly light my hair on fire with excitement, so I’ll leave it to you … does this sound like a growth story to which you’d like to hitch your wagon? See some excitement in those filings or announcements that didn’t catch my eye? Have a different interpretation of their market that gives you confidence? Let us know with a comment below.

P.S. Just in case you’re keeping score I should also tell you that yes, I thought Amazon was too expensive at $50. That was more than five years ago, and it’s lately been around $400, so perhaps I’m just an idiot.

Related Gumshoe Articles

“Britain’s Secret Oil Strike”

Sniffing out the Red Hot Penny Shares tease of what "could be the largest oil reserve in recorded history…"

16 Comments Read More

“This NEW FUEL SOURCE could make Saudi Oil look like a clapped-out old Duracell battery!”

Teases from Tom Bulford, and some thoughts on opportunities in a falling market.

2 Comments Read More

Leave a Reply

39 Comments on "“Amazon’s Big Brother” from Red Hot Penny Shares"

avatar

laskinp
Irregular
1
March 19, 2014 1:55 pm
CBIU.L looks to be a bit more then a online retailer for companies. They provide a full workflow environment for the Purchasing process. Their tools appear to support the full procurement process. Contract management, sourcing , price benchmarking, spend intelligence (reporting maybe?). They handle invoicing for their suppliers, banking integration, etc. Not too bad. I’d like to know who the management team is though. They claim to have had this Ecommerce vision since 1998. What has taken them so long? If their solution is cost effective and works the way they claim, they may be able to make a dent… Read more »
Marc
Guest
0
March 19, 2014 2:02 pm
This tout of CLOUDBUY PLC ticker = CBUY: London Stock Exchange currently trading at $42.75 seems like a pump and dump to me. It’s far from a penny stock “from Red Hot Penny Shares, a letter that’s published by Fleet Street Publications, the UK arm of Agora” at 42.75 a share and is currently tanking off its previous high of somewhere around $56.00 in mid January as if it had been pumped and is now someone is dumping shares on the market . This is the only thing this stock has in common with penny stocks that I can see.… Read more »
emanigol
Member
2
emanigol
March 19, 2014 2:06 pm

I do not know if this constitutes a “wide moat”. Just like Dell changed computer sales forever, Amazon changed “any” sales forever (I was surprised when they bought diapers.com though; why just not start selling diapers outright?). At the end what exactly makes this a succesful business model? It clearly does not disrupt anything.

vivian lewis
Guest
0
March 19, 2014 3:14 pm

first of all, boys and girls, all UK stocks trade in British pence. so this stock is at 42.75 pence or thereabouts.
secondly of course you can buy in Britain. I do with my darling discount on-line broker, e-trade, which charges 10 GB pounds per trade, about double what I pay for US trades. It is best to do your British buying in the morning when London is open to get a keener price.
Other brokerages will also trade in Britain: Fidelity, Interactive Brokers, Scottrade, and, more expensive than the others, Chuck Schwab.
For the record, this is not a recommendation.

midorosan
Irregular
46
midorosan
March 28, 2014 10:32 pm

Chuck Schwab as you call it charges US$8.95 per trade way less than £10.00 I have to say I have never seen such confusion over simple currency conversions, there are other currencies in the world you know the almighty dollar no longer rules the roost.

John Harris
Guest
0
John Harris
March 19, 2014 3:19 pm
Why do these guys (or anyone) think Amazon is somehow limited to consumer sales. Why does the world need a different platform for business to business (B2B) sales? The fact is businesses can already buy through Amazon (and my company does buy some basic commodity things that way from postal grade rubber bands (for direct bulk mail) to ink cartridges for our postage meter (much cheaper by the way than from Pitney Bowes) . And I expect Amazon may have that 7% of B2B sales here in the US already but I have no data to suggest that. I own… Read more »
vivian lewis
Guest
0
March 19, 2014 3:29 pm
here are the CBUY figures for those of you who like to read accounts. The p/e ratio is -42.75x times earnings and most of the accounts are in the red (marked by a parenthesis around the number in the UK like in the USA). Sorry I cannot make it all align. This Cloudbuy stock is an example of Bilk (sic) Bonner (Agora) stock advice but note that the share used to trade for a mere 10 pence before the last year: Cloudbuy Market Data TIDM CBUY Ticker Code CBUY.L ISIN GB00B09Y8Y28 Currency GBX Issue Country GB Sector Ticker NMX9530 Year… Read more »
Ventureshadow
Guest
0
Ventureshadow
March 19, 2014 5:50 pm

Cloud Buy? Like Bridge Buy? Like Brooklyn Bridge Buy?
Like http://iboughtthebrooklynbridge.com/

Losing money on stocks is bad enough. Jumping obstacles to buy a stock on a foreign exchange and then losing money on it feels like a punch in the nose. Been there, done that, thanx to Sjuggerud’s advice.

TheMerlin
Guest
0
TheMerlin
March 19, 2014 6:22 pm

I’ll keep it simple. Any time I see something with Agora’s name on it…to the Delete folder immediately. I remember years ago when he was first starting and looking for writers for his hypes. Teir whole strategy foces on greedy people looking for the big kill. I havene’t seen one pan out yet. Maybe there were some…but I’ve never seen any.

dealerdeb1
Irregular
20
March 22, 2014 9:36 am

LOL Me too this AGORA is a ridiculous sophomoric money seeking pitching machine. I guess morons that don’t have Travis always fal for this stuff. I have to say though I was never inclined to throw money away even before Travis.

vivian lewis
Guest
0
March 19, 2014 6:01 pm

just try http://www.global-investing.com rather than stuff from over-hyped hot marketeers. We look for foreign stocks worth buying. check our track record by Mark Hulbert. read my readers’ paeans. You don’t have to go with Sjuggerud; Lewis is a lot easier.

Alan Harris
Guest
0
Alan Harris
March 19, 2014 8:23 pm

Punting again Vivian?

JayBee
Guest
0
JayBee
March 19, 2014 8:51 pm

Okay, I missed another one. What does, “Punting again Vivian?” mean?

Alan Harris
Guest
0
Alan Harris
March 20, 2014 7:59 am

Punting for business…..ie dropping an advert into GS for her own fav tip sheet. Dont worry, my comment was meant to be tongue in cheek. Im sure Vivian took it well.

TheMerlin
Guest
0
TheMerlin
March 19, 2014 6:51 pm

I’ll keep it simple. Any time I see something with Agora’s name on it…to the Delete folder immediately. I remember years ago when he was first starting and looking for writers for his hypes. Their whole strategy focuses on greedy people looking for the big kill. I haven’t seen one pan out yet. Maybe there were some…but I’ve never seen any.

pmd3nka
Guest
0
pmd3nka
March 20, 2014 1:18 am

“Japan is pushing the boundaries on where this tipping point may be. Many a punter has come to grief betting on the imminent demise of Japan. But one thing we do know is that every day the Japanese economic train is getting one day closer to the solid concrete wall they are hurtling towards.”

Alan Harris
Guest
0
Alan Harris
March 20, 2014 8:21 am
Im based in UK so this tease bust is very welcome. I also subscribe to Red Hot Penny Shares (my only subscription other than GS Irregulars (which is twice (make that 100 times) the value and half the price. RHPS has been much improved by Dave Thornton. I sat thru an afternoon meeting/seminar with Tom Bulford and listened to 1hr of info surrounded by 3 hours of Um’s and Er’s !! It was about as interesting as watching paint dry. Still, I think its worth looking at the bigger picture. B2B is a mysteriously overlooked market. It has the potential… Read more »
vivian lewis
Guest
0
March 20, 2014 10:13 am
dear Mr Harris You wear wellies despite being a gumboot reader. Yes I punt. I also offer US readers unfamiliar with UK market mores info on how to invest in your market, which will help your stocks, assuming you pick them well: how they are priced in pence; how you should buy in the morning; how you can trade using US brokerages. So I do tell people on what basis I am holding forth–that we have skin in the game and we have special expertise. Moreover http://www.global-investing.com has been tested and polled about by gumbooted readers for value and honesty.… Read more »
John Harris
Guest
0
John Harris
March 20, 2014 10:54 am

Dear Vivian, There is more than one “Mr Harris – at least Alan and myself, John. I disagree with Alan about the potential for the B2B market. The wholesale market for industrial raw goods is the lions share of purchasing by manufacturers. I don’t see Amazon serving that market. Service businesses may buy office products through Amazon or other such ventures, but that is already happening. Big retailers buy directly from wholesalers, not thru Amazon. Maybe I am wrong, but I will still pass on CBUY

Alan Harris
Guest
0
Alan Harris
March 20, 2014 12:52 pm
Sorry John, maybe my terminology was wrong….I assumed that B2B covered wholesale too. But I didnt say Amazon would take this market…I said SOMEONE would become the B2B ‘Brand’ like amazon has become THE brand for retail. I recon Alibaba is in there with a shout……..its already massive in China. Certainly CBUY is unlikely to do it. As for dear Vivian, perhaps you should ask Travis how he affords to publish Gumshoe without charging a subscription. Certainly its not by littering the sheet with flashing ads….I think theres just 1 discrete ad per article,; hardly retirement income (Irregulars is a… Read more »
John Harris
Guest
0
John Harris
March 20, 2014 3:38 pm
Hi Alan – You may be right that some B2B service develops. I have run across Alibaba but as you say usually as a link to manufacturers in China, and that may be helpful as we don’t have nice directories of such, and if you need a few thousand wigets or parts you may find a source for those through Alibaba but I don’t know if they just direct you to possible suppliers (which is what I have assumed) or if they handle the transaction (as Amazon does). But for the bulk of raw goods, if Kellogs needs 20 tons… Read more »
Alan Harris
Guest
0
Alan Harris
March 20, 2014 4:06 pm

John…surely thats the point ‘ if Kellogs needs 20 tons of corn for corn flakes I doubt they will go through Amazon or any other intermediary. They go right to a grain dealer.’
Ah but if there was a auction room hub where Kellog could tap in We need 20 tons, 2400 farmers could bid in a dutch auction without paying a grain dealers %. This is much more efficient for both Kellog and the farmer….and if the hub took .001% for the connection, it’d be a nice little earner for a trivial piece of software.

Rob
Guest
0
Rob
April 28, 2014 7:44 am
That works on a once off basis but Kellog wants to sell you corn flakes on a regular basis so needs an on-going relationship with farmers and dealers. Going for the cheapest available could upset the on-going relationship and lead to an inability to produce the corn flakes. Part of the problem in the supply chain is that it is complicated by volume discounts and offers paid for by the vendors all the way down to the retail stores. That has led to the need for complex software to support all of that. Maybe the lower costs of this approach… Read more »
Judy
Guest
0
Judy
March 21, 2014 3:07 pm

Some of the newsletters talk about an 25% or 33% Stop Loss. Can you explain the formula for that, I’m a fairly new investor. Thank You. Judy

Eric
Guest
0
Eric
March 21, 2014 3:35 pm

As a UK investor, I am pleased to say that CloudBuy is ramped up trash. Trading at a stupid multiple of sales, this VISA deal is hardly an endorsement, its a tester. I see it going back down to 25p in short order.

By the way, Red Hot Penny Shares is known in the UK as “Ramping Sh1te Penny Shockers”. It has barely any credibility.

Eric

Bob Levat
Guest
0
March 25, 2014 3:50 pm

Funny, it’s always served me quite well, am up 45% on average on 6 stocks bought in the last year from rhps tips

Tommo
Guest
0
Tommo
March 22, 2014 1:20 pm
Cloudbuy as far as I can see is an online emarketplace technology that serves the B2B market. They have an exclusive 3 year deal with Visa ( which if you look at Visa’s history of deals and investments is not unknown) so for Visa in my opinion to even consider the technology, is saying something of the technology. Looking at what they have is 1 million user B2B portal which does seem to be gaining traction (based upon recent news items from the company). I’d thought i’s take a look further into company. They also develop care emarketplace technologies (… Read more »
Tommo
Guest
0
Tommo
March 22, 2014 1:57 pm
Ok I get it. If you look closely you’ll find out what Visa and Cloudbuy are trying to achieve together. Visa have in the past been looking for an emarketplace technology which they can leverage regardless of sectors. It does look to me that cloudbuy has that technology. They also have a product set. Looking at the company itself it seems they have poached a Visa exec and an Ariba exc to head off an expansion globally ( recheck that as I may be wrong). They have a new model. A percentage transaction model for their emarketplace technology. For every… Read more »
Bob Levat
Guest
0
March 25, 2014 3:18 pm
I am invested in CBuy. The technology is far superior to anything else out there. The partnership with Visa is quite recent and a huge endorsement, a game changer in my opinion. Visa are intending this to be very Big indeed. CBuy also analyze clients spend and make savings, visa give a rebate, the system is secure and the corporate clients win win and CBuy rake in a percentage of spend. it is the only system allowed to deal with uk govt nhs public body information etc. They are in talks at ministerial level re govt dept procurement. A lot… Read more »
supertraveller
Member
0
supertraveller
May 5, 2014 9:42 am

Hi Travis,
Its good to see articles on UK shares, be it a good pick or a bad pick your advice is well appreciated.

Alan Harris
Guest
0
Alan Harris
May 5, 2014 10:07 am

I think its important for all to realise that GS has the potential to be global…….Id love to syndicate it in UK if I had 1/2 Travis’ skills. Why would any business person want to limit subscriptions to just one set of borders. It takes no longer for me to read this stuff than Travis’ next door neighbour and the technical, fundamental analysis and profit/loss is identical. There’s a big cake on offer….sink your teeth in Travis.

Alan Harris
Guest
0
Alan Harris
May 5, 2014 10:09 am

God knows every other market on the planet is poorly served by teaser crew.

vivianlewis
Member
167
vivianlewis
May 5, 2014 10:22 am
I am again peddling my own canoe. Teasers exist globally and in many jurisdictions are less well-regulated than in the USA for example in Britain, where libel laws would limit what Travis and other critics can write. I think the worst stock pumpers operate out of Australia by the way. You cannot trust a foreign market just because they talk English. My own Austrian buddy has a very hard time because his service (legit) is copycatted by another with a nearly-the-same name run by pump and dump folks. The good thing is that both sites are in German so not… Read more »
wpDiscuz