I trust you enjoyed the festive break and are now raring to do battle with the market for another twelve months!
This first Blog post of 2016 provides a short ‘year-in-review’ of each of my current portfolio holdings.
As I mentioned at the start of 2015, I find writing such reviews extremely useful — not least because it encourages me to double-check my investment logic to ensure I am still invested for all the right reasons!
Summary: Headline results as expected, but they hid a weaker second half and some disconcerting cash-flow movements. The figures contained plenty of other irritations and worries, while the chairman’s statement was notable for what it did not say. All told, the results carried too many signs of profit trouble ahead and I sense PEN could return to its haphazard ways witnessed between 2000 and 2009. I have sold.
It’s not often I look at a 12-bagger and decide it’s still worth buying.
But that is exactly what happened when I pinpointed Pennant International (PEN) the other year.
To cut to the chase, this £23m military equipment specialist had suffered badly during the banking crash and the shares had plunged to 6p. But then a succession of upbeat results and contract wins eventually caught me eye and I bought in at 74p during October and November 2013.
What particularly appealed to me was the group landing its largest-ever contract alongside results that spoke of “good prospects for the short, medium and long term”. It’s quite rare to see such ‘multi-horizon’ optimism within a company RNS!
Also prompting me to buy were management’s sizeable shareholding, the firm’s asset-flush balance sheet, a focus on organic growth and a lowly market valuation.
While PEN’s expansion looks to have paused temporarily in 2014, the group’s overall prospects remain positive and I’m pleased to say the appealing executives, financials and valuation remain in place today. Continue reading →