This week

What I am reading this week?

What am I listening to:

What I am researching

AVS

This should have been published the day after AVS agreed to a takeover but for some reason that didn’t happen. 

I posted back in September:
“I also topped up Avesco. This is a sound undervalued company with good metrics and Stockranks. I anticipate continuing to buy this on the way so that it joins BOO, FEVR and BVXP as fourth heavily over weight holding in the portfolio.”

AVS is currently 5% of the portfolio”

As many (though not if you read the FT, it is not even mentioned) of you will know now AVS was on the end of an agreed takeover offer from NEP Group Inc yesterday (RNS) at a 125% premium to the  Wednesday 16th closing price. 

To see the RNS come through and then take in what it meant was an amazing sensation.  Though whether it will ever be repeated to this degree I am not sure. 

It was Paul Scott over Stockopedia on his SCVR who lit the spark.  I would love to be able to say and as wrote in column yesterday:

“Unfortunately (or fortunately!) I don’t have the time to analyse the s@&t out of stocks and looking back at my notes I was simply attracted by the ROA etc figures, the divi growth and the fact that it on Stockopedia figures it was trading below book. That was enough for me.”

I still have a business test takes up huge amounts of my time and this simply does not leave the time to spend ages and ages on analysing a stock to make sure it is not a mistake waiting to happen. But I believe:

  • The only way to learn is to be in the market and learning from what you do wrong and right
  • In the current enviroment there is simply no point in leaving ones money sitting in the bank account

So I continue to invest, read and learn as I go along. Yes there have been some bumps along the way and we have been in a generally rising market but I am well ahead of any metric you want to use. Now I must make sure I am not complacent. 

Anyway back to AVS. Before yesterday AVS was about 6% of my ex-cash portfolio and was my 6th largest holding and it had been my intention to top up to the 10% of portfolio level. As I write (18/11/16 10:07) it is now 14.1% of my portfolio showing a gain of £20,592. Most, though not all, of that came yesterday.  

AVAP

This is one of those shares that when I reflect on it makes me feel like a fraud benefiting from tips, luck and a rising market!  I ask why am I in this stock?  I am not sure I can answer this one.

I can’t remember why I bought AVAP. I first bought in June 2015 at 155.7p and sold out 2 months later at a small loss because I did not understand why had bought the stock. I then bought back in this year at 139p in September, and topped up on 16th November and 18th November at 190p and 191p respectively.  It is now 4.2% of portfolio as I write, so not large for me and definitely not conviction size. 

I am now sitting on a 14% gain after two months and I am tempted to exit on the basis:

  • that I don’t know why I bought the stock
  • The rise is probably only due to the possible sale of its 24 ATR72 aircraft 
  • Stockrank is only 52
On the positive side:
  • It is misunderstood by the market which leads to
  • The low PE of sub 8
  • Sub .8 PEG
  • It trades well below book
Also:
  • Has $48m of cash on the books
  • has a history of a small but steadily rising divis
  • If the ATR sale comes off there is likely to be a nice special divi
  • Jim Mellon (not my favourite person BTW) tipped it right at the end of his MI presentation
So if it can rise another 10%/15% from here before next September this will give me a nice 25% gain. Going the other way I think a 10% pull back from here and I will exit, put it on the barge pole/too difficult pile and move on. 
 
I have set myself an alert on Stockopedia as I am not in favour of hard stop losses. 
 
As far as I can tell we seem to be in a momentum driven market and the market seems to have got behind this stock, so for now I will hold but I think I must resist the urge to top up unless I gain some special insight in to the company and at the moment I don’t have the time to research in more depth.
 

FIF

FIF was a stock I purchased initially back in March 2014 at 57.10p and then at 105.8 in February 2016.  The reasons? They are lost in the mists of time!

Looking back at the Stockopedia Stock Report for March 2 2014  I can see that:

  • the stock had good quality and momentum scores on Stockopedia
  • PEG was at .44
  • PE was 9.66 with estimate for 2015 of 7.89
  • The stock was paying a dividend
  • It was trading below book
  • Looking at the chart sentiment did seem to have changed

I made a small purchase equivalent to about 3% of my portfolio inc cash.

I should have been purchasing more on the way up but was yet to learn the benefits that this can bring to a portfolio.

The second purchase in February this year was well timed (luck not judgement) as give or take 105p is the YTD low but if I had known I was going to sell out so soon I probably would not have bothered. That said I have seen an 11.0% + return in 9 months on this second purchase so not to be sniffed at.

Anyhow at some point I learnt about the FIF LTIP.  I am not a fan of these and especially when they seem to give directors pretty big chunks of my company for nothing.  Taking the RNS (Investegate) from April this year where it talked glibly, in my opinion, about

have been issued 1,102,957 and 1,214,867 Ordinary Shares.”

and

cash amount of £1,196,503 and £1,317,904 respectively will be paid to meet the PAYE and national insurance payable in respect of the settlement of the options.”

This is a company with a market cap of £150m and annual profits of around the £8m mark (Stockopedia shows an estimate of £13m for this current financial year). Surely these figures are too large for this size of company and shows that directors and shareholders interest are not aligned.

This was simply too much for me and I sold half my holding on May 17 at 113.6p.

I then sold the rest of my holding last week (28/11/2016) at 117p for total return ex divis of 63% over the period. My initial investment was up 100% give or take in the 32 months I held them. Overall a very satisfactory return. 

Now we will just have to wait and see whether my instinct was right in the same that it was with VLK

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!