Tag: DTG

  • Tesco & Dart Group (TSCO, DTG)

    Keeping up

    First of all - I am still here! The eagle-eyed might have noticed that I've been looking for a job and finishing my exams in the last couple of months, so I took a break from blogging while I threw my attention at both of those endeavours as well as the proliferation of great sport on TV this summer. The assessment is, thankfully, completely finished; the former has been hugely aided by the blog, which has put me in touch with a number of great people (ongoing, I should note!), and the latter has been exceeding even its own high expectations, probably aided by the prompt departure of the England team, who left no lingering hope to be brutally extinguished in the knock-out stages.

    I'm left facing a portfolio which I feel slightly out-of touch with, then, but also thoughts and ideas which I have had but haven't blogged about. I'll spend the next few posts rectifying those outstanding matters, then, with a relatively open run around of things I feel like discussing.

    Tesco (TSCO)

    Don't shoot me for starting with Tesco again. You'd be forgiven - or perhaps spot on - for thinking I have some sort of obsession with the retailing giant. I probably explained it best in my last post on the supermarkets:

    I like the supermarkets. I like the supermarkets because they're the best example I can think of of capitalism in action. They're relentlessly profit driven machines in constant competition... (more…)

  • Dart Group (DTG)

    Decision time

    Dart has, as I mentioned in my portfolio review last week, seen a rather strong rise in the time it's been sitting in my portfolio. I bought at about 90p back in July 2011, and after a (not at all worrying) 40% drop in value in the first half year of holding, it's now seen an relentless surge and sits at about £2.50 a share. Before I get into talking about Dart's position now, I just want to note that the story above illustrates quite nicely a principle I was talking about in the comment section of that post:

    I am a little stubborn as an investor. I don’t buy into the stoploss mentality. I think buying shares because you think the market is irrational and misprices securities is a perfectly reasonable thought process – but then saying that you’ll sell if it falls below some arbitrary, predetermined value is a little suspect. I stick to my guns almost relentlessly unless either I realise I was wrong in the first place or something significant changes.

    Being a long-term, fundamentals based investor is sometimes at odds with much of what is apparently market mentality, and is even more often at odds with what seems like common sense or ingrained behaviour. I don't want to take the intellectually seductive line in painting 'value investors' (a phrase which, as I've learnt, hasn't a great deal of meaning) as stoic, noble stalwarts against the foolishness of the market, but when investing you always have to ask yourself what edge you have over the market - what it is which makes you better. It's not a question about deserving a better return as such, but if you're investing in the hope of doing better than the fund managers and their fees, you have to understand what you're bringing to the table which means you can earn a better return. Looking at smaller shares is a good start, in terms of both taking on additional risk (a reason congruent with EMH) and in terms of allowing more potential for pricing error (a reason at odds with EMH). Even better is having the conviction to ride out big falls in the knowledge that it is exactly your perception of a mispricing that caused you to buy in the first place. Why can't it become more mispriced? In short - don't bury your head in the sand, but as Dart proves, sometimes you have to ride out the pain to see your conviction vindicated. Whether you can do that depends on the confidence you have in that conviction. If I was a better investor, I would've been able to take that a step further, and enjoy the market's madness by buying even more. (more…)

  • BWNG, CWK, DTG

    The third set

    The third in a series where I refresh my opinions on the portfolio's current holdings:

    Intro

    Post 1

    Post 2

    Getting closer! I was tempted to do the final 5 in this post, but given the doubtless length it'd then get up to, and the fact that the last two are the ones I'm most uncertain about, I thought I'd stick with 3.

    N Brown (BWNG)

    Leaving N Brown to this post allows me to comment on their results, released yesterday, which were met with positivity by the market. The shares closed up over 10% on what look, at first glance, rather uninspiring figures. Two things to say about that, I suppose - firstly, uninspiring compared to what? Boring, relatively flat results will be good for the share price if everyone was expecting a poor set of figures! Secondly, I wonder if much of the positivity comes from the bit the media seemed to have seized on - something in the outlook. The headlines, anyway: (more…)

  • Friday Reading

    Over and Out

    Earlier this week I glanced back over the formality of the Morson situation and saw that, indeed, things seemed to be progressing exactly as expected for the management buyout. Acceptances of the offer look to be rolling in and, since they've now passed the 75% threshold, the delisting can go ahead and Morson can continue (once again) as a limited business.  Entertainingly, apparently this makes the third time the Mason family have bought back the business - once from the administrators, once from a private equity group, and now from the general market and back into private ownership. As I was Googling around for similar situations and opinion on the subject, I found an interesting piece from a few years ago which highlighted a few tangential issues around delistings and big shareholders. I'm not really sure what the 'solution' is, if indeed you deem there is a problem. I find the situation around the conflicts of interest between dominant shareholding directors and minority private investors too much of a minefield, so my solution is to step away from businesses with big management stakes. That's a shame, because I still think the best way to remove the principal agent problem between directors and shareholders is to remove the thing that separates them - the first group not being part of the second!

    On the other side of things, Theredcorner on Twitter has a number of posts up on his new blog, including a few stock reports and a rather poetic piece on the patience in investing. I seem to recall a  Wilfred Owen piece slipped somewhere in one of his posts too... His breadth of knowledge is evident from both his Twitter and his posts, anyway, and so is well worth reading. He's also covered two French companies so far, too, so that may widen the lenses given the burgeoning population of UK investing blogs. Vive la revolution!

    Finally, apparently Dart Group has broken Richard Beddard's 'value yard-stick' . It's a member of my portfolio, too, for much the same reason as the many others I know who hold; financially safe with a large cash pile (albeit made up of customer advances), cheap relative to tangible book, and cheap relative to historic earnings. Oh, and it's growing. I don't really see what more I'd want! It continues to wobble around without much of a general directional trend, so I'm curious to see what will happen (if anything) to reconcile that market price with intrinsic value - though I am making the assumption I'm correct in saying there is a gap there and the market is wrong! Since the dividend is rather miserly, there's no yield mechanism, and I have to wait and see. If it can continue to reinvest profitably, the potential gains continue to grow.

  • Dart Group (DTG)

    Cash is King

    Dart Group, the airline, package holiday provider and owner of a nationwide distribution group, posted their preliminary results last week - and it's fair to say they've kept doing what we expected them to, with a pick up in both revenues and profits in a difficult environment. Subdued would be a fair reflection of the profit growth, with margins coming down as revenues rise, but that's probably to be expected given the climate for discretionary consumer spending. Net profit is flattered a bit by a smaller than average tax bill, but it's surely a positive that everything's still going in the right direction.

    I was a little surprised to see the stock move only 2% upon the release of the results; at a P/E of less than 5 it's hardly priced for success or any sort of growth, but the market still obviously has some fundamental misgivings about the business as a whole. I'm still not entirely sure what those are - if I were to hazard an uninformed guess it'd probably be a combination of it being a small cap (and perhaps viewed as more fragile) airline, which is hardly a sector in the ascendancy at the moment, the European woes knocking consumer confidence further, and perhaps their choice of capital structure. Discussions around dividends have gone back and forth around comments and blogs at the moment, and whether it is a wise choice for Dart to pay a larger dividend or not is one question; regardless of the answer, I suspect doing so would benefit the share price. Irrationality? Probably.

    Interestingly, in my first piece last year I roughly 'forecast' (though I hate using that word) the revenues for the year from the order book - my conclusion being that, should historic trends hold true, the broker forecasts for revenue - at the time £620m - would be too low. I gesticulated towards revenues of more like £730m if one only looks at the order book. As it happens, revenue actually came in somewhere in the middle of those two figures - £683m. Still, that's over 10% above broker forecasts, so my napkin maths probably did help me treat those estimates with a healthy dose of scepticism!  (more…)

  • 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…)