At the end of last week, I decided to make a top up of my already successful purchase of Cambria which is up around 80% from my original purchase. I don’t consider myself smug at all in this top up even though the price has risen following an RNS on dealerships on 11th January 2016. The truth is I have been a sluggish investor here and should have topped up months ago as the restrained nature of the good news kept flowing. However, no more moaning, I just had better put up and become a touch sharper! I have some spare cash in the portfolio that’s lazing around and not earning it’s keep hence a top up albeit not as compelling as my other purchases of Camb.
Just a few lines on what I like about the business:
Well, let’s start with the turnover and profits which have appreciably increased year on year since 2012. To my mind, Cambria is simply a business that is going in the right direction whilst enjoying a favourable climate. I like Cambria it although I am mindful of the cyclical nature of such businesses.
The ROCE is decent at 18.1 & the three year average CROCI stands at an impressive 27%. The operating margin is what it is for a car dealership business, not brilliant but it makes profits.
Cash-flow ps appreciably higher than eps and also lots of free cash-flow: yes, I know it’s boring but I like being bored. There are no issues with debt which is nice to see and the company also has plenty of cash on the books.
The dividend which is nothing to get excited about at 1.1% but to be fair Camb are trying to grow it by 20-25% a year. The dividend is of course massively covered and also the FCF dwarfs dividend payments.
The company continues to look for acquisitions and post my recent top up released an RNS on 11/01/16 regarding the Jardine Motors Group which Cambria anticipates will be immediately earnings enhancing.
We have a very healthy Piotroski at 8 which gives me confidence. Also, the Stock Ranks given in Stockopedia look incredible at 98. As ever, I cross check to see if that confidence is echoed by Sharelockholmes and I am pleased to say it is as they have a market score of 1(1 is the best score with Sharelockholmes and 100 the worst). So really in terms of ranking you can’t get much better. Just a word of caution with rankings, they tend to confirm or give comfort to my purchases and they are definitely not the sole driver!
There have been a few discussions, articles recently concerning Cambria; some feel it’s now time to book profits but I feel albeit with a degree of caution, that further gains can be made. I have to ask myself if I am becoming overly keen on this business and becoming a touch biased; biased is a much more acceptable term than “falling in love with a share”. Well, to my view asking that question of myself keeps me aware of such a potential weakness, an awareness that needs to remain sharp with all portfolio holdings. It’s also very pleasing to know that some very respected private investors continue to hold positions in the business. It was also interesting to listen to a couple of radio interviews of David Stredder who continues to be an admirer of this business that under promises and over delivers. Within these interviews, Camb was discussed along with a good number of other companies.
Of course, there are risks with car dealerships as they are a cyclical business but it’s up to us investors to keep on our toes and not get to be overly greedy. As for a price target, I am looking for another 20% from last week’s purchase price of 81p before I evaluate further.
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