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. I try to offer balanced; both bull & bear views on stocks that appear in the Voyager Log. I will never ramp a stock & simply try to offer my honest opinion on a company. Like everybody who offers an opinion, sometimes that opinion is proved to be wrong.
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.
I hope that everybody has had a good summer enjoying our mixed but wonderful climate. In terms of market activity, the Voyager portfolio is rather concentrated with a rather reduced number of stocks and as I have written before, contains a very significant percentage of cash after taking profits following a very good first half of 2019. Since the last Voyager RNS Log was published, profits have been taken on ARC, BOY, D4t4, DTG, FOUR, GRG, KWS, SCT & SOM. A small profit on IDEA was balanced by a small loss on IDEA. Also, I took a 7% loss on TM17 as I just did not feel comfy with it; not a good call as it’s moved up nicely since I sold. So, after all that activity the Voyager now consists of the following stocks:
AAZ original buys at average 93p December 2018: a stock championed by my footy friend Simon on Twitter & showing the features I seek in a stock; let’s not go on about my dislike of the ex-Soviet block stocks! Simon writes a very good blog which can be found at http://share-knowledge.org.uk
ABDP original buy at 410p in 2016
GAW original buy at 2400p in Feb 2018, I was late to the party here just could not identify with the product/hobby: yes, don’t tell me, daft reasoning from me.
IGR original buy at 180p in 2016
LIT average buy at 93p and currently about 7% underwater caught in the Burford tailwind.
LTG initial starter purchase at 115p fairly recently
SDI original purchase at 35p late 2018
SND added at an average of 123p now subject of a low premium take over.
SPSY traded a few times & current batch down by about 3%
Just a note on why I moved to a higher cash position in late June/early July, really repeating my actions of 2018 which served me well in protecting me to a large extent from that rather torrid last quarter of 2018: well in addition to the current political uncertainty, it was my perception that we were seeing the following:
My thanks to SharePad for these charts
So, with that backdrop, again as I have communicated before, I moved to my highest cash position since the financial crisis of 2008; banking good profits and simply being cautious and managing risk. In addition, earlier in 2019 I increased my holdings in the “lazy stuff” that I just continually add to and let it sit in the bottom drawer: Fundsmith, Smithson, Blue Whale & a touch in Finsbury G&I: most of this gives me good non-UK exposure. Incidentally, I don’t consider this “lazy stuff” folio as part of the Voyager; I suppose that’s because it’s not really success via my own work but rather its excellent work done by some talented folk I trust. I should also say that now it looks likely that no-deal is an unlikely divorce scenario that I am feeling a touch less cautious and will be happier to take attractive positions as they show themselves; I may well have to wait but I am happy with that.
Disturbingly once again we see some “lucky” dealing in terms of significant sales by some of the senior directors of AIM-listed companies; for example, take a look at ALT, AIEA, BUR and even one I did hold SOM. In the case of BUR, two directors sold a combined £118m of stock four months before the Muddy Water story broke. The directors then used essentially loose change to show their confidence post-Muddy Waters by buying back a miserly under £10m of “bargain price” shares. Sort of tells a story to take serious care particularly on AIM with very significant director sales. Note: not all director sales are bad news for shareholders, in fact far from it: it’s well worth reading the excellent article The Ducks Are Quacking by Tim Rogers. The article can be found on Conkers3.com site.
A quick look at a couple of RNSs this week for a couple of ex-holdings:
04/09/2019: Somero: SOM: Mkt Cap: £125m: RNS Interim Results.
Interim Results for the six months ended June 30, 2019
Flexibility of operating model demonstrated, enabling increased dividend
Somero Enterprises, Inc. is pleased to report its interim results for the six months ended June 30, 2019.
-- Financials are tracking broadly in line with the guidance provided by management in its 7 June 2019 trading update, with full year revenue expectations of between US$ 83.0m - 87.0m
-- H1 2019 results highlight the flexibility of the Company's operating model that allows for rapid adjustment of costs to align with product demand
-- The Company is proceeding with long-term growth investments made possible by a strong balance sheet and positive cash flows
-- In line with the Board's outlook for the remainder of the financial year, the Board has declared a US$ 0.0575 per share interim dividend representing a 4.5% increase compared to H1 2018
My View: Just as a piece of information regarding the way I interpret trading updates and the wording used & accepting my broad brush & not an exact science:
My take on RNS cautious wording/profits warnings is:
Anyway, I did write a fair amount about the previous SOM profits warning in an earlier Voyager offering a bull & bear case and being in awe of the CEO’s luck in selling his shares at the end of March as I wrote at the time “Was the sale of £2.7m of shares by the CEO Mr JT Cooney on 28/03/2019 inspired by the sight of a modern-day Noah’s Ark floating past his second-floor window? We can speculate but never really know!”. I won't go into any great depth here as I covered this one quite fully in June. Suffice to say that sales are not going in the right direction and in addition to the rain-related USA market we have Europe & the Middle East falling back badly. China on first look you could say it’s the same as H1 2018 but if you dig a little deeper China sales have actually receded since 2016. Additionally at the time of the June profits warning an estimated turnover for the year was given $87m this has now been cautiously revised to $83m-$87m. Sorry SOM but it looks rather as if things are deteriorating further since the June profits warning-TU. Adding the painted outlook statement did not really encourage me to continue to hold as I sold the residual holding. Overall my investment in SOM has been a very profitable one as I entered at 100p back in 2014 but good things don’t last forever especially with cyclical stocks.
Incidentally, although a very profitable experience, I really should have done better. I sold >60% of my SOM shares at something over 300p as they a) hit the 50d MA and b) touched the 8% trailing stop-loss. Of the remainder, which then went on to rise quite well and maybe should really have been sold when the share price fell below the ongoing trailing stop-loss/50d MA/150d MA last October: yet still a positive feel for SOM at that time in the investment community. I then sold a further chunk at the June profits warning and the residual after the 4/9/2019 poor TU. Overall, a very profitable investment but it would have been appreciably better if I had followed my own rules regarding:
Dart Group: DTG: Mkt Cap: £1100m: RNS AGM Trading Update
At the Company's Annual General Meeting today, Philip Meeson, Executive Chairman, will make the following statement:
"In our Leisure Travel business, the later booking trend as reported in our Preliminary Results Statement on 11 July 2019 has continued, with overall demand for both our Flight-Only offering and Package Holiday product continuing to strengthen. Encouragingly, package holiday customer numbers as a proportion of total departing customers have increased for summer 2019 to date.
Ok, I reckon this part sounds fine.
Winter season forward bookings have yet to match our seat capacity growth, therefore pricing for both our leisure travel products will need to remain continually enticing.
Not so fine; what they are saying is that they are struggling to sell seats for the winter season & are lowering prices.
Encouraging progress continues to be made at Fowler Welch, our Distribution & Logistics business, with new commercial wins improving the quality of revenue and operational excellence ensuring customer satisfaction.
Maybe it’s just me, but they should have flogged off the Fowler & Welch legacy business years ago; it just doesn’t fit with the new look DTG.
With still some way to go in the Leisure Travel winter booking cycle, the Board remains optimistic that current market expectations for Group profit before foreign exchange revaluations and taxation for the year ending 31 March 2020 will be met.
What they are saying is “if everything really goes well for us we might just reach market expectations”.
Looking further ahead, given the cost pressures the Travel industry is facing in general, which will intensify given the weakness in sterling, plus the deepening Brexit uncertainty and the impact this may have on consumer confidence, we remain very cautious in our outlook.
The Board will provide a further trading update on publication of its interim results on 21 November 2019."
My View: after being a Voyager resident since buying at 200p back in 2013, I sold 60% of my DTG holding leaving in mid-May at an average of 932p and the residual batch leaving at 800p in July. The reason for the sales was a combination of travel industry worries, Brexit worries and simply what the chart was telling me. It had been a great ride but time to disembark off the aeroplane for a little while at least until things become a touch less risky.
As you can see from my comments against the RNS paragraphs, I reckon on balance it’s best not to be onboard DTG just at the moment; remains on the ex-holding watch list for now.
Does Success Rate Matter? I read a good conversation on twitter discussing the percentage success rate that private investors have in terms of profitable selections. Within Voyager over the years, I have held many shares that go up a few % and add just a touch to the bottom line and of course, jettison as early as possible those that fall over say 8%; simply protecting capital as it’s not at all painful to take an early small loss. The real work is done by a smaller population of stocks that go on to become long term resident in the portfolio and really significantly contribute to the portfolio success: the +10% and -8% leavers are really just incidental. In fact, you could be wrong 50% of the time with your stock selections and as long as you manage your portfolio well, be very successful.
A touch of entertainment: If you are anything like me than a good investment video/story is really enjoyable. A few that I certainly found both enlightening and entertaining are:
The Big Short: the story of the sub-prime lending that catalysed the financial crisis: Netflix
Betting on Zero: the Herbal Life pyramid system: Netflix
The China Hustle: really makes you think about the credibility and worth of some well known financial “stamps of approval”: Netflix
The Inventor out for your Blood In Silicone Valley: the incredible story of Elizabeth Holmes and the Theranos scandal: should be available in the UK later this year probably on Netflix.
Well, that’s it for now; maybe catch up again in October.