Barratt (BDEV) / Supergroup (SGP)

Noise and news

Two results announcements! Yesterday saw Supergroup, the fashion retailer, publish their Q1 figures, and today had Barratt announcing details on their full year performance. Barratt is still the largest holding in the portfolio and has made up a big part of its substantial outperformance over the last few months, so is certainly worthy of some comment. Supergroup, on the other hand,  isn’t something I’ve invested in. It was, though, a member of my little pet project back in May – ‘Google Trends for Fashion Trends‘, and so I’m interested to follow up on that little escapade and see if my musings then were of any long term interest to me.

Supergroup

You’ll probably need to read the original piece for background – linked again here – but the basic premise of my post then was trying to see if freely available tools have any predictive power on revenues. Google Trends essentially weighs the amount of online interest for a brand – and if online interest for a brand is a good proxy for revenues, which seems a reasonable idea, perhaps we’re onto a winner.

Anyway, Google Trends showed online interest for SuperDry to be down 22% in 2012 on my crude measure in May. Since we’ve now had the full year results for Supergroup, we can use the same time periods – match up the company’s accounting periods with the data on Google Trends, and see if anything interesting pops out. Those full year results showed revenue up 32%, with like for like up 2%. Google Trends interest was up 7.6%.

Supergroup’s Q1 results, announced yesterday,  saw sales up 20% and like-for-likes up again 2%. Google Trends data for the periods in question – the bottom graph above –  showed 60% more interest.  The only conclusion to be drawn is that the data is, unsurprisingly, ludicrously noisy. I’m not all too confident is has any use beyond being a little bit interesting! Still, interesting stock. Decent chance of continuing to grow, by the looks of things, and it’s hardly at a princely multiple of its earnings given that.

Barratt

Barratt released their rather hyped results today, which came (surprise surprise – there’s no excitement in large caps!) dead in line with forecasts; PBT at £110.7m against forecasts of £110m. The basic story seems to be playing out as it was expected to, and it expect it to continue that way: Barratt say it best with “the strategy we are pursuing is capable of delivering significantly enhanced returns without an improvement in market conditions.” It feels a little like an accounting quirk – the main driver of the increased profits is that more and more of their houses are getting built on newer land; land which was acquired more cheaply and non-impaired land, and therefore generates more profit for the business. It’s a quirk of having such a long cycle, I guess.

Nonetheless, it’s currently looking a lot more expensive than the 70p it was hovering around about a year ago, and I think it’s logical for your conviction to weaken as the price increases. I guess my selling price would be at about book value – just above £2 a share, and about 30% above the current price. The company has stated it plans to introduce a dividend next year, which I suspect will be a welcome development for the shareprice. Persimmon had a pretty good time of it when they announced their grand plans to pay out a hefty chunk of their profits over the next decade.

Nothing particularly fascinating, then, and I expect it to continue that way. I like the macro story in the sector and I like (similar to Howden) the way in which growth is likely to come even without any further capex or a big improvement in the economic situation.

Still, shares are down 5% on the results. I’m not sure what was disappointing – perhaps the lack of dividend this year – though they had risen to 170p yesterday, from 150p at the start of the month, anyway. As ever, I chuckled when reading the usual assurances that it was just ‘profit taking’. I love the phrase ‘profit taking’ – something implicit in that phrase is supposed to make us feel better about other people selling. Of course, they were just ‘shaking out the trees’ (another beauty) for those without the nerve for the next leg up. I suspect the best course of action is to continue to pay very little attention to the stock price – unless you’re thinking of selling – and focus instead on the operations of the business. In that vein, it looks like the basis on which I invested is still intact, so I’m still here. No profit taking for EV!

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