I've given the blog a bit of a refresh after a friend accused it of being a bit 'stodgy'. It should also look a bit better on mobiles and tablets now - which apparently make up 25% of my readers! Direction-wise, I will hopefully be back on the small-cap equity bandwagon soon enough - pending some final job-related stuff. The markets are looking decidedly wobbly at the moment, but there's always value to be found if you overturn enough stones.
I continue my love affair with Howdens, for instance, which is more or less flat year-to-date even after continuing and relentless improvement in their figures. I sold out far too soon, and am now left with the slightly more difficult decision as to whether to buy back in. I think the group will make £140m in net profit this year, which puts them at not-cheap P/E of nearly 16. Countervailing that, you're buying a quality business with great returns on capital. The real lever you have to pull to shift Howdens from being a decent investment to a great one is how much of that (effective) capital - they lease their stores, so outlay is fairly minimal, and they have basically no traditional debt obligations - is actually able to be deployed. One of the things that caught me out was management's growing confidence that they're able to open more and more stores in the UK without cannibalising existing sales. They seem pretty bullish on this trend continuing, hence my optimism for the group generally, but I would like to hear management's plans on France. They have a small depot toehold over there that they're clung on to, but things are beginning to move: (more…)