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. 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s