Since the bottom of the market crash in the spring, the value of Bitcoin has been shooting up. But I don’t think the move is sustainable over the long term. And there’s no dividend income if I hold Bitcoin. On top of that, the higher the price of Bitcoin goes, the more I believe the risk of a reversal to the downside increases.
So, I’m not making Bitcoin part of my long-term portfolio of investments. And I don’t believe the cryptocurrency can contribute to my quest to get rich and retire early. I’d sum up Bitcoin up in one word: risky.
I reckon this is a share to buy now
But there’s a huge opportunity for me in London-listed small-cap shares such as UP Global Sourcing (LSE: UPGS). For starters, I like the modest valuation with the earnings multiple near 12. And with the share price near 94.5p, the dividend yield is around 4%. On top of that, the balance sheet looks strong too.
Meanwhile, today’s full-year results report reveals to us the strength of the company’s performance with cash. Indeed, the firm has just repaid the money it received from the government under the Coronavirus Retention Scheme. It’s also paid all its deferred VAT and PAYE payments. The company reckons the repayments were possible because profitability and cash generation were “stronger than expected” during the crisis.
As well as demonstrating the strength of the company’s finances, I reckon the move to repay money to the government also reveals the integrity of the management team at UP Global Sourcing. Both factors encourage me to make a long-term investment in the company’s shares.
The firm makes its living by owning, managing, designing and developing well-known brands focused on the home. It sells to more than 300 retailers in 37 countries and divides its products into the categories of Audio, Heating and Cooling, Housewares, Laundry, Luggage, and Small Domestic Appliances. The brands include names such as Beldray, Intempo, Constellation, and Progress. There are also licence agreements in place for the Salter and Russell Hobbs brands.
Targeting sustainable growth
The growth strategy involves continuous development of the portfolio of brands for “mass-market, value-led, consumer goods for the home.” And the company targets the sales channels of discounting retailers, supermarkets, online platforms and international retailers. The directors reckon that the “tried and tested” approach led to a “resilient” performance for the full year to 31 July 2020, despite the challenges of the pandemic.
Although total revenue decreased by just over 6% in the period, the company adapted well to the changing market dynamics. Indeed, online revenue rose by just over 47% to become 14.5% of the total. And supermarket revenue increased by almost 40% to become more than 24% of the total. Meanwhile, underlying earnings per share slipped by just 2.5%, which I think is a modest decline given the tough year’s trading.
Looking ahead, the directors are “confident” the strategy will deliver sustainable growth in the coming years. I’d buy some of the shares now and hold for the long term as part of a diversified portfolio of promising small-cap shares.