My ShareScope Articles

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25 October 2019
By Maynard Paton

Studying free cash conversion is vital when evaluating a set of accounts.

The measure compares free cash flow to reported earnings, and can indicate whether a business is a ‘cash fountain’ or a ‘cash guzzler’.

Ideally we want to own companies that generate plenty of spare cash, because such cash can:

• Underpin accounting profits;
• Indicate an attractive business, and;
• Fund welcome dividends.

By employing SharePad, I identified Rightmove as an elite cash producer.

Read my full Rightmove article for SharePad.

Maynard Paton

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30 September 2019
By Maynard Paton

Dynamic growth shares are among the market’s most exciting investments.

Find a business that has expanded rapidly and offers the prospect of further earnings growth — but also has an overlooked share price — and you could be on to a winner.

Medica — an AIM-traded supplier of radiology reports to hospitals — could be one such opportunity. The company’s forecast P/E of 15 appears modest given the 300%-plus earnings growth seen during the previous five years.

Read my full Medica article for SharePad.

Maynard Paton

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04 September 2019
By Maynard Paton

Buying a share at a discount to its book (or net asset) value ought to be the safest way of investing.

Indeed, what could go wrong if you can effectively buy assets worth £1 per share for, say, 50p?

The reality — sadly — is not always that simple.

Let me show you what I mean by using SharePad to evaluate Hammerson, a FTSE 250 real estate investment trust with net tangible assets of £5 billion and a market cap of only £1.6 billion .

Read my full Hammerson article for SharePad.

Maynard Paton

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09 August 2019
By Maynard Paton

Quality companies undergoing temporary problems can often become attractive investment opportunities.

On that basis, perhaps AG Barr is worth closer inspection.

The soft-drinks manufacturer famous for Irn-Bru recently warned that profits would be lower than expected… and the share price plunged accordingly.

However, AG Barr does boast a quality track record. During the last 40 years for example, the group has lifted its annual dividend by an average 11% — and shareholders have never seen their income cut.

Read my full AG Barr article for SharePad.

Maynard Paton

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15 July 2019
By Maynard Paton

Imagine this. You find a blue-chip company that offers:

• 21 years of consecutive dividend increases, with the last ten years showing 10% per annum growth;

• Management guidance of further 10% annual dividend growth “over the medium term”, and;

• A share price with a 10% dividend yield.

Too good to be true?

Well, that is the situation at Imperial Brands.

Read my full Imperial Brands article for SharePad.

Maynard Paton

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24 June 2019
By Maynard Paton

Today I am revisiting the share screen that pinpointed Games Workshop back in January.

The shares of the quirky wargaming retailer have soared more than 60% since that review…

…and I wonder whether the same screen can unearth another promising opportunity.

This time the screen returned 26 matches, and I plumped for the largest on the list — sports retailer JD Sports Fashion.

JD’s earnings per share have surged from 6p to 27p — an average of 35% per annum — during the last five years.

Read my full JD Sports Fashion article for SharePad.

Maynard Paton

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16 June 2019
By Maynard Paton

Today I have revisited a share screen that applies two ratios favoured by ‘quality’ investors — operating margin and return on equity (ROE).

The exact criteria I re-used were:

1) An operating margin (latest and 10-year average) of 20% or more, and;
2) An ROE (latest and 10-year average) of 20% or more.

This time I have pinpointed Jupiter Fund Management, a £1.7 billion fund manager with a mighty 41% operating margin and a robust 24% ROE.

Read my full Jupiter Fund Management article for SharePad.

Maynard Paton

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24 May 2019
By Maynard Paton

My latest SharePad article covers one of the most impressive UK growth stocks of the last 20 years — Domino’s Pizza.

Domino’s appeared on my radar after I revisited one of my previous SharePad screens.

The screen in question searched for companies with dependable dividends and reasonable yields.

I selected Domino’s because I was already aware of the pizza chain’s dynamic growth history — and wondered why the shares had fallen to offer a useful, 4%-plus dividend income.

Read my full Domino’s Pizza article for SharePad.

Maynard Paton

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10 May 2019
By Maynard Paton

For this SharePad search I re-used the screen I employed to pinpoint Victrex.

The filter focuses on two ratios favoured by ‘quality’ investors — operating margin and return on equity (ROE).

This time I selected Abcam, a £2.6 billion AIM company that develops and sells antibodies.

Abcam boasted a super 30% operating margin and a robust 20% ROE.

Read my full Abcam article for SharePad.

Maynard Paton

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27 April 2019
By Maynard Paton

For this market trawl I employed two ratios favoured by ‘quality’ investors.

The first measure was operating margin, which represents the percentage of sales converted into profit.

The second measure was return on equity, or ROE, which is calculated by dividing earnings by the shareholder equity used to produce those earnings.

I used SharePad to identify a suitable company, and selected Victrex — a £2 billion specialist manufacturer of high-performance polymers — for further investigation.

Victrex offered a wonderful 39% operating margin and a robust 23% ROE.

Read my full Victrex article for SharePad.

Maynard Paton

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15 April 2019
By Maynard Paton

I am convinced the very best shares to own are often led by executives who truly act in the interests of ordinary shareholders.

In particular, bosses who:

• do not dilute investors by issuing shares willy-nilly;
• create dependable returns through a rising dividend, and;
• own a lot of shares themselves…

…should deliver better profits than ‘salarymen’ directors who care more about their wages, options and bonuses.

I employed SharePad to identify a suitable company — and selected Renishaw for further investigation.

Read my full Renishaw article for SharePad.

Maynard Paton

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27 March 2019
By Maynard Paton

I recently employed SharePad to identify a strong R&D-based business.

The exact SharePad criteria I used were:

• An R&D-to-turnover ratio of 10% or more;
• An operating margin of at least 10%, and;
• Dividend growth for a minimum of five consecutive years.

SharePad returned only four matches.

I selected Craneware because, among those four shares, the company was the largest and offered the longest dividend record.

I was also vaguely aware of the business being renowned for some quality financials.

Read my full Craneware article for SharePad.

Maynard Paton

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15 March 2019
By Maynard Paton

I found Accesso Technology after screening for companies that offered an attractive growth history as well as respectable future prospects.

To narrow the field down further, I looked for share prices that had fallen since the start of the year and balance sheets that carried net cash.

The exact SharePad criteria I used were:

1) A negative share-price performance since 31 December 2018;
2) An average 5-year earnings growth rate of 10% or more;
3) A forecast 1-year earnings growth rate of at least 0%, and;
4) Net borrowing of zero or less (i.e. a net cash position).

I noted Accesso’s share price had fallen a hefty 43%, while the forecast P/E of 15 did not look too demanding given the group’s past and expected earnings growth.

Read my full Accesso Technology article for SharePad.

Maynard Paton

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28 February 2019
By Maynard Paton

For this SharePad search I screened for companies that exhibited an extended history of high margins and high returns on equity (ROE).

To narrow the field down further, I required my shortlisted companies to possess cash-positive balance sheets.

The exact criteria I used were:

1. An average 10-year EBIT margin of 20% or more;
2. An average 10-year ROE of 20% or more, and;
3. Net borrowing of zero or less (i.e. a net cash position).

I selected Hargreaves Lansdown from the 24 matches because this company:

• was the largest on the shortlist;
• offers services used by many private investors, and;
• prompts different opinions from quality investors Terry Smith and Nick Train.

Read my full Hargreaves Lansdown article for SharePad.

Maynard Paton

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11 February 2019
By Maynard Paton

Being able to analyse international shares — at no extra cost! — is a wonderful feature of SharePad. You can take your pick from several US and European indices.

One overseas share attracting my attention of late is Apple. The US company has appeared on my radar because:

• I know billionaire investor Warren Buffett owns the shares;
• I see the Apple P/E on SharePad is a reasonable 13.7, and;
• I own three Apple devices.

When the world’s richest investor buys a share, finding out why can often pay off.

At the end of September 2018, Mr Buffett’s Berkshire Hathaway investment vehicle owned 255 million Apple shares with a then value of $58bn. At the time the investment represented 8% of Berkshire’s assets.

During the first nine months of 2018, Mr Buffett acquired Apple shares at prices I estimate to average $170 — a level similar to that seen today.

Should we now join Mr Buffett as Apple shareholders?

Read my full Apple article for SharePad.

Maynard Paton