Week No 7 of The Voyager RNS Log: Week commencing 20/08/2017
Monday 21/08/2017: No RNS of interest to the portfolio or Whittler universe.
Tuesday 22/98/2017: RNS Persimmon:PSN: Half Year Results
As has been the case with the majority of housebuilders over the last few years, a very decent strong set of results backed up by a lengthy and confident outlook statement:
Persimmon is a share that I have held on three occasions over the last 15 years. I consider PSN to be a quality business but due to its product, housing, being closely linked to the mood of the economy, house builders prosperity is cyclical in nature. On the other hand, when the mood of the economy is positive, it offers excellent returns on capital, great free cash flow and makes handsome returns to investors in the form of dividends and return of capital/special dividends. I have to say that about 20 months ago I had really become obesely overweight housebuilders in the ISA portfolio. The attractions were simply just too good to ignore and they had done marvellously well for me but in January 2016 I rather trimmed the sector thinking that would be enough of a ride for the time-being. However, Brexit presented such wonderful opportunities and I took the plunge once again including a fairly medium folio % in Persimmon at slightly over £14: what could possibly go wrong? Well thankfully nothing did go wrong and the shares prospered well including some very generous returns of cash & dividends all of which have been reinvested in further purchases of PSN. That medium sized holding has now developed into a reasonably significant holding.
My View: PSN is a quality business, yes it’s cyclical in nature but provided you keep a close eye on momentum & the housing market in general, I don’t consider it overly as a risk. I will continue to hold.
Wednesday 23/08/2017: No RNS of interest to the portfolio or Whittler universe.
Thursday 24/08/2017: Revolution Bars Group:RBG: What an interesting morning with a couple of RNSs one from Stonegate confirming, as I suspected, that they will be going ahead with an agreed takeover of RBG but at a modestly increased price of 203p; the indicative price in the earlier RNS a couple of weeks back was 200p. Then our friends Deltic determinedly release their RNS acknowledging the 203p from Stonegate but at the same time declare their intention to evaluate a cash offer for RBG and very interestingly go on to say that RBG has given them access to the accounts: Wow, do I detect a bidding war? Who knows? We will just have to wait and see.
My View: My investment strategy is roughly based on about 75% of stocks qualifying via return on capital ROCE/CROCI & free cash flow matrices but the remaining roughly 25% is on what I classify as special situations: probably similar to a whole number of other private investors. In terms of special situations, they could be what I consider to be value plays or possibly a company where something “game changing” is happening. Over the years I have done quite well with these special situations and a couple of recent examples are Lavendon and Waterman. Now just to be clear, with these special situations I only go for what I consider to be good quality yet undervalued businesses and most definitely not value traps or dividend seduction whores where the dividend is paid out of anything but free cash flow. To that recent list, I can now add RBG as I consider the 203p from Stonegate as money in the bank and I can’t see the price falling below that level now. So my intention is to simply hold on and await developments from Deltic to see if a better offer is made for RBG and then if Stonegate really want their bid on the cheap to continue, see what they can come up with; I am in no rush.
Friday 25/08/2017: Air Partner: AIR: A very solid trading update:-
PRE-CLOSE TRADING STATEMENT
Air Partner has made a strong start to the year with underlying pre-tax profit for the first half of the financial year expected to be not less than GBP4.0m, which compares to GBP3.0m reported in the same period last year. The Group retains a strong net cash position.
Our Broking division, comprising Aircraft Charter and Remarketing, has performed well across all product lines during the first half, while the Consulting & Training division is delivering solid results with an encouraging pipeline of opportunities to be secured in the second half of the financial year.
In line with our growth strategy, the Board continues to assess investment opportunities, both organic and acquisition, to enhance or extend the services and capabilities we offer our customers around the world, and to strengthen and advance our market position. We are on a journey of transformation, with the clear objective to become a more balanced business, with two market leading divisions - Broking and Consulting & Training - providing exceptional service and value to our customers globally and delivering high quality and increasingly visible earnings to our shareholders.
The Board is pleased with the strong start to the year and remains comfortable with its expectations for the full year.
As we always state, in the world of aviation, and most especially in the global charter industry, it is prudent to be ever cautious and vigilant. The global charter business has always been, and will continue to be, a volatile industry, and against this backdrop we will manage the business for the long term, with a very clear strategy of alignment to the needs of our global customer base.
My View: I am very happy to hold my present position in AIR which is now up by around 70% since my original purchase. In addition I have made a series of top up purchases during 2017 including some positive rebalancing with AIR in the Tinker folio. I am a very happy holder whilst at the same time appreciating the potential volatility within this market as outlined honestly in the trading statement.
Sad one of the week has to be Dixons Carphone PLC in which I have not held a position for over 18 months. I have such fond memories of Dixons/Dixons Carphone having bought them for what was a ridiculously low price back in 2013 as they were starting to once again get their act together; finally selling them in January 2016 following some RNS releases that indicated that the superb growth in profits was tailing off. It’s quite comforting in a way reading the 24/08/2017 RNS and finding out that I am not alone in being slow to trade my smartphone up to the next super smart model that can do all sorts of things that are unlikely to really interest me. As it stands my iPhone 6s needs a recharge every day; it does not seem so long ago that my Nokia could last a week on a single charge but there again, that was what it said on the side, a phone. I really like a lot of the things a smartphone can do; excellent camera & the super 4G but this RNS maybe suggests that the customer’s appetite is almost satisfied.
Fourth Week of New section: Glad I’m Not There (a sort of reverse take on the old Judith Chalmers holiday programme briefly mentioning a dog of the week that thankfully I don’t own). This weeks star prize has to go to a high market cap company, Provident Financial (PFG) a FTSE 100 business: note I have never held either a long or short position in PFG. Oh morally how worthy they are of copping a nasty one. Sorry to go off on a rant but I absolutely deplore such businesses that make their money by exploiting those in desperate need of a loan when such facilities are unavailable because of credit rating etc via banks. These unfortunate often poor customers of PFG need help and not financial exploitation in a similar but possibly less dramatic way to pay day loan companies. On Wednesday PFG issued an RNS and put it this way, “if Carlsberg did profits warnings….”. It was simply a dreadful profits warning and had all the dreadful elements of profits collapsing along with the new strategy for the business, the CEO departing and the dividend being scrapped. Honestly, it could not happen to a more deserving bunch of bums. For me, such a business involving what is politely called “sub-prime lender” is totally uninvestable on ethical grounds and there is absolutely no chance I would ever want to own the shares; I like to make money but not by supporting the exploitation of the poor. I probably come across as a raving socialist but to be truthful I am much more of a capitalist with a conscience.
In terms of profit warnings, investors would have had an opportunity to seek the exit door on 20/06/2017 when a slightly veiled profits warning was issued and the share price fell by 18%. Investors would then have had a few more days to sell at around the £24/£25 mark before the usual post-PW gradual decline set in. On PW day, 23/08/2017, the share price fell astonishingly by over 60%. Will it recover? Well, quite honestly I don’t care as it would always sit way up on my bargepole list.
Incidentally, I found it rather sad that Woodford wrote a note on the day of the profits warning almost excusing himself from the hurt that it would cause investors in his underperforming fund; a little humility would perhaps have been a touch more appropriate.
Finally, something I learned many years ago; Procrastination is, in my opinion, the worst enemy for a private investor following a profits warning and remember no matter how good an investor you are, you WILL suffer the occasional profits warning; that’s a simple stocks investing truth.
Do have a great weekend and as ever, happy investing.