Q2 2016: 3 Top-Ups And 5 AGMs

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 (%)
Andrews Sykes2.72.32.9
City of London Inv6.86.66.9
Electronic Data Proc2.83.03.3
French Connection5.06.65.1
Mountview Estates10.410.99.8
FW Thorpe9.97.07.5
M Winkworth0.70.83.6
World Careers Network2.04.03.6

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:

* Satisfactory results from Mountview EstatesCastings and Andrews Sykes;

* Acceptable results from World Careers Network and Mincon;

* Lacklustre results from RecordElectronic Data Processing and Getech, and;

* Nothing of significance from BrainJuicerCity 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:

* M Winkworth
* French Connection
* Tasty
* Andrews Sykes

I have not written up my BrainJuicer AGM notes, but the fellow attendee there was ace investment writer Richard Beddard — who gave his verdict here.

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!

Maynard Paton

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.

4 thoughts on “Q2 2016: 3 Top-Ups And 5 AGMs”

  1. Hello Maynard,

    I do enjoy reading your posts, and I know others do too, so please keep it up!

    “At the end of March I was down 5% and by today’s close I was down 10%.” – If it’s any consolation, my own performance this year has been worse than this (down about 20% YTD), not least of all because I stumbled into Brexit with a portfolio stuffed with small cap consumer cyclicals and housebuilders, little cash and no thought of hedging! Hopefully I’ll remember this for next time.

    Through Champion Shares you helped give me the confidence to start investing, and while this stage of the market is painful, it should also prove to be a great lesson, because these are the times one has to learn to live through to be an investor.

    DJAN does look tempting at these levels. I bought CGS just before Brexit. It’s down about 10% so could be worth topping up. I also bought IGR and QRT, thinking they’re quite good value and perhaps more so with the tailwind of falling GBP. Finally, the speculator in me persuaded me to buy PLUS.

    I mistimed buying PSN at the bottom, though it’s nearly back to my purchase price, and I held INL through the falls. It’s down 25%. Housebuilders now look a questionable choice, and I’m pondering whether things like DJAN and MTVW might be a better bet. (I hold neither at the moment).

    I look forward to hearing your thoughts on TSTL. I still hold some, but the option scheme and what reads to me like a mixed outlook makes me a bit nervous.

    One more thing: do you have any advice on determining how much cash to keep on hand at any given time?

    Many thanks, and good luck!

    • Hello Duncan

      Thanks for the comment and sharing your own Brexit experience.

      Yes, these are the times you have to live through as an investor — and they are often the times when the best opportunities appear. It is difficult to look at your battered portfolio and be positive enough to buy possible bargains, yet that is generally what you have to do to succeed with shares.

      I am not sure why house builders have been hit so hard. I do not really follow the sector, so I may have missed something obvious, but I just don’t think the volume builders with a geographic spread of operations will suffer too much in the near term. Maybe valuations in the sector had ran ahead of themselves and the prospect of some uncertainty caused a sudden de-rating to a more sensible level.

      With TSTL, the business enjoys material overseas revenue, which ought to provide some benefit with the weaker GBP.

      I do not have any specific advice for cash levels. Ultimately it comes down to personal intuition, and the opportunities you find. I like to keep a bit of cash on hand, just in case of a sudden opportunity. Sometimes cash levels are be dictated by movements in your shares, where you top-slice holdings that perhaps become too large a part of your portfolio or the valuation has become expensive. You can do the opposite of course, by reducing your cash when valuations have become cheap and some of your shares need to become a larger part of your portfolio.


  2. Excellent update Maynard, yes your Blog is very useful and interesting to me so please keep it up. I have lost about 3% since Brexit and remain confused as to why the markets have climbed like they have. My biggest fallen has been Tasty I guess because small caps seemed to have suffered more than the main index. I don’t see why Tasty should be worse off other than a reduction in immigration if it were to come about could effect wages of employees but that a mute point in my view. Property prices may fall which would help and the weakend pound attracts more visitors to Blighty which could improve trade but again that’s a marginal gain for `tasty I judge

    Keep up the great work

    • Hello David

      Thanks for the comment. I guess the wider market has risen due to the weaker GBP against the USD, which would help those mega-caps (oils, miners, pharmas, etc) with USD earnings when translated into GBP.

      I can’t see much of a Brexit fall-out with Tasty in the near-term at least. Immediate concerns are the speed of its expansion (as you say, 4 outlets opened this half suggests a lot of openings are required in H2), plus the sales blip in H2 last year, plus the costs of a new central kitchen etc that will hit margins this year. However, I do wonder if new sites might become easier to acquire if rival chains are sitting back due to the Brexit ‘uncertainty’.

      Tasty’s last annual report says: “The Group does not have any material exposure to currency risk or other market price risk.“. So nothing much doing on the weak pound. In the years to come there may be fewer foreign nationals available for restaurant work, which may affect the business, but it’s very hard to say. Lots of other things could happen before immigration numbers come down, if they ever do.


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