Quality UK Investment Blog
01 January 2016
By Maynard Paton
Happy New Year!
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!
15 December 2015
By Maynard Paton
Quick update on Tristel (TSTL).
Event: AGM statement published 15 December
Summary: It looks as if this medical-wipes specialist is all set to surpass profit expectations for 2016, and probably its own targets for 2017 as well. Throw in some new (to me) speculation about deals with FTSE multinationals, and it’s no wonder the share price has performed so well of late. In fact, this holding has grown to become 18% of my portfolio — and I must admit to some nerves given the premium growth rating. Anyway, I continue to hold.
11 December 2015
By Maynard Paton
Quick update on Electronic Data Processing (EDP).
Event: Preliminary results published 11 December
Summary: As expected, this dull software microcap reported no miracles. Cost savings should underpin the firm’s near-term progress, but revenue growth remains as elusive as ever. At least EDP still enjoys plenty of recurring income and has committed again to a hefty 5p per share dividend. I’m trusting the trio of North American funds that hold 28% of this stock will one day stir-up some corporate action so we can all exit at an advantageous price. I continue to hold.
30 November 2015
By Maynard Paton
Quick update on French Connection (FCCN).
Event: Trading statement published 30 November
Summary: Phew! A pleasantly surprising update that revealed stable trading and a signal that losses could be narrowing. However, the most welcome news was the redevelopment of the group’s loss-making Regent Street store, for which compensation of £2.4m will be received from the landlord. I just wish FCCN could be paid off for all of its under-performing shops! I continue to hold.
24 November 2015
By Maynard Paton
Quick update on Record (REC).
Event: Interim results published 24 November
Summary: A lacklustre set of results in which the board remained optimistic of further progress — but where new clients were still nowhere to be seen. This statement was particularly irritating due to higher-than-expected staff costs and commentary about an ‘increased’ dividend. However, at least my earnings guess has not changed. One day I trust REC’s currency strategies will have their day in the sun, but until then I must content myself with a useful 5%-plus yield and dreams of what could be. I continue to hold.
13 November 2015
By Maynard Paton
Quick update on Castings (CGS).
Event: Interim results published 13 November
Summary: Just what I like — a concise set of results that reports steady progress and robust financials. In fact, I could not find anything to complain about, with revenue up, profit up, cash up, the dividend up, plus the prospect of further growth during the second half. What’s more, the share price does not look that expensive. I continue to hold.
04 November 2015
By Maynard Paton
Quick update on World Careers Network (WOR).
Event: Preliminary results published 03 November
Summary: Oh dear — my portfolio suffers yet another profit warning! WOR had already owned up to lower earnings this year, but now it has admitted to further cost increases for 2016. Nonetheless, these annual results revealed an improved second half while net cash currently equates to half of the present market cap. Bear in mind, too, that the last time this software developer invested at the expense of near-term earnings, profit eventually quadrupled. I continue to hold.
03 November 2015
By Maynard Paton
Quick update on Getech (GTC).
Event: Final results published 03 November
Summary: Oh dear — a profit warning for 2016. So much for management’s optimism from just a few months ago! The oil-sector downturn has also created extra guesswork with GTC’s valuation, while I remain concerned about the firm’s hefty development expenditure. Nevertheless, I believe GTC’s range of specialist data and services, alongside an asset-rich balance sheet, should see the firm through the difficulties. I continue to hold.
23 October 2015
By Maynard Paton
Today I’m revealing my latest share investment.
The company in question is Castings (CGS), a long-established iron castings and machining group that’s based in the Midlands.
You may recall that, back in September, I added Castings to my watch list.
Well, after mulling over that write-up, I then bought in at an average price of 426p including all costs. The bid price is now 440p and the holding currently represents about 8% of my portfolio.
When I invested, I felt this £188m firm offered many traits of a respectable investment.
Important attractions for me included a durable dividend, an asset-flush balance sheet, improving productivity, good-value management and an upbeat immediate outlook. What’s more, a possible P/E of 11 suggested the shares were priced quite modestly.
However, I recognised CGS was by no means a one-way bet. Obvious risks include serving a small number of large customers and a recent profit history that has seen its ups and downs.
13 October 2015
By Maynard Paton
Quick update on Tristel (TSTL).
Event: Final results and annual report published 12 October
Summary: It’s always nice to see your largest holding issue good figures and watch the share price rally strongly! These results met or exceeded my expectations, with bumper H2 margins, good all-round revenue growth and upbeat management commentary. The firm’s repeat-purchase and patent-protected products continue to promise further growth — notably in the United States — and the current valuation reflects such optimism. I continue to hold.
21 September 2015
By Maynard Paton
Quick update on French Connection (FCCN).
Event: Interim results published 21 September
Summary: A grim set of figures that had been flagged by an earlier profit warning. News of further store closures and maintained gross margins were reassuring in the circumstances, but the real saving grace was the relatively positive outlook for the second half. There’s still a chance this share could one day prove to be a bargain, but for now its basket-case status remains intact. I continue to hold.
08 September 2015
By Maynard Paton
Quick update on Tasty (TAST).
Event: Interim results published 8 September
Summary: A very satisfactory set of results, with highlights including higher margins and a further acceleration of new restaurant openings. It certainly appears as if TAST will expand using debt rather than equity, though further borrowings will be needed for the business to become self-funding. I remain convinced the family management here can replicate its earlier success at Prezzo (PRZ) and can perhaps quadruple TAST’s market cap. I continue to hold.
04 September 2015
By Maynard Paton
Today I’m continuing my hunt for Watch List shares with a look at Castings (CGS).
Here are the initial attractions that prompted this research:
Respectable financials: The accounts showcase a dependable dividend, net cash and property assets
Straightforward management: The executives do not collect grandiose wages nor own any options
Interesting valuation: The shares could offer a possible P/E of 11
As usual, I’m applying a question-and-answer template to help me pinpoint companies that match the criteria set out in How I Invest. I’m looking for as many Yes answers as possible.
25 August 2015
By Maynard Paton
Quick update on Record (REC).
Event: Business update published 25 August
Summary: A very disappointing statement. A major client has withdrawn $2.8bn from REC’s administration and I’ve had to slash my earnings guess by 27%. The shares have dropped significantly, though at 29p they remain valued at 10x possible profits and yield 5.7%. The business remains high margin and cash rich, but sadly still dependent on a small number of customers. I continue to hold.
Today I’m summarising my current thoughts on French Connection (FCCN), a small-cap fashion retailer that continues to suffer from poor trading and which remains an under-whelming investment in my portfolio.
You can read my earlier Blog posts on FCCN here. But to cut to the chase, a trading statement in April owned up to weak retail sales and it’s likely the current year will witness FCCN’s seventh overall annual loss in eight years.
One day I’m sure a sustained turnaround here could deliver an exceptional share-price gain — although there is the real chance this company may never actually turn…
Anyway, prompted by FCCN’s share price falling steeply of late, I’ve weighed up the various pros and cons of what has become a very frustrating business and investment. Just to confirm, I continue to hold the shares.
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