Well following on from the 12-month review of performance the three portfolios, 3YL, ASH & Tinker the revisions to the ASH and Tinker have been made. Remember that the 3YL remains totally unaltered in composition over the three years of the comparison and will continue to hold it’s original investments in:-
AdEPT Telecom, Amino Technologies, Bodycote, Character, Dignity, Elementis, Hikma Pharmaceuticals, Next Fifteen Communications, Persimmon and Somero Enterprises.
This portfolio followed the investment rules of selection of what I assess as quality companies having good returns on capital employed and good free cash flow: as ever, I am not really looking for fudged or manipulated earnings per share. I like companies that are mature enough to pay dividends and in terms of sustainability of that dividend I am fare more interested in FCF dividend cover rather than conventional dividend cover.
As discussed in the first year review, the 3YL & Tinker converted £100k to £129k in 12 months; a 29% return and the Tinker converted the £100k into £131k; a 31% return. The proceeds from the first year of the ASH (annual sit on hands) £129k will be reinvested equally in the following 10 companies as will the proceeds of the Tinker £131k.
The 3YL will continue with the original shares simply left alone to do their stuff and the ASH will chug along with its new allocation of shares and remain untouched for the next 12 months. The Tinker of course will of course contain the same collection of shares as the ASH but l freely shift the capital allocation between the 10 companies as I react to company news and prospects. In reality I don’t make vast number of changes in a year and avoid market noise such as brokers views or tips preferring to make my decisions on what is actually happening within a business. For example if one of my companies puts out a statement such as “trading ahead of expectations”, I may well be tempted to sell a part position in another stock and reallocate to the one showing improved prospects/momentum.
So, to the meat of this article, the revisions to the ASH & Tinker for the next 12 months:
From the stocks in year 1, I have retained two of the very successful AIM stocks:
Amino Technologies: AIM Listed: Market Cap: £136m: Yield 3.5%: FCF Div Cover 1.9:
ROCE: 15.2%: CROCI: 16.1% & 3 year Average CROCI: 13.4%.
Somero Enterprises: AIM Listed: Market Cap: £141m: Yield 3.6%: FCF Div Cover 2.6:
ROCE: 50.2%: CROCI: 29.6% & 3 year Average CROCI: 26.6%.
The new stocks to enter both the ASH and Tinker portfolios are:
Air Partner: AIM listed: Market Cap £56m: Yield 4.8%: FCF Div Cover 2.2:
ROCE: 26.1%: CROCI: 35.9% & 3 year Average CROCI: 50.4% (81.8, 47.0, 22.4)
Bioventix: AIM listed: Market Cap £78m: Yield 3.3%: FCF Div Cover 1.5:
ROCE: 56.7%: CROCI: 43.2% & 3 year Average CROCI: 34.4%.
D4t4: AIM listed: Market Cap £64m: Yield 1.4%: FCF Div Cover 7.7:
ROCE: 21.4%: CROCI: 39.0% & 3 year Average CROCI: 3.3%.(3.2, 10.5, -2.7)
Galliford Try: FTSE250: Market Cap £1190m: Yield 6.4%: FCF Div Cover 1.1:
ROCE: 15.3%: CROCI: 8.7% & 3 year Average CROCI: 4.2%.
ITV: FTSE100: Market Cap £8296m: Yield 3.5%: FCF Div Cover 1.8:
ROCE: 40.2%: CROCI: 23.4% & 3 year Average CROCI: 22.1%.
Telford Homes: AIM listed: Market Cap £260m: Yield 4.4%: FCF Div Cover 1.4:
ROCE: 15.6%: CROCI: 7.9% & 3 year Average CROCI: -0.5% (19, 6.7, -27.2).
WH Smith: FTSE250: Market Cap £1840m: Yield 2.9%: FCF Div Cover 1.8:
ROCE: 63.7%: CROCI: 45.3% & 3 year Average CROCI: 50.8% (45.9, 48.0, 58.4)
Zytronic: AIM Listed; Market Cap £58.5m: Yield 4.3%: FCF Div Cover 2.1:
ROCE: 18.0%: CROCI: 20.3% & 3 year Average CROCI: 16.2%.
Points to note:
Four of the stocks have market capitalisations in the range of £50m to £100m, three stocks in the range £130m-£270m & three fairly big boys including two FTSE250 & one FTSE100 company.
The average yield for the portfolio is around 3.5% and is well covered by FCF which for me adds a little comfort: all dividends will be of course reinvested.
Although I don’t use the Stock Ranks system in my share selection process, I do once selected go and have a look at what SR values have been allocated to my chosen stocks; just adds a little to ones confidence I suppose. For the ten stocks in the revised portfolio, the average SR is 85. Also a quick check of the Piotroski scores for each company gives an average Piotroski score of 6.
The first year of the Tinker was highly successful in giving a total return of 31% and I hope this selection and rebalancing to given equal weights of the respective portfolio totals to each of the 10 stocks in the ASH and Tinker will be somewhere near as successful.
I will publish as a minimum, quarterly updates of portfolio progress.
Ownership: I own investments in all of the ten companies listed within the revised ASH & Tinker as well as positions in most of the portfolio before it’s 2017 rebalancing/refreshing. The stocks have all been identified via my screening methods mentioned previously within this blog where I am looking for companies that make very good returns on capital invested, have good FCF and are increasing profitable turnover.
As ever, nothing written here is investment advice but merely a blog of my investment process to hopefully make a reasonable return from the UK stock market. I hope you find such articles possibly informative and entertaining and should you have any comments or questions than contact me and I will be happy to respond.
Welcome to my Blog Page - I hope you find my whittling on to be of some interest. I am a private investor who is happy to share thoughts on the market and individual stocks. Please remember that I am definitely not offering tips or investment advice.