Pursuit Dynamics: could be time for another run with this small cap tech darling

There are few smaller companies creating quite the stir in the City that Pursuit Dynamics is this summer.

The people who believe in this company are some of the shrewdest investors in the country but others are more doubtful saying the company has been promising to deliver on its potential for a long time.

This £163 million Hungtingdon-based company, which builds fluid processing systems aiming to cut costs for industries such as brewing, is seeking to make the move from research and development to the commercialisation of its systems. Ultimately it aims to float each of its business lines as standalone companies on the stock market.

Citywire knows at least two senior UK equity fund managers who have been buying the company on their personal accounts in recent weeks and it has also picked up support from some heavy-hitting funds.

On 5 July Mark Lyttleton bought an additional 1.1 million shares to bring his position to 2.46 million shares in the Blackrock UK Absolute Alpha fund, giving him a 3.53% stake in the firm.

The biggest single fund investor though is Thomas Dobell’s M&G Recovery fund. He controls a full 12.2% of the firm and has added some 725,000 shares since April.

Dobell has been backing the stock for years and it is worth noting that other big names also have – and then given up – such as Crispin Odey who held a stake in 2007. Indeed in June of that year Citywire boomed ‘Pursuit Dynamics set to reward the likes of Dobell and Evershed'. At that time shares were trading at £2.20. Now, after a series of fund raisings, it is trading at £2.18. Effectively this shows that it has crawled up to its pre-credit crunch level, more than doubling in price since its low in March 2009, but it has hardly rewarded investors yet.

Its own brokers are valiantly talking the stock up. Cenkos is the more conservative of the two company advisers giving a price target of 500p. It currently stands at 218.5p.

The other adviser, Mirabaud, is less shy putting a price of 762p on it based on cash flow modelling which assumes the company's intellectual property is successfully commercialised.

High hopes then for a company which even its own house brokers do not predict will hit profitability until full year 2012.

Hargreave ignores the hyperbole

Giles Hargreave – probably the most successful UK smaller companies investor of the past fifteen years – has doubled his stake in the past three months to hold 150,000 shares.

Hargreave is not the type to be won over by house brokers or boiler room talk. Equally, he is the first to admit that he is not a 'true believer' in this stock. However, he argues that the fact this company has held up its value, despite not yet reaching profitability, is testament to how convincing its story has been to sophisticated investors.