Tag: Dart

  • Communisis – Dart – Plastics Capital

    Progress and updates

    Communisis

    On Tuesday, Communisis again found itself tipped in Investors Chronicle - as it did not so long ago, in February. Once again I found myself rather impressed by the price reaction; both times the stock shot up double digit percentages, with the first time seeing a 40% rise in the following weeks. Sorry, no link - it's behind a paywall - but the piece seemed rather short and to the point, highlighting the low price relative to the dividend and their projected earnings. I still like the company - only a few weeks ago they reported their 2011 results, which seemed to show things moving along in the right direction, albeit with some rather hefty restructuring costs. They genuinely seem to be repositioning the company well for the future, though, and the business is very cash generative if it needs to be, so I still like it.

    My only niggling wonder is whether to sell it in the coming weeks or not. Around a month after the share tip last time, the stock had dropped about 25% of its share price again. I wonder if I'm dabbling in the arcane arts of trading-and-hoping by thinking this may have been inevitable given a short, sharp shock to demand. After all, I only have a sample size of one to go on, and the question I have to ask myself is what I would do if the stock didn't come back down, but kept rising. Realistically? I'd probably be pretty annoyed, since I would have sold below what I thought it was really worth. I think that's a hint that I should hold it.

    Plastics Capital

    Plastics Capital haven't got much coverage on this blog since their inclusion in the portfolio not far off a year ago. The simple reason for that is a pretty good one; they haven't done or said much that really needs writing about, which is fine by me. I am quite happy with them just continuing to pump out the widgets they were set up to! The share price has drifted down somewhat in that time, a little more than the market, despite continuing to release consistent trading updates which report sales in line with market expectations. Market expectations are for a slight pullback in profit growth, I should note, but still put the business on a mid single-digit P/E - and the company suggest that this year hasn't been that great for them. One of their businesses reporting first orders in both the US and China bodes well for the future in the biggest markets, and the share price moved accordingly - closing the day up 6% after having hit +16% somewhere along the way. Small cap price movements are entertaining!

    Dart Group

    I suppose similar could be said for Dart as for Plastics Capital above - their share price has stumbled since last July when I included it in the portfolio, despite continuing to perform well. They too expect current-year profits to be in line with market expectations as of last week's trading update - and the forecasts I found put the business on a P/E of just shy of 5 (vs. 7 last year), confirming their growth credentials. There is evidently some hefty scepticism and dislike around the company, presumably because of the relatively small float and usual suspicion around a sector which hasn't historically been the best friend of investors.

    Not a great deal is being returned to investors either, and their good cash generation is being plowed back into the business - perhaps a downside for some who want a sign of intent from the small cap. From my point of view, though, it seems good. I like that the business I've invested in has more profitable uses of its cash than giving it back to me. They seem to be good custodians of my capital so far, so growing and increasing their profits makes sense. (more…)

  • Friday Reading

    Birds of a feather

    While there's a degree of overlap in the value investing blogosphere, there's also a degree of distinction, too. That comes from value being so difficult to define; are cigar butts value? Are net-nets where management is splashing money on 'operational improvements' value? Does cashflow or earnings define value - indeed, how do you weight all the different factors in deciding when to invest? Entertainingly, there's also the itchingly contrarian instinct that runs through this value blogger - and while I can't speak for all of them, the emergence of Dart Group on more than a few of our portfolios has set off a flurry of conversation on Twitter!:

    A downside of blogging is you realise you're not as original as you thought! Sometimes I worry abt value investors herding...
     
    @RichardBeddard is there anyone that doesn't own it at this stage?

    Richard Beddard and John McElligott respectively. Dart is, by a considerable margin, now the most blogged about stock I own; with both Duncan at Kelpie Capital and the aforementioned John McElligott at Valuestockinquisition posting fairly bullish reviews. Both are well worth reading and go into more operational detail than my piece - and both, I also note, pay particular attention to the interesting cash and cash flow situation of the company. They have piles of cash in payments for services not yet rendered and also have the usual business with a large depreciation charge bringing down accounting earnings, but potentially shifting ar0und investment to manipulate cash flow. It's an interesting company, anyway, and it's down ~30% since I purchased; and I did think it was rather cheap then. (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

    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…)

  • Dart Group (DTG)

    Come Fly with Me

    And then there was one! My portfolio has but one member left without a detailed post, and it's certainly not for lack of interesting things to say. On my meandering journey through the stock markets, Dart simply got left until last, in the meantime underperforming both my portfolio and the market quite significantly. As I said when beginning this series, I find stocks that fellow value investors have bought which have then declined fascinating. If I agree with their initial logic and nothing has changed, I'm presented with an attractive opportunity made even more attractive by the fact it's now cheaper than ever. Dart's down nearly 20% on the back of weak consumer confidence and spending - but if these trends are cyclical as I believe, the long-term prospects of the business are as rosy as ever.

    Unusually, the metric box on the right combines two of the most attractive features of the stocks I'm after; it is both cheap on an earnings basis, trading at 6.2 times last year's earnings, and on an assets basis - £1 invested in Dart buys you more than £1 worth of tangible assets, and hence your downside is reasonably protected. Perhaps the only disappointment is the weak dividend yield, which as discussed last post is the first sign of management intent I'm looking for. Still, forward earnings are forecast to be even stronger, and it's that combination of factors that initially drew me to the business.

    The metric graph is a little dizzying, and makes long term trends difficult to see, but that comes with the business - Dart operate both a low-cost airline and a distribution business, mostly based in the north of England. Margins are fairly thin in both these segments, and highly sensitive to cost pressures - with Dart having to absorb greater fuel costs, for instance, while being unable to pass costs on to particularly price sensitive consumers. Operating a low-cost operator in a recession only exacerbated that problem! (more…)