Voyager RNS Log August 2018
As ever, although I may get keen about a stock, what I put into print here is purely me sharing my rambling thought process and NOT INVESTMENT ADVICE to either buy or sell a particular stock.
The key to the colouring of text within these notes:
Text in normal black: just my thoughts.
Text in blue italics: direct lifts or copy & paste from the RNS issues by the business.
Text in green: loosely, the investment principles that I feel comfortable with.
Red is a disclaimer in that what I write is NOT investment advice.
What a summer, in fact, it’s been so hot that I just don’t feel the need to have my usual September break in North Cyprus as I have simply had enough heat to last me a little while yet. I rather fancy I will settle for a few days walking in Cumbria away from the crowds. In fact, maybe I can juggle a trip to the lakes and take in the Hatters away game at Blackpool in late September; I can feel a plan forming.
The summer months have been rather kind to the Voyager portfolio with the value steadily advancing even after slimming down the amount of capital invested. Strangely & simply due to a different percentage mix of the same stocks, the portfolio I manage for a friend is a few % points ahead of the Voyagers decent summer showing. As have I written in this log in the recent past, I tend to think there could be something of a storm brewing with uncertainties such as Brexit on the horizon and after such a profitable bull market it strikes me as simply prudent to take some profits and boost the cash coffer for future attractive buying opportunities.
During August there has been some trading in the Voyager with a touch of profit been taken on a few ABDP after a wonderful run from my initial buy at £4. I also sold XPD for a 30% profit over a few months, IQE for a small overall profit; lost 2% on TW which despite decent results was not in a sector currently in fashion. One other sale was my earlier re-entry to previously profitable FDEV which could not get any traction in the current market.
I did some quite substantial top-ups on share price weakness: GAW when it retreated to £28.50 on the release of good results, DTG, KWS when it drifted back below £17 and some further XPP on share price weakness.
So, after all this trimming and topping, the Voyager holds only 18 directly owned stocks and of that 18, 6 account for 55% of the invested portfolio.
With the degree of uncertainty we have at the moment I rather think that investors need to be aware of the difficulty that they can be exposed to when trying to sell small market capitalisation shares. That difficulty, of course, gets magnified the further we drop in market cap and generally I work on a guideline of having no more than one stock of below £50m market cap within the portfolio. I rather suspect that many of today's investors have not been through anything like the torrid bear markets of 2001 and 2008. In such bear markets or even major corrections, it can be almost impossible to shift any meaningful quantity of sub £50m cap stocks. Anyway, I have done my risk mitigation, migrated within a stockade of high conviction quality stocks (can I really call BOO high conviction?) and have plenty of dry powder if glorious opportunities materialise.
The spread betting side of my investments has been going very well over the summer. I never use any exposure that could not be covered by capital held in the live account and I operate a strict risk management system in terms of potential losses. Ahh, I should also say that in my experience betting on an index is just not worthwhile; never worked well for me and so I leave it alone.
So, let's have a quick look at RNSs that have been released in August covering stocks held within the Voyager.
Firstly a couple of stragglers from the end of July:
XP Power: XPP: Mkt Cap. £590m: Interims 30/07/2018: posted some sound half-year results although they did say they would need to manage component costs which had increased recently. The turnover & order intake were both up around 9% compared to H1 last year with gross margin at 46.7% and operating margin around 20%. The company at the H1 stage says it is confident of meeting the full year expectations. Initially, the shares reacted well almost hitting £38 on the following day but then a persistent seller emerged disposing of stock chunk by chunk which then worried a few smaller holders into discharging their position. I took the opportunity to top up with a couple of purchases below £31; I may have missed something but to me, this is a quality well-managed business with good growth forecast; let’s wait and see if I have missed a trick!
Games Workshop: GAW: Mkt Cap. £1.2b: Finals on 31/07/2018: To my view, these were a terrific set of results with turnover up 39% & PBT up an astonishing 94%; yes everything about the results apart from one small section read very well, was well written and in straightforward text. So, why did the shares take a significant slide backwards to £28.50? Well, this buying opportunity was kindly created by the following comment in the report from CEO Kevin Rountree “It would be unrealistic, if not daft, of me to promise that we can continue to grow at the rates we have reported over the last two years. I am not, however, planning to scale down our ambitions, I am just informing you of the backdrop”. To my view, that was, of course, a perfectly sound and realistic comment but it did slightly wobble the market, cause a lovely price dip and of course the chance for me to make a significant top-up of my current holding. A lovely company which in my opinion has much further to travel.
Portmeirion Group: PMP: Mkt Cap £127m: Interims 02/08/2018: As expected a decent set of interims with PBT up by 29% and my fag packet calculations still strongly suggest that PMP will beat earnings expectations for the full year although PMP is being politely conservative as the H2 is a big one for them and merely saying “we remain confident in our ability to meet full-year market expectations”. A really sound company that I am happy to hold.
Keywords Studios: KWS: Mkt Cap £ 1.2b: two announcements this month firstly a half year trading update on 03/08/2018 and secondly an RNS on 20/08/2018 announcing two more acquisitions. So, firstly a look at the trading update which as you would expect indicated some very good numbers with a 66% increase in adjusted PBT. Then a statement saying “we anticipate a strong second half performance in line with current market expectations for the full year”. Now the ahead of market expectations traders may have been a bit disappointed with that statement and the shares drifted back as low as £16 and yes, for a quality company it offered another topping up opportunity which worked out rather well as I had recently top sliced at £18-50.
We then had the two acquisitions announced on 20/08/2018 which as per usual with KWS seem a good addition at reasonable prices to the range of services on offer from KWS, The market warmed to these acquisitions and the shares rose over the next few days to go over the £20 mark which is nice as I bought my first batches at just over £3.
D4t4: Mkt Cap £65m: Contract wins announced on 14/08/2018 which although not quantified in terms of delivery of revenue or profit, appear to be very encouraging. Also, the H2 weighting issue has been removed as a worry which is good news and indeed news that the market reacted to very positively. We then had an AGM statement of 23/08/2018 which was very positive in tone and also went on to say “the Board remains confident of delivering on its expectations for the year ahead”. All good news and the shares kept up their momentum reaching 180p; also good news to the Voyager as I topped up at 124p after the April positive RNSs.
Computacenter: CCC: Mkt Cap £1.6b: Interim Results: a decent enough set of interims and as expected really and an “in line with expectations” comment for the full year. Maybe some were looking for another “ahead of expectations”. After a good run we are now seeing some profit taking and maybe a breather before possibly heading higher. I will keep a close watch on CCC and if the drift continues I will sell.
IG Design Group: IGR: Mkt Cap £360m: Acquisition of Impact Innovations.
A beautifully managed minimal discount placing to fund the acquisition of Impact Innovations plus leave a little in the war chest for further expansion of the group. As a consequence of this acquisition, IGR will become the largest consumer gift packaging business in the world and also very sweetly this acquisition vastly increases it’s exposure to the USA. Additionally, as the CEO Paul Fineman points out there will also be significant synergy savings and additionally unleash the group's expertise in automated production management on Impact. The large household names in the massive consumer goods market are customers of IGR and this will increase further and to a greater depth with having Impact as part of the enlarged group. The placing at the ridiculously meanest of discounts of 0.06% was heavily oversubscribed such is the regard for IGR and the enlarged group's prospects. As I write the shares have advanced to 600p almost 15% up from the pre-announcement price.
Regular readers of the Voyager will know just how highly I regard IGR and its management team. The share price has increased fourfold since I bought and I have also topped up an appreciable number of occasions. Yet again I am tempted to top up further but they already occupy my No1 spot in terms of stock value within the Voyager; I bet I go and buy some more on a pullback!
All in all, its been a very good summer for the Voyager and that slice of good fortune has been aided by my approach to stocks that I purchase. The approach would never fit all investors and almost certainly not value investors, the best of which do phenomenally well by exerting great patience with deep value situations. With me, I buy into a company and should the story that supported by buy decision change or the market indicate my timing was way out, I simply sell, protect capital and move on. With the stars of the Voyager I both top up when the price looks attractive or the newsflow is compelling and I also top slice occasionally when the price looks a little overheated. I then often buy further stock with those proceeds when overheating is followed by a touch of consolidation. As I say, this approach has worked well for me over a considerable time. In summary that approach is:
Turning to future Voyager logs, If readers find my ramblings useful then I will resume the weekly publication of the log as the newsflow picks up pace after the summer lull.
That’s all for now and have a great weekend as we say farewell to this brilliantly warm summer.