Tag: CCT

  • Spring Cleaning

    Some portfolio turnover

    I spent much of the last couple of days doing three main things - firstly, deciding what to do with Morson and co, current constituents of the portfolio after the disappointing situation I blogged about last Friday. Secondly, in light of that, cleaning up all the spreadsheets I use for tracking my performance and managing my investments - particularly as it's coming up to this blog's first year anniversary and, as such, it'll be good to look back with some clarity over my investment decisions. I did create this to learn, after all! And thirdly - well, it sort of spoils my writer's suspense over the first point - but my dilemma was deciding what to do with both the portfolio's current residual cash, and any cash that might be realised from... I don't know... selling an investment, for instance.

    The Morson Question

    It probably won't surprise readers to hear that I sold Morson from my virtual portfolio today, then. The price I sold at, 47.5p, sits close enough to the bid price of 50p. I have absolutely no experience in the planned cessation of trading (if they manage the 75%) or almost complete market wipeout (if they don't) in shares like this, which is the main reason behind selling, since my uninitiated guessing would have said the process would wrap itself up fairly quickly - and, since the risk of the family pulling out appears to be basically nil, those managing to buy shares at 47.5p are doing rather well. As I say, though, I don't like guess work, so I'll watch how the process proceeds and how quickly shareholders get their money out - and take the information forward if the scenario ever pops up again. I suppose the situation is quite unusual in the probabilities involved, given that it's an MBO by management with a significant interest already, irrevocable undertakings for more than 50% of the share capital, and financing apparently already in place. Maybe those interested in arbitrage will make some money here! (more…)

  • Friday Reading

    More Results & a Pearl of Wisdom

    I like company results time, because results give me a tangible feeling of whether I'm doing well or not. I suppose even that's a little self-indulgent, as I desperately try to stay away from the folly of market watching, but at least it gives me a good hint as to the underlying direction of the company. That's something that the price doesn't reflect - a core principle behind being a value investor - so results days give me a nice chance to catch up, reassess, and hopefully give a company some fresh eyes. Alongside my post on Wednesday, then, we had two sets of figures come out yesterday.

    Firstly, Howden Joinery, a stock which I admire for more than just the cheap price - I'm hoping that isn't influencing my rational investing brain. Firstly, I like their annual reports - they have an easy to follow explanation of everything they do, from start to finish, thorough explanations of why they do what they do, and good supporting figures. In management statements, wording is concise and clear, and - something I wish more companies would do - when they note a figure is 'in line with market expectations' they state what those believe those market expectations to be. This is a breath of fresh air. In a sense, I'm not sure I am so concerned that it leads me to like the company more - because I think a management which values transparency and good communications is a management likely to be fair in other senses, too, and that's the sort of business investors should align themselves with. I should say I'm not being paid by Howden for this and, joking aside, I remain driven by the numbers and the relative valuation of the business. The interim statement looked to confirm my faith; it reported, as usual, revenues continuing to rise and the company continuing to steadily expand. Revenues were up 5.9% this time, with 20 new depots (they currently operate 510) planned for this year. They continue to occupy a significant chunk of my portfolio at a pre-exceptional P/E of less than 10, and happily so; things seem to be going along more or less in line with my original analysis, found here. (more…)

  • Directors & Shares

    A Fine Line

    Back in September, I published a post on how directors could prove to their investors that they were in it for them – the owners of the company – and not themselves, the temporary custodians. My answer was a rather empthatic one; the easiest way to make a director think like a shareholder is to make him a shareholder. Now he's not just motivated by his salary and bonus, but is incentivised to care about the share price - after all, it now directly affects his own income. Recently, though, that black and white answer has come up against a few questions; the latest of which was brought out by the investor disquiet at Elektron. I had posted a piece on Elektron on Monday - so congratulations to those of you who read it - but it has since disappeared into the ether of the internet. The first lesson for me today, then - back things up more regularly. Since it's a good example, though, I'll start with Elektron as I think about exactly what the implications are behind directors, share ownership, and incentivisation schemes.

    The disquieted

    As I mentioned in the now buried post, probably the best places to point to for the story behind Elektron's recent shareholder anger are the online message boards at ADVFN and iii. Elektron are a company who seem to be recovering operationally, with much improved profits last year. Glancing through the annual reports, I noted that the Chairman had a significant chunk of shares. Theoretically, this strong ownership should give shareholders some faith that the Chairman is in it for the long haul. One quote from the bulletin board stuck in my mind, though: (more…)

  • Twelve for 2012

    Part Two

    With six of my stock choices briefly explained here, I conclude my twelve for 2012 in this post. The format for my last picks is exactly the same as for my first - I want to explain them briefly, simply, and without too much jargon. If you want a more detailed analysis, of course, I did do full posts on all these companies - just use the search bar above right or tags at the bottom to find them!

    Howden Joinery

    Howden Joinery, makers of predominantly kitchens and fittings, have a very low cost business model and growth which is both deceptively recession-proof and surprisingly strong. Due to Howden's approach to selling to the trade instead of consumers, stores tend to 'mature' over time as they increase in account holders - something which is still driving growth even before store expansion. On top of that, though, Howden is continuing to pursue growth in the vein of its existing model - cutting out the expensive high street stores customer-facing sellers need, and allowing themselves to focus on margins, which continue to be very strong. French expansion is on hold at the minute due to the uncertainty, but the business seems solidly run and consistently profitable since their troubled beginning.


    Cranswick make sausages and meat products, and were memorably described in one of my very early blog posts thus:"This seems like a Buffettesque company. I think the company will slowly accrete value." That's a description I probably agree with as, through various cycles of pork selling prices, Cranswick has continuously grown and remained profitable. In fact, they've grown revenue year on year for the last 10 years, and almost grown profit consistently for that same period. The balance sheet is extremely conservative, the management seem the same, and so the question always came down to valuation; and at a P/E of below 11 an extremely safe, consistent grower whose margins had been slightly squeezed seemed a solid bet. (more…)

  • Plastics Capital (PLA), Creston (CRE), Character (CCT)

    A round of news

    With 3 sets of results out this week, I thought I'd pull together a quick post showing how 3 of my picks are holding up. Plastics and Character have been in the portfolio since inception, with Creston a later addition in a sector (media) I found attractive. The headline result would be one of positivity, with all three companies showing year-on-year improvements in profits by some measure; though that is probably more a testatement to managements' fantastic statistical manipulation than great performance! Market reaction has been varied, as ever, and there are obviously many factors at play here; but given the minute P/Es all three companies are trading on, a continuation or  improvement in their profitability is exactly what I expect and hope to see. It follows that if their other issues are sorted, they'll probably be due for a re-rating; as well-financed growing companies rarely trade on low single digit P/Es.

    Plastics Capital


    - Revenue down 0.3% - Operating profit down 3% - Profit before tax up 10.5% - Reported pre-exceptional profit down 9.2%

    A rather mixed set of statistics, and I've put the most borderline of the three sets of results first. Their niche plastics business has been impacted by the recession and earthquake related supply-chain issues as the core issue of less demand fed through to their products, but the chairman was quick to point out that the business is growing in one sense; new business is compensating for less volume in existing business, which will hopefully provide a good basis for recovery whenever that golden day does come. The business's niche focus and market dominance in a number of very specific products means that they have a very low rate of attrition, as customers rarely have a great deal of choice, and long-standing relationships presumably are prohibitively expensive to change. (more…)

  • Character Group (CCT)

    Steadying the ship

    Character Group are one of my portfolio's picks that's holding up better. They're up about 6% after fees and spread since my initial purchase, which is heartening given the state of the general market in that time, though on an earnings basis they still appear very cheap - trading on a historic P/E of just 6.4 and a forward P/E largely the same. Some of the problem, I suspect, is highlighted in the graph. Sure, they had a strong year last year, and are forecast a good one next year - but how much faith can we have in a continuation of that trend given 2 huge swings in the last 6 years?

    To justify an investment, then, we have to qualify why the downswings occurred, how likely they are to happen again, and whether the price they're trading at justifies the risk we've quantified. Obviously, that's a lot of touchy-feely factors - it's difficult for me to pluck a number out of the air and decide there's a 23.4% risk of a sizable downswing in 4 years time - but that shouldn't be a reason not to attempt it. The world of finance is difficult, and the same difficulties are faced by all market participants. We're just looking to apply a solid set of principles and a little common sense to find shares that the market might be pricing incorrectly at this point in time.

    With the introduction aside, then, we move on to the business itself. Character Group have a trait in common with a lot of the businesses I like - what they do is fairly simple. They design, produce, and sell toys - a growing number of which with well-known 'names' attached to them, such as Doctor Who and Peppa Pig. In this sense, they provide a route for monetising those intangible assets (brand names) that other firms hold, which makes it an attractive proposition for them; and Character hardly do badly out of it either, with a 34% gross margin most recently reported. The toys are largely produced in China to keep costs down, almost a prerequisite in this day and age, and sold both in the UK and internationally - around 18% of group sales come from outside the UK. (more…)