Voyager RNS Log Weeks Commencing 14/10 & 20/10 of 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.
In my last Voyager Log written two weeks ago, I commented that Mr Market had the jitters as displayed by the fall in all of the major LSE indices. Since that time, Mr Market has continued to fret and all the indices have declined further; more so here than on Wall Street. It just seemed so predictable to me back in the early summer that our EU/UK politicians were going to make a dog's dinner of the whole negotiation process. Oh, my apologies to any dogs that may read this log as I am sure you have far more sense than our glorious political leaders on both sides of the channel.
Currently, I am feeling fairly vindicated in moving heavily into cash over the last five months. I still retain some attractive stocks and just like fellow investors holdings, these have declined a touch as the overall jitters continue. However, any bottom line decline is not that painful as it is heavily cushioned by the cash under the mattress. That cash will be used and gradually reinvested once the imbeciles settle down and agree on a way forward for the UK. However, with the world of the private investor, there is always something on the radar that may cause turbulence and with that in mind, I wonder how much longer the ridiculous single currency of the EU will last for. Something to look forward to I suspect.
I repeat myself time and again; yes, ok, no need to agree! Firstly investing is a long game, it’s not a race. It does not matter unless you are selling of course, what your portfolio’s performance was yesterday, last week, last month, this year etc: what matters is you return over three or five years. Secondly, yes boring again, the application of risk management to one’s portfolio and by this, I mean having a risk management plan to protect your capital.
Again on social media, I see that many folks are licking their wounds as their profits decline. If you invested at the top of the market then my sympathies, it happens: stocks go up as well as down. On the other hand, if you have less profits now than you had a few weeks ago, take comfort from the profits you have accumulated in the last 3,4,5 years of this friendly bull market: I suspect that overall most investors have done very well over the medium term.
During turbulent times like we have been experiencing since the start of October, newsflow from companies is almost irrelevant in that even good news is insufficient to halt the gradual slump in stock prices. In fact, in terms of newsflow, it’s been rather light for the Voyager and this is down to having a reduced number of positions plus simply very few RNSs appearing. Oh, I should say that all my spread bets have now been closed for a couple of months: in my view, open spread bets at the moment are really too much of a gamble.
Sometimes I tend to think that the words of the song Private Investigations, written by the excellent Mark Knopfler, sums up the logic of our friend Mr Market: well any excuse will do for me to play a few tunes by Dire Straits, the lyrics:
It's a mystery to me, the game commences for the usual fee plus expenses, confidential information……..
I go checking out the reports, digging up the dirt, you get to meet all sorts in this line of work. Treachery and treason there's always an excuse for it and when I find the reason I still can't get used to it…..
Now for a quick look at the few RNSs relevant to the voyager over the last two weeks: I won’t go into the usual detail as anything apart from a premium takeover bid causes a stocks price to decline at the moment. So, more of a summary note plus a few observations on some stocks that have been jettisoned from the Voyager in recent months as profits or an occasional slight loss taken:
RNS newsflow from stocks currently within the Voyager:
Tuesday 16/10/2018: IG Design Group: IGR: Mkt Cap £430m: RNS Trading Update:
My View: a very sound update from what I consider to be quite an exceptional, high-quality business run by competent managers capable of communicating openly with investors. The trading update reads very positively with progress in all geographical areas and branches of the business. The big acquisition of Impact Innovations is performing well and I suspect will perform even better now it’s in the IGR stable. Overall, currently IGR is performing in line with management expectations but I have a sense that they will have an outturn at the top end of those expectations. I am happy to continue and touch away just a smidgen more of share price weakness.
Thursday 18/10/2018: Games Workshop: GAW: Mkt Cap £1010m: RNS Trading Update:
Following on from the Group's update in September, trading to 7 October 2018 has continued well. Compared to the same period in the prior year, sales are ahead and profits are at a similar level to the prior year.
However, the Board remains aware that there are some uncertainties in the trading periods ahead for the rest of the 2018/19 financial year. A further update will be given as appropriate.
My View: well according to my fag packet calculations when comparing actual to broker expectations, GAW is performing a touch ahead of expectations: the broker consensus was for a slight decline. Ok, so far so good, but then Mr Market frets about the “uncertainties” comment yet two things here: firstly that style of comment is now almost commonplace in company RNSs as the country struggles with the Brexit plague and secondly it’s the very same comment that GAW included in a trading update back in July 2017 yet Mr market worries!! Even worse still, I got a web copy of an article published by a journal that people actually pay for saying that the trading update was an unscheduled one; what utter nonsense as anybody who reads RNSs will appreciate. Do you own research and by all means test your thoughts with other respected investors but don’t blindly follow the shoddy work of journalists.
Well after that little rant, I am more than happy to continue to hold.
Monday22/10/2018: D4t4 Solutions: D4t4: Mkt cap £77m: RNS Trading Update
Briefly: Adjusted profit is expected to be comfortably in line with management expectations & also confirmation of a strong cash position.
My View: yes indeed a sound update and even Mr Market is his mean mood grudgingly let the shares rise a few %. My current batch of D4t4 was bought at 118p and despite a decent appreciation, I am happy to continue to hold as the valuation does not look overstretched and the returns on capital attractive.
A few brief thoughts on stocks I have sold in recent months and NO LONGER HOLD who have issued RNSs recently:
Softcat: SCT: which I sold at 846p as part of my derisking exercise, issued a reasonable trading update but with a note of caution: the shares are now at 670p. Good company and one to maybe return to later.
Tristel: TSTL: a stock that had been very kind to me and my final batch was sold at 275p again during my Brexit risk management plan. TSTL issued final results which looked reasonably decent but lacked the USA market penetration evidence and the shares duly fell back to 210p: they were at 340p at the end of June. Again a very nice business but maybe a touch overly generous in terms of management rewards; silly me, I thought the directors were happy to simply work hard for a decent salary! Sadly and so many companies are doing this, we have adjustments for share-based payments. Once you consider share-based payments as simple remuneration, the PBT for Tristel is actually flat year-on-year and not the +15% adjusted claimed. Where did the 15% go, yes, to the directors/staff as remuneration which is simply a true cost to the business!
RWS issued a confident trading update with revenues driven by that exciting acquisition of Moravia back in November 2017. I think I was right to sell at the time of their indigestion RNS at the end of April but maybe I should have bought back in when things improved. A quality business worth keeping on my watch list.
Zytronic: ZYT: issued a run of the mill profits warning. Unfortunate but not totally unexpected from this rather nice well-managed business. I had held ZYT for a long period but the final significant batch left the Voyager last October when the share price became a touch overheated for my liking at 580p. Again a lovely little niche business but with an over-reliance on a small number of customers and difficult to forecast (potentially lumpy) sales.
Patisserie Holdings: CAKE: well the snippets of news keep emerging and the extent of the fiddling may even go deeper as we now hear of nondisclosed share awards to directors. I won't comment further other than to say I am so glad I followed my gut instinct back in September 2017 when after visiting Patisserie Valerie I asked myself “so, where are all of these supposed customers; why aren’t they crowding out this near empty shop”? As ever, I sincerely hope current holders have something when the shares come back from suspension.
Air Partner: AIR: issued interim results which looked fairly ok but after making some decent profits on AIR in the past, I just can’t get excited about a firm that loses some hefty invoices and seems to have systematically covered it up in their accounts for a few years: not for me, why take the risk?
Finally, on an ex-holding XPD sold at 78p taking profits in August again as part of my Brexit risk management, the share price has during October fallen by some 40% yet no worrying RNS; strange times! A bargain now or further to fall? As Mark Knopfler of Dire Straits would sing: It's a mystery to me, the game commences………
I hope these notes encourage a few investors without an investment management plan/risk management strategy that just maybe having one is worthwhile. Things will every so often jump up and threaten your wealth on the markets; you can’t change that, it will always happen. Something you can do is be prepared by having a carefully thought out plan that you can execute in a cool collected fashion if required and believe me, every few years it will be required.
Well, that’s it for this week except to say I have made one very significant purchase and a few little top-ups to current holdings. The significant purchase was some lazy money for the IPO of Smithson which gives me some global exposure within an IT to what in Terry’s terms are smaller and mid-cap global companies; in my world, they are fairly significant market cap companies.
This weekend, despite industrial action on some trains, I am heading down to London for the Hatters game against AFC Wimbledon; hopefully, I will arrive in London early enough to make an interesting day of it.
Whatever you are doing, have a good weekend as we turn the clocks back; never a good feeling is it!
As ever, happy investing!