30 June 2016
By Maynard Paton
Happy Thursday! I hope you continue to find my Blog useful… and that your portfolio has fared much better than mine during the Brexit turmoil!
Yes… a few of my shares have been thumped of late and, for me at least, 2016 is fast becoming a somewhat grim year. At the end of March I was down 5% and by today’s close I was down 10%.
I must confess, the decent gain I enjoyed during 2015 now seems like a lifetime ago :-(
Still, markets never go up — or down — for ever.
I mean, Warren Buffett always reckons we should “be greedy when others are fearful”…
…and all that me, you and every other private investor can do in times like these is to simply find decent companies at attractive valuations and just hold them for the long haul.
Buy when there is blood in the streets… if you can log into your account
I am happy to admit that I never expected a Leave outcome, and I am also happy to admit that I have absolutely no idea what is going to happen next.
My only saving grace is that cash represented 12% of my portfolio on referendum day, so at least I have had a bit of ammunition to snap up some potential bargains.
Not that having cash on hand necessarily was any use in the post-vote market chaos…
I don’t know about you, but both of my cheapie online brokers failed to offer quotes during the Friday-morning plunge, while my subsequent experience of the RSP service has been somewhat hit and miss, too.
I guess it is all well and good to remember that we should always “buy when there is blood in the streets” — but recognise, when it actually happens, that we may not be able to get an order through… or even log into our dealing accounts.
Anyway, I did manage to add to one of my existing holdings during the recent slump. I also topped-up on two other shares some time before the carnage.
This is how my portfolio has changed since the start of the year
I publish quarterly updates to round-up what’s been happening within my portfolio (you can read them all here), and this Blog post recaps my April/May/June activity.
The table below shows three columns.
The left-hand column shows my portfolio at the end of 2015, the middle column reflects the position at the end of March, while the right-hand column displays my portfolio at today’s close:
01 Jan 2016 (%)
31 Mar 2016 (%)
30 Jun 2016 (%)
|City of London Inv||6.8||6.6||6.9|
|Electronic Data Proc||2.8||3.0||3.3|
|World Careers Network||2.0||4.0||3.6|
Two gambles on London property
I made three top-ups during the quarter.
First, Daejan (DJAN). I explained why I bought this commercial and residential property group within this review, and I increased my holding this week by buying at £48 including all costs.
DJAN is a bit of a gamble, as the group is heavily dependent on the health of London’s property market.
But DJAN’s veteran family management has steered the business successfully through various economic difficulties before, and the group’s conservative financing ought to protect shareholders relatively well this time around.
Buying at £48 compares to an £85 per share net asset value.
Next up is M Winkworth (WINK)… although buying more of this estate-agency business in May may not prove to be the smartest investment decision of the year.
You see, this business is another that is heavily dependent on London property… and this week rival Foxtons (FOXT) issued a post-Brexit profit warning. Oh well.
For the time being at least, I am comforted by the fact that WINK, unlike FOXT, operates as a franchise business.
As such, WINK has much lower fixed costs, and any downturn pain should therefore be shared with the franchisees. Wishful thinking perhaps, but I’m hoping WINK’s earnings may not be hit as hard as those of FOXT.
Anyway, I bought more at 131p including all costs and calculated the then trailing cash-adjusted P/E was 8.6.
At today’s 115p, the trailing cash-adjusted multiple is 7.2. I am hoping a profit warning may already be priced in.
I started to invest… but news of a buyback scuppered my plans
My third top-up of the quarter involved BrainJuicer (BJU).
I started buying into this marketing-research business during March and bought more in April.
Initial attractions included an owner-aligned board, some cash-rich and cash-generative accounts, the ‘disruptive’ nature of the group’s services, a reasonable record of growth, and what appeared to be a modest valuation.
Unfortunately, BJU soon scuppered my plans for a sizeable investment by announcing it would buy back up to 7.5% of its share count.
The share price quickly jumped and available stock then became quite hard to buy… and I’ve therefore been left with an annoyingly small holding.
Anyway, I am in at 325p including all costs and I hope to buy more in the future. I plan to write up my reasons for buying BJU in the weeks ahead.
Among my other holdings, I have not bought or sold a single share.
I trust I will exit this share with a nice cash sum
As usual I have kept tabs on all of my existing holdings — trying to seek out bargain buys just in case.
Here is a summary of all the developments:
* Nothing of significance from BrainJuicer, City of London Investment, Daejan, French Connection, FW Thorpe, M Winkworth, Tasty and Tristel.
Probably the best news to emerge during the quarter came from Electronic Data Processing. This micro-cap software business has essentially put itself up for sale and I trust I will soon be able to exit this share with a nice cash sum.
I then hope to recycle any EDP proceeds into some of my existing, smaller positions — such as Mincon, Andrews Sykes and BrainJuicer — assuming their share prices offer decent value at the time. I own 16 shares right now and I am still keen on tightening up my portfolio.
He wore ‘double denim’ and gave me a straw to clutch
These past three months have seen me out and about in central London attending no less than five AGMs. The companies involved were M Winkworth, BrainJuicer, French Connection, Tasty and Andrews Sykes.
A few general observations about these meetings:
* I gained entrance to all of the AGMs without any representation letter from my nominee broker (a print-out of my online portfolio sufficed as proof of being a shareholder);
* Attendance was muted — there were no more than three external shareholders at each of the meetings;
* The general absence of other shareholders meant I was glad to have attended armed with my own questions, and;
* All five meetings allowed decent conversations with (most of) the directors.
Links to my recollections of four of the meetings are below:
Sadly there were no amazing revelations disclosed at the five meetings, but I did enjoy a bit more of an understanding of each company and a few snippets of useful information.
One highlight in particular was having five minutes talking to Christos Angelides, the ex-group product director of Next, who is now a non-exec at French Connection.
Kitted out in ‘double denim’, Mr Angelides acknowledged he was assisting French Connection with its fashion ranges — albeit in a small way. Some say Mr Angelides was the “power behind the throne” at Next, so any help from him should be welcomed.
I came away feeling it was a straw I could clutch onto during French Connection’s ever-lengthening turnaround.
Anyway, my next trip out is to visit Tristel on 21st July for the company’s shareholder open day.
As well as touring around the factory, I’d like to get to the bottom of what happened earlier this year with management’s greedy option scheme.
I suspect the board has already prepared a ‘charm offensive’ on that matter… and a satisfactory trading update on the same day will undoubtedly quell some of the awkward questions.
Right, that’s it for this quarter. I now need to crack on and recoup this year’s losses.
Until next time, I wish you happy and profitable investing!
Disclosure: Maynard owns shares in Andrews Sykes, BrainJuicer, Castings, City of London Investment, Daejan, Electronic Data Processing, French Connection, Getech, Mincon, Mountview Estates, Record, Tasty, FW Thorpe, Tristel, M Winkworth and World Careers Network.