AIR

AIR released Interims today. Full details on Investegate. They look very healthy to me and I am glad I have stuck with this stock. Though I did have a slight wobble back on 29th August when I sold 1,127 shares at 370p, which as it turned out was a low!  I should have shown more backbone.  

It is currently 8.6% of my non cash portfolio and very volatile for reasons unbeknown to me.  However the volatility recently has been all one way – up. 

The price having risen from 370p since the beginning of July to the present price of 490p. I should have picked some more up after the referendum result when the price dropped to 329p. How utterly rediculous that it fell at all, let alone to this level, but I failed to do so and I am only just getting comfortable with large holdings as a percentage of my overall portfolio. That would have been a 50% gain in three months.

I am tempted to pick some more up to take the holding to 10% of the portfolio. I will think on it today and see. It has good Stockranks of 84, 68 and 74. With an overal rank of 93. It has the following relevant(to me) figures: 

Historic PE – 16.8

PEG – 0.49

ROCE – 18.6%

ROE – 14.2%

Divi Yield of around 5.5%

Turning to the chart the share touched 620 back in January 2014 and declined steadily ever since (I suspect because Mr Market got board).  I would have thought that this sort of level would be a reasonable target in the short to medium term so I am very happy to hold and possibly top up.

One downside on this stock is the spread which is in the region of 690bps. An aspect of stocks which I still don’t understand!

 

BOO and holding size

BOO released its interim results today, Tuesday 27th September 2016, and as the stock is only off 0.26% I am assuming the market likes the results and that they were up with expectations. This is such a busy time of the year for me that was not even aware that results were out today.

Anyway turning to the results they looked impressive to me certainly don’t make me want to cut back on my holding. More on that later. In summary the figures were:

 

£000	6 months ended	6 months ended	Change
	31 August 2016	31 August 2015
Revenue	127,316	90,784	+40%
Gross profit	70,466	54,539	+29%
Gross margin	55.3%	60.1%	-480bps
Operating profit	14,053	5,976	+135%
EBITDA (adjusted)(1)	16,510	7,613	+117%
Profit before tax	14,364	6,270	+129%
Cash at period end	67,056	60,360	+£6,696
Earnings per share	1.01p	0.45p	+124%

I was particularly impressed with the EPS growth 124% and the sales (revenue in new money but I believe sales says what it does on the tin) growth in the US of 93%.

See Investegate for more details. 

Nothing gives me cause to think that events aren’t up with the price and the Stockopedia Stockranks are pretty impressive with figures of:

Quality 84 

Value 3 

Momentum 98 

StockRank™ 72

It is not a value stock but I have enjoyed the ride.  It will be interesting to read what Paul Scott has to say.  See his comments here.

This neatly leads me on to the question of holding size. BooHoo is 18.8% of my portfolio or 14.0% if you include cash. I am 25.6% in cash at the moment.  I had a nice little debate on Twitter a while back about the size of an individual share holding within a portfolio and whether one should top slice as a stock rises in price and therefore as a percentage of portfolio or run the winners.

It is a complex and much debated issue. But personally I believe that a rise in price alone is not a reason to top slice.  What one has paid for a stock in total as a percentage of the portfolio stays the same or in fact decreases as the overall value of the portfolio, hopefully, increases.

I bought BOO at 37.15p, 43.35p, 48.23p and 55.90p so the stock would have a long way to fall before I no longer had an acceptable return on the stock.  Additionally the state of ones portfolio is very fluid and increases in other holdings reduces exposure to larger holdings.  

A final couple of thoughts on this.  Ben Grahan use to hold over 100 stocks but broke all his own rules to put 50% of his money into Geico.  This one investment made more money for him than all his other investments over his entire lifetime. Now I would not claim that Boohoo is a value stock in any way (or that I am Ben Graham!!) but if you believe that a stock has got what it takes then I think run the profits.

Secondly the directors/owners, who own 40% of the company, won’t be saying ooh the stock price is up x% (depending what time frame you take) and rushing out and top slicing there holding.  I am not sure why I, though I am not an insider, should also rush out and sell part of my holding.

Anyway this may be naive but time will tell.  

If the story changes or there is insider selling or any other number of factors alter I may change my mind but for now I am happy to run my position.

I was hoping to publish this on the day of the results but things got in the way. 

 

Christie Group

I have held CTG since 14th May 2012 when made my first purchase at 70p and it was one of my earliest investments.  It was bought for no other reason than it was one of Lord John Lee’s favourite stocks. He still holds 3.05% of the company. I have done little research into it since and am considering jetesoning it for reasons I will come to and certainly think Lord Lee could find better places for his money!

I have bought chunks of stock over the past four years at 73p, 67p, 73p, 53.6p and 110p. The last purchase being back in March 2014. My total investment over this period has been £11,864.00.

In late 2014/early 2015 I sold 7926 shares at 128p and 151p for £11,290 which means my current holding of 8754 shares are held for “free” pretty much. Though in hindsight I should have sold the lot at the beginning of 2015!

I have been considering, for while, selling the holding and was looking today and noticed that the Stockopedia Stockrank CTG has dropped to an awful 12. With the following ranks:

Quality: 14

Value: 42

Momentum: 22

To be honest on most metrics it is looking pretty ropey.  Profit, debt, free cash flow, working capital are all not great but in the interim results on September 12th David Rugg (who owns 12% of the company) wrote:

“After a difficult first half in the run up to the EU referendum, progress has resumed. We have stepped up the margin in our stocktaking division and are seeing increased activity in our transactional business. We look forward to a stronger finish to the year.”

The RNS also pointed to

• Interim dividend maintained at 1.0p per share (2015: 1.0p per share
• UK transactional pipelines at end of first half up 19% on H1 2015
• Strong European Hotel transaction activity
• Christie Finance’s pipeline of loan transactions has grown by almost 50% on a year ago, while the average loan value arranged for clients has increased by 9%
• Impact of living wage on UK retail stocktaking operations offset by successful fee negotiations

So while the figures for the first half nothing short of awful the outlook seems promising.

On the negative side Paul Scott doesn’t like them at all writing most recently:

“poor interim results from this services group. I can’t see any appeal in this company at all. Although the shares have come down quite a lot, as they should have done.

The outlook for H2 is better though. Note that there’s a hefty pension deficit on the balance sheet”

For me the jury is still out on pension deficits as they are a direct result of the current absurd monetary policy of most governments, but they can not be ignore completely

On balance I have decided to halve my holding on the basis that while I trust management they maybe being optimistic.

 

Week in Review

Well it has been an interesting week with Crawshaw taking a beating on Thursday and with a lacklustre performance from other holdings, it means the portfolio is down 0.76% on the week (though I must say I dont have complete faith in my calculations, Stockopedia is not very good for keeping a record of portfolio changes/performance). Not a disaster but….  On top of that I am not sure  what the hell I was doing in CRAW and maybe the decision to top up after the fall was a mistake but it is done and I will wait to see what comes out over the coming months.  I shall be watching very carefully but I am happy to give the management time (years) to get the roll out and therefore profits back on track.

For the record the following stocks in my portfolio were up 2% or more on the week:

• AVON – 14.20%
• SOM – 6.53%
• AVAP – 4.90%
• FIF – 3.41%
• AVS – 2.50%

and the following were down 2% or more

• CRAW – 48.%
• EMR – 7.73%
• BKG – 5.69%
• BDEV – 3.75%
• LTHM – 2.59%

Only 2 (AVS and BDEV) of my 8 largest holdings which make up 75% of the portfolio moved more than 2%.

As an aside I have decided that as soon as I have inputed my portfolio transactions into Sharepad (a fairly mammoth task as unbelievably they have no import facility) I will publish the portfolio on a quarterly basis. 

CRAW

Well didn’t Crawshaw take a battering today. Down 43.54% and 8% yesterday.  This is by far the largest one day fall I have been on the end of and while not great I am ok with it. It took, along with a 2.13% fall from BOO (probably spooked by disappointing update from NXT which seems daft to me) my portfolio down by 0.8% which is tolerable and nothing like the falls in the days following Brexit where half my all time gains were wiped out. All now recovered and then some.

This was always a bit of a punt and a stock that I should never have probably been in. No delete that should never have bought. But we are where we are.

After the fall yesterday I placed a limit order to top up my holding to 2% out of market hours. (something I learned from another book I read – Guy Spiers Education of a Value Investor I think but I can’t be sure. Place your orders in the cool of the night when you are less likely to be influenced noise and market gyrations.)

I then had to make a descison: exit the position or top up. Doing nothing was not an option I believe. See the book The Art of Execution for more on this. In the end I decide the market had over reacted and I placed a second order to take my holding up to 3.38% of portfolio ex cash or 2.93% of portfolio including cash.

Anyway I bought Crawshaw originally as a punt but also with the intention of sticking with it for the long term and I am sure that Noel Collett having been CEO for barely 18 months is not going to want to throw in the towel at this stage. I will be watching very carefully to see how things go. As an aside I am still holding around 12% in cash.

On the subject of cash I will cover that tomorrow if I have time.

AVON

Opened small position in AVON at 1% of portfolio. Reasons:

• ROCE of 19.1%
• ROA of 37.2%
• Forward PE is 13.9 and the historic PEG is only .54
• Growth in sales and profits have been steady.
• There is a small divi.
• Stockopedia are Q=79 V=20 M= 73 giving an overall rank of 62 so nothing special.
• Qualifies for two Stockopedia screens Buffettolgy-esque Sustainable Growth and Buffettolgy-esque Historical Growth Green
• Favourable comments from Paul Scott and commentators.

Only a small position to study some more.  I find it useful to put ones toe in the water as long as the fundamentals seem sound and then study some more before selling and moving on or adding to the position.

Largest Holdings 09/09/16

Stocks accounting for 75% of my ex cash portfolio

• BOO – 18.29%
• BVXP – 10.66%
• FEVR – 10.55%
• AIR – 9.03%
• DIS – 7.78%
• XPP – 7.61%
• AVS – 5.79%
• BDEV – 5.65%

Gains & Losses week ending 09/09/16

Gains over 2%

• BOO – 11.20%
• SOM – 9.50%
• AIR – 7.50%
• AVS – 6.30%
• FIF – 3.54%

Losses over 2%

• FEVR – 5.71%
• AVAP – 3.81%
• BKG – 3.31%
• CRAW -3.03%
• BDEV – 2.80%
• DIS – 2.12%

Holding Size

I tweeted yesterday about my holding in BOO  (Stockopedia) (Google Page). This is now up 100% since my initial purchase on 15th October 2015.  I then topped up in February 2016, April 2016 and June 2016.

The increase means that Boohoo is now 15% of my portfolio including cash and 17.97% ex cash.  It is not my intention to top slice while the outlook for the company remains the same or improves and even then any set backs would have to be permanent rather than temporary in nature.

This raises the possibility of the stock having a huge weighting in my portfolio.  For example if Boo doubles while the rest of the portfolio increases by 10%, Boo would become 28.5% of my portfolio.  If it goes higher than this, which I believe it will, then there is a prospect of it being 30% to 40% of my portfolio.

I am only aiming for modest returns (in the sense that if I can equal say the FT250 or All Share the journey will have been worth it) over say a 10 year period.  So if Boo can be up 20%/25% over a couple of years then I will happy but (and it is a big but) if it can three, four or five bag over a 5 year period then it can truly transform my investment returns.

My final thought on this for the moment is that if BOO was my business (that is I owned 100% of the stock) I would not be selling out now (to say Amazon) just because my share price had increased 100%, so I dont see the logic of selling out when when I own 0.00363% of the business!

That is all for now but this is probably a subject that I will return to again. Portfolio size, diversification, diworsification and running your winners is something that interests me a great deal.

 

AAPL

I bought Apple on 29th April 2013 at $61.29 as it seemed simply undervalued and beaten down simply because people wanted to dislike it and so many people around me saw its products as aspirational and all they wanted to buy was an iPhone, an iPad and a MacBook.

I think over the intervening period I was proved right and eventually sold out on 16th May 2016 at $92.45 missing the peak of around $130 but still happy with my 50% profit over three years.

I sold because sentiment seemed to have changed towards the stock from a company that could do no wrong and would go on forever innovating and producing new products that we didn’t know we needed. I certainly think that the release of the iPhone 7 confirms this. Apple has lost its way but I don’t blame Tim Cook. It simply that in its space you can’t simply go on growing and producing at the rate Apple did in the past.

• I am still using MS Office 2003
• My Dell laptop is 6 years old, drives three screens and has 2Gb hard drive space
• My iPad 2 Air does everything i need
• My iPhone 6 is near perfect save for battery life

Why would i upgrade these or buy a new product?

I am therefore happy to be out of Apple for now but could see myself re-buying in the future if the price drops sufficiently.  It is still a great company.