Voyager RNS Log WC 01/04/2018
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 for 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.
This week a different introduction by saying that I am a mistrusting individual when it comes to the business culture of certain countries of the world; can’t see me ever changing that mistrust but should I just occasionally break my rule?
I have a geographic deep mistrust with companies domiciled in certain countries and whilst I have absolutely nothing against the good folk of China, Israel, Russia or the wonderful African continent, I just don’t need to take the risk in terms of investing in such companies. I have to have faith in the accounting practices and honest news release of companies and unfortunately, countries as described in the areas above, simply do not give me that faith. Yes, I will miss out of some investments but simply put, I just don’t have the appetite for that kind of risk; I have to feel that I can trust the integrity of the directors of a company. In an investment club many years ago, we got our fingers burned with GEO Interactive Media/Emblaze; I personally had a fortuitously profitable but I consider lucky escape with Telit Communication when my some & mirrors digging raised some real concerns. I would suggest that any investor might find it worthwhile putting together some form of defence to guard against the “smoke & mirrors” merchants of the investment universe.
Enough ranting about my mistrust of management, yet to be fair, if you don’t have that basic trust of the management practices on any business and that includes wherever they are domiciled, however can you either invest or remain invested? Anyway, on to this week's Voyager RNS.
Tuesday 03/04/2018: Air Partner: AIR: Mkt Cap £60m: RNS is about accounting issues:
YEAR END UPDATE
The Board of Air Partner has identified, during the course of its year-end review process, an issue predominantly relating to its accounting for receivables and deferred income.
Following preliminary investigations, the issue principally relates to the collection of receivables from customers and accounting for uncollected amounts since financial year 2010/11. Certain uncollected receivables were inappropriately offset against deferred income rather than being expensed to the income statement in the appropriate financial year. This is a non-cash item and has no bearing on the Company's cash balances.
Whilst the investigation continues, the Board presently understands that the cumulative amount between financial year ended 31 July 2011 and the financial year ended 31 January 2018 is approximately £3.3 million and a significant proportion of this relates back to 2011.
At no point was a customer, operator or supplier impacted or disadvantaged. Further, the Group continues to maintain a strong net cash position.
My View: As ever when such news breaks, I carry out a very rapid risk evaluation and 95% of the time sell as soon to the opening bell as I can. In this case, I asked myself a few fundamental questions about management of AIR particularly as the RNS seems to have been rushed out without the management at AIR really knowing the full extent of the problem “Whilst the investigation continues”:
Do I still have sufficient trust in the management of the business to have my capital invested? The answer was of course no; simply how can I with them having not just once but systematically made such an accounting error. Indeed will senior managers & directors bonuses that may have been paid in relation to such “profits”, be repaid?
Will the ongoing investigations reveal more unfortunate errors? The answer is I don’t know but what I do know is that a risk that further unfortunate errors could be identified which could lead to considerable further downside and that risk does not sit easily with me.
In such circumstances, I ask myself the very simple question: “If I did not hold this stock already, would I buy today given what the situation is now”? Again for me, the answer is NO.
I originally bought AIR at just over 70p and have enjoyed decent dividends and a steady if sometimes choppy appreciation in share price but at the moment the stock simply carries too much risk to be comfortably retained within the portfolio and has been jettisoned and a very decent profit banked. As it turns out I got a very much better price by selling early than if I had waited until later in the day or indeed the next day or two when the shares fell another 20%. I did not sell at the top or anywhere close to it but that’s fine with me as it's been a capital benefit to the portfolio.
I know that some investors are a little loath to sell on such news and worry about sunk dealing charges and whilst that may have been a worry with the silly dealing charges of 20 years ago, many brokers only charge a tiny £5 commission on a trade. I shall not bore folk with my whittling on about procrastination…
Wednesday 04/04/2018: No RNS relevant to the Voyager portfolio but as retail appears to be under so much pressure, I decided to cash in my holding in Newriver Reit. Overall, it’s done ok for me but with the gradual demise of retail and the shopping experience moving so much to either the internet or tightening household purse strings, I just saw upside as not favourably balancing the potential downside. So it was a fond goodbye to an old friend from 2013 and time to move on.
I have to say that in the past four months I have done considerable top-slicing of some positions that had just got a little too frothy; in hindsight, that was most definitely the right thing to do but the cash pile is now becoming a touch heavy. As ever, patience will be exercised in selection, execution and selling. However, it is becoming increasingly more difficult to identify good FCF/Returns on Capital stocks at attractive prices but I had to bite the bullet in late March and make a very late entry into Games Workshop as it dipped to the £22 mark. Do you know how many times over the last couple of years I have identified GAW as having so many characteristics that I look for in a stock yet my prejudice in terms of identifying with the business, prevented me from buying in early 2017. Never mind, maybe better late than never!
Thursday 05/04/2018: No RNS relevant to the Voyager portfolio but I do keep running the rule over BOO; a share I sold for some decent profits and just keep questioning myself if it is still overvalued or getting into “buy back in” territory? I see a broker this week has placed a price target for what it’s worth, of 125p as they still feel the stock is overvalued at the mid 140’s: time will tell. I will simply keep on the watch list for now.
I also set some time aside on Thursday evening to simply review over the last seven years records my “when there is a doubt get out” culture and quite honestly the picture is overwhelmingly positive. I would say that stock selection by whatever your chosen method may say on average give you a 50% or 60% win rate. Without a doubt in my view the crucial factor that differentiates the good performance from the average performance is how you actually manage those stocks that don’t perform: I could write a book about it! What saddens me is when private investors continually go into denial with an attitude of “it will come good, I am sure”. A massive character strength in investing is to acknowledge a not so bright prospect and move on.
Friday 06/04/2018: No RNS relevant to the Voyager portfolio; lovely as I have some project work to get on with outdoors in the garden.
Whats On the horizon next week:
Two portfolio companies have reporting dates next week; one an exciting company and the other one an incredibly boring company; there is nothing with boring companies, I love them!
09/04/2018: Keywords Studios: Finals
12/04/2018: WH Smith: Half Year
Finally, with the financial year closing, it’s time to calculate an allocation of profits to my two selected charities and pleasingly this FY has proved to be a very good investment return for me and therefore for my charities, Shelter & Prostate Cancer UK.
Have a good weekend & catch you next week.