Q1 2020: 1 Sell, 1 Top-Up And An Emergency Portfolio Review

31 March 2020
By Maynard Paton

I always like to start my quarterly portfolio reviews with a happy welcome. But not this time.

The country faces a national emergency. Lives are at risk, supermarkets have empty shelves, jobs are being lost…and the finer points of individual shares no longer seem that important.

I have nonetheless decided to maintain this blog through these difficult times — although future posts may be sporadic.

I hope you will find my updates useful. One day I will look back at what I have published to remember how I coped (or not!) with the crisis. I may even emerge from these events a much wiser investor.

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City of London Investment: Market Crash Pushes Yield To 9% After Positive H1 Results Show 11% Dividend Lift And Potential To Maintain Payout

23 March 2020
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • Funds under management rallied to a record level in GBP terms, lifting revenue by 11%, profit by 22% and the dividend by 11%.
  • However, the market crash that followed these results has superseded a lot of the statement’s commentary and accounting.
  • Profit may now be running almost 40% lower than at the start of the year and may just about cover the 28p per share full-year dividend.
  • The accounts continue to sport high margins, decent cash flow and net cash — all of which ought to see the business through the present downturn.
  • Although the shares have been rated modestly on a P/E basis for years, the possible yield now tops 9%. I continue to hold.

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[SharePad] Screening For My Next Long-Term Winner: AB Dynamics

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18 March 2020
By Maynard Paton

Recent market ructions have sent many shares tumbling — and perhaps created some buying opportunities.

Amid the mayhem, I devised a straightforward screen. I simply looked for decent-sized businesses that were still expected to grow, paid a dividend and were conservatively financed.

I applied the following criteria within SharePad to identify some respectable candidates:

  • Forecast earnings per share growth of at least 10% this year;
  • A market cap of £250 million or more;
  • Must have paid a dividend last year, and;
  • Net borrowings of less than zero (i.e. a net cash position).

I then ordered the shortlist based on how far each share price had fallen since its 52-week high.

I selected AB Dynamics because, of the names on my shortlist, I knew AB possessed a reputation for ‘business quality’ and its shares had fallen among the furthest.

Read my full AB Dynamics article for SharePad.

Maynard Paton

Tristel: Management Reveals Extra NHS And Chinese Orders To Combat Coronavirus After H1 UK Sales Advance A Superb 14%

29 February 2020
By Maynard Paton

Results summary for Tristel (TSTL):

  • Bumper first-half figures showed very satisfactory double-digit growth following superb sales increases within the UK and various overseas markets.
  • The underlying profit performance was complicated by undisclosed acquisition contributions, US regulatory costs, hefty option charges and cheeky bookkeeping.
  • Following these results, the coronavirus outbreak has led to an emergency “special exemption” order from China and prompted “substantial” extra purchases by the NHS.
  • The accounts remain in good shape with high margins, net cash and respectable cash generation.
  • The valuation has become extremely punchy with an estimated underlying P/E of 43. I continue to hold.

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[SharePad] Screening For My Next Long-Term Winner: Boohoo

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16 February 2020
By Maynard Paton

Cash flow movements can often indicate whether or not a business enjoys a powerful operational advantage.

A strong business might:

  • Receive customer payments upfront for goods/services it has yet to deliver, and/or;
  • Pay suppliers months after goods/services have been received.

However, a weak business might:

  • Receive customer payments months after its goods/services have been delivered, and/or;
  • Pay suppliers upfront for goods/services it has yet to receive.

SharePad allows us to easily pinpoint companies that operate with advantageous cash flow movements. Boohoo, the prominent online fashion retailer, offers a good example of what to look for.

Read my full Boohoo article for SharePad.

Maynard Paton

[SharePad] Screening For My Next Long-Term Winner: Greggs

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26 January 2020
By Maynard Paton

‘Run your winners’ is popular stock-market advice.

Great companies often remain great investments for a lot longer than most people expect…

… and can deliver life-changing rewards to anyone who refrains from selling out too soon.

Where can we find potential winners to run? I thought the best performing shares of 2019 would provide a good starting point.

One business that did well during 2019 was Greggs, the well-known bakery chain, which saw its shares rocket more than 80%.

Greggs is actually a textbook example of ‘running your winners’. The shares had already surged 100-fold before last year’s price jump.

Read my full Greggs article for SharePad.

Maynard Paton

My Portfolio: Year In Review 2019

10 January 2020
By Maynard Paton

Happy January!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 5,562-word post provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2019, as well as provide a few remarks about valuation.

As I mentioned this time last year, I find writing such reviews extremely useful — not least because I double-check my investment logic to ensure I am still invested for the right reasons! The upsets I will suffer during 2020 will most likely be caused by the shares I already own rather than by new shares I purchase.

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Q4 2019: 2 Sells And Up 13.1% For 2019

02 January 2020
By Maynard Paton

Happy 2020! I hope you enjoyed last year’s positive market and that you continue to find my blog useful.

A quick summary of my portfolio’s 2019:

  • Overall gain: 13.1%*;
  • Nine shares went up and six shares went down;
  • Performances ranged from Tristel, up 61%, to Tasty, down 74%;
  • Three shares were topped-up: Daejan, Mountview Estates and S&U, and;
  • Three shares were sold entirely: Castings, Getech and Oleeo.

(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees and paid dividends)

Before I review my 2019 performance, let me first outline what happened during the final quarter of the year.

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Daejan: £120 Per Share NAV Is More Than Double The £55 Share Price As H1 Update Reveals £46m US Property Devaluation

31 December 2019
By Maynard Paton

Results summary for Daejan (DJAN):

  • The statement revealed fresh first-half records for revenue, up 12%, underlying operating profit, up 7%, and net asset value, up 4%.
  • New rent laws in New York led to a £46m devaluation and put DJAN on course to register its first annual valuation loss since 2009.
  • A 6% strengthening of the USD counterbalanced the New York devaluation and helped support net asset value.
  • The accounts remain conservatively financed, with capital expenditure reduced significantly following earlier cautious remarks from management.
  • The share price represents only 46% of net asset value — despite net asset value advancing 75% during the last five years. I continue to hold.

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Mountview Estates: H1 Figures Show NAV Inching 4% Higher To £96 Per Share After Management Suffered Significant AGM Protest Votes For The Third Consecutive Year

28 December 2019
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • Brexit “uncertainties” led to a dull performance, with revenue falling 1%, underlying operating profit improving 1% and an unchanged dividend.
  • An improved gross margin and the disposal of four investment properties for prices well above book were encouraging.
  • Debt represents a modest 10% of the group’s property estate — which continues to be accounted for at cost.
  • This year’s AGM witnessed further protest votes against the independent non-executives, the board’s pay and the auditors.
  • MTVW’s book value increased by 4% to £96 per share, although the balance sheet could inherently be worth £200-plus per share. I continue to hold.

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Oleeo: Bombshell Tender Offer And Delisting Proposal Forces My Exit At A 30% Loss

23 December 2019
By Maynard Paton

Results summary for Oleeo (OLEE):

  • A bombshell tender offer and delisting proposal overshadowed details of the 2019 results.
  • I have tendered my full holding and recorded a 30% loss after owning the shares for four years.
  • The tender offer was not exactly generous, given OLEE’s net cash represented 93% of the tender valuation.
  • A delisting was always a risk when the executive chairman (and related parties) owned 84% of the business.
  • Full-year revenue climbed 7% to reach a new high, although the significant development expenditure seen since 2015 is set to depress profit for at least another year. 

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[SharePad] Screening For My Next Long-Term Winner: Mears

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20 December 2019
By Maynard Paton

This SharePad article did not turn out as I had expected.

I had thought I would be evaluating a business with glorious financials and tip-top management.

I ended up studying accounting alarm bells and a dissident shareholder trying to oust the boardroom.

The SharePad screen I used looked for companies that offered:

1) A 20-year (or more) record of dividend increases, and;
2) Forecast dividend growth for the current year.

I selected Mears, a £269 million provider of housing-maintenance and social-care services, due to its forecast 5.3% yield.

Read my full Mears article for SharePad.

Maynard Paton

System1: As H1 Figures Show Just 4% Top-Line Growth And AdRatings Burning £2m A Year, Could ITV’s Euro 2020 Competition Validate A Potential Recovery?

20 December 2019
By Maynard Paton

Results summary for System1 (SYS1):

  • Another unremarkable performance, with underlying gross profit up 4% and profit (without AdRatings) rebounding 24% due mostly to improved cost control.  
  • The start-up AdRatings service continues to lose £2m a year and is increasingly dictating the company’s progress, potential and valuation.
  • An ITV competition to determine the most “emotionally engaging” advert during Euro 2020 could create extra recognition for System1-type marketing and SYS1’s services. 
  • The accounts remain cash rich and the business (without AdRatings) exhibited a healthy 21% margin.
  • The P/E could be anywhere between 8 and 26 depending on how AdRatings, share-based payments and the cash position are viewed. I continue to hold.

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Bioventix: Satisfactory 2019 Results Reveal (Yet Another) Special Dividend And Indicate Growth During 2020-2025 Depends Entirely On Troponin

17 December 2019
By Maynard Paton

Results summary for Bioventix (BVXP):

  • Satisfactory double-digit growth spearheaded by notable demand for the group’s main antibody.
  • Progress beyond 2020 now appears dependent entirely on the new troponin product, revenue from which remains low.
  • An unsettling tweak to management’s outlook suggests the pipeline antibodies may require a further five years of development.
  • The accounts remain in excellent shape with terrific margins, appealing equity returns and minimal reinvestment requirements that have prompted yet another special dividend. 
  • The valuation remains rich with an underlying P/E of 28. I continue to hold.

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Tristel: Record Annual Figures (Once Again) And Impressive Three-Year Targets Support An Understandable 30x P/E

12 December 2019
By Maynard Paton

Results summary for Tristel (TSTL):

  • Record annual figures for the sixth consecutive year, supported by satisfactory progress both within the UK and abroad.
  • The underlying performance was complicated by Brexit stock-piling, an acquisition, US regulatory costs and option expenses. 
  • The publication of new three-year financial targets was impressive, and suggested the company could grow organically at 10-15% per annum. 
  • The accounts are still healthy with high margins, net cash and respectable cash generation. 
  • The valuation remains understandably rich with an estimated underlying P/E of 30. I continue to hold.

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