As many of you will know (though not if you read the FT, it is not even mentioned) by now AVS was on the end of an agreed takeover yesterday from NEP Group Inc at 125% (2.25 times) the closing price on 16th November 2016.
Reading the RNS was surreal and I expect not to be repeated experience.
It was Paul Scott over at Stockopedia who lit the spark and I would like to say that then my razor sharp investing skills kicked in and I analysed the stock to death and then decided to take a position. However things were slightly different to that, as I wrote yesterday in comment to Paul’s column:
“I bought in June, September and early October. 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, was trading below book. That was enough for me.”
I still have a business that takes a huge amount of my time and I simply don’t have the time to spend analysing a stock to death before I invest (I am comforted by the fact that there is some research that indicates that you can over analyse and that beyond half dozen metrics you don’t increase your advantage. Somebody wrote yesterday that he was held back from buying because of the spread but if you think you are going to see say 100% over 3 to 5 years is a spread of 5% that important?) but I do some analyst and like to see:
- Little, ideally no debt. (Thanks to Robbie Burns for that one)
- Substantial management stake. (Thanks to Lord Lee for that one)
- Honest management so no VLK for me. (Thanks to Warren Buffett for that one.)
- Good ROE, ROA, ROCE and operating margin figures
- Dividends (preferably rising)
- Low PE (nice but not essential. I own FEVR and BOO after all!)
What I now have to do is work out what I can learn from the AVS
investment and whether this might translate across to other investments.
Anyway back to AVS
. Before yesterday’s rise it was my 7 largest holding and about 7.15% of my ex cash portfolio. It is now my second largest holding (BOO
still has the top spot).
My ex-cash portfolio was up 7.5% on the day.
My average purchase price was 266p
My gain on the stock is £20,313.
I have not sold as to do so would be to give up £1,000 by not waiting for the sale to complete though may be makes sense to lock in half now and give the market makers their turn! But it does seem a lot of money to me!
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%
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.
Reports coming out of China at the weekend made me optimistic that external pressures from the economies that matter – US, China, Japan and the EU will mean that Brexit when and if it happens has a chance of being very benign.
I therefore decided to top up my holdings in Barratt, which I should have done after the Brexit fall but I was too traumatised (I have to say more from the effect on my business rather than the falls in the stocked market). That said I still failed my first to buy when there is blood on the streets or being greedy when others are fearful. Hopefully I will learn from this for the next time around.
BDEV is still a modest 5% of the portfolio.
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
Finally I added to my position in EMR. This is not a massive conviction holding and represents only 2.5% of the portfolio and has a very high Stockrank of 98.
I wrote this on Monday 5th September
BVXP: This stock came on to my radar when it was discussed by Leon Borros and Paul Scott. The transcript of the interview can be found here. The audio is on qualitysmallcaps.co.uk. This well worth a read/listen if this company interests you. At the time of the interview it was Leon Boros’ largest holding.
Additionally Gervais Williams at Miton Group holds just under 14% of the stock.
Additionally the CEO Peter Harrison has a 12% stake in the company. I like to see directors with good stakes in the companies they run.
I bought an initial stake on 13th October 2015 and topped up on 4th December 2015, 14th April 2016, 23rd April 2016.
I then attended a Sharesoc presentation by the CEO of the company and was much impressed. So I topped up further on 17th June 2016 and finally again on 28th July 2016. This gives me an average purchase price of 1068p.
The company is very niche but the ROA, ROCE, ROE and operating margin are extraordinary. I think in addition they have a great moat.
I am very happy with the stock being 11.5% of my portfolio ex cash or 9.17% including cash.
The price has jumped today by around 20% to 1160p and I suspect that there is more to come.
AIR: Actually only sold 16% of my holding on Friday because the other transaction that I placed was in my ISA and was on a limit order for one day which was not fulfilled. So happy failure. Now I have to decide whether to sell into today’s strength. Am inclined to do so.
I can see no reason, as always, for the move in the price so it is likely to be down 15% tomorrow.