Portfolio performance since I started counting (31/03/16) 162%
(Calculated on (current portfolio – starting portfolio) divided by starting portfolio).
The portfolio return for the month was heavily skewed by a dividend and a capital realisation in the Private Portfolios and should not really be used to judge anything.
New Holdings
META – I have long wondered about holding Facebook. On one side it has some great parts; Instagram, Oculus, WhatsApp. On the other it seems to treat its users very poorly. However having been through a few of the Oakmark presentations and doing some DD myself I do think that (a) the accounting is sensible, even conservative (b) the view of management is long term and this could be a compounder (c) Should the company be regulated and split up the sum of the parts is greater than the whole (d) there is a decent gain to be had between where the company has been and where the company is now. That being said Meta is in the political view so the initial investment is a medium starter for me. Bought in at $221.94
VTY-I have been in VTY before and think it is amongst the best of the builders. Particularly with regard to management. That being said this is a bit of an opportunistic purchase. It is in a related industry to another holding of mine and I have become aware that it’s sales rate is very strong at the moment. Again this is only a medium starter position as I have no clarity on its cost pressures and whether it is experiencing revenue gains but margin compression. I would not normally do this. But as I have said I have been in and out of VTY before and place more weight on the skills of management than I normally would. Bought in at 946p
Wisdom Tree – CHRG. This is a lithium ETF. I already had Global X Lithium as an ETF but this had fallen since my purchase and with the YE approaching I decided to tax harvest the loss. Which was 17%. The final decision was based on reviewing the holdings in both funds and whilst there is not a lot in it I do prefer the Wisdom Tree holdings. But without the YE loss harvest I probably would not have acted. Bought in at 3267.5p
Sales
Global X Lit – rationale as above Loss 17%.
Supreme – I do continue too quite like Supreme. However it was in a pot with Capital Ltd and I really wanted to add to my holding in Capital Ltd. Of the 6 or so shares in that wrapper Supreme was my least favourite so it went. I took a 10.5% loss on SUP.
Phoenix- I sold after the results presentation to analysts and investors. This is a cheaply valued company that is doing some good things. But had to write off over £1bn of mistakes. I am happy that they largely originate pre the current CEO, but during the presentation no mention was made of them. I do not like companies that will not admit and face the mistakes. If they want to run “a nothing to see here folks approach” it makes me itchy. This was made worse by the fact that the presentation was all focussed on how successful they are being, yet omitted to mention that they were in fact loss making. I was also incredibly unimpressed by the FD. I heard his whole presentation as “I will do”, “I will decide”. There was no team in his presentation and I did wonder what the CEO and other unit heads thought of it. One of my general guides is that after 6 months of an initial investment I should be persuaded that I want more of a holding. Even if only to get to 1%. In the case of PHNX the numbers look OK. But I had no desire to increase my holding and so decided to sell. I took a 7% loss.
Adds
Added to AV. – Going through its capital reorganisation and that should be a relatively quick and easy win for shares held in a tax wrapper. Likely to be a strong dividend payer going forward and looks to be holding quite a lot of cash back. This is fairly obvious and either needs to be deployed in a useful manner or the pressure will grow for another special return to shareholders. So far I have been impressed by Amanda Blanc who has done what her predecessors could not. Anchored by the dividend back stop I am happy to add to my holding. Avg in to AV. Now 361p
CAPD – The company is both an investment fund and a rig hire business with a small list of related businesses that it is trying to build into proper businesses in their own right. On the plus side both the fund and the rig hire businesses are based on gold and that is a great market to be in.
With regard to the fund the three main issues are (a) it is not a "buy the best" fund, but in part takes stakes in mines that want to use its rigs. As such it is kind of a sales tool. Though its growth does suggest that it can pick the jobs to take equity in. (b) a lot of the value of the fund is in non public equities so the valuation is not easily realisable. (c) Managing the fund detracts from managing the rig business. They are different. Though of course the counter is the sales aspect of the fund.
With regard to the rig business it has a circa 79% utilisation rates. Utilisation rates are the lifeblood of a hire business and 79% is decent and ahead of the historic rate. That being said it is pretty static, though on a growing fleet, so there are a number of units that are not getting hired and will need to be written off eventually.
Wirth noting that with a YE in December revenue was up 68% 2021 v 2020. This is a company that is doing well, and in its investor and analyst meetings is saying the good times are continuing.
The companies market cap is circa £200m and the investment fund is circa £45m and made an investment gain of circa £25m last year. For the ease of maths let us attribute a £40m valuation to the fund to be conservative. That leaves £155m to be supported by the rig business. The total operating profit was about £40m and to my mind this is actually a bigger positive for rig hire, to cover the significant cashflow and start up costs in the mine truck hire and scientific assay business. At worst stopping these saves cashflow and losses, at best these become worthwhile profitable businesses in their own right.
Not entirely sure what valuation you want to put on a rig hire business in Africa but I don’t think 8 is extravagant. It may even be low. So 8*£40m = £320m.
So £320m to cover a valuation of £155m gives £165m of excess value today which is well over a 20% MoS. And on top of this you do get a chunk of potential upside which I wouldn’t value but it is nice to know exists.
This is why I sold SUP to add to CAPD. Avg in to CAPD now 83.4p
SHELL – I held my nose and added to the worst run large company I know. I can’t find a decent review that doesn’t feel that with good management this could be worth so much more and so I am inverting the Warren Buffet quote – Buy a business that good management can make a real difference too, as one day they will. I have to admit that this holding is open to ongoing review as a raft of potential opportunities to improve have been suggested to management, yet they have consistently failed to grasp any of them. Average in to Shell now 1883.9p
SOM – Great set of results from a shareholder focused team. Added a bit on recent weakness. Market did not seem to like that the company has seen a weak situation in China and is decreasing effort. I however think it is sensible, even overdue. The Somero products provide both quality and replace people. Low cost, low quality environments are not the correct ones for SOM. Also as they said there is a lot of copyright issues in China. This is a business making almost £25m pa with a market cap of £280m. On an EPV of 8% the valuation should be in excess of £400m. Average in price now 371p.
TGA – Thungela continues to drive forward with its biggest problem being its inability to get all it could sell to port, because of the failure of the local railroad. Market Cap £1.35bn and profits of £350m so a PE of less than 4. A maiden dividend declared and no sign that pricing is going to fall out of bed. If Mr Market wants to greenwash I will take the other side of the trade. Average in now 387.2p
This is at a time were it is become increasingly obvious that many ESG funds were simply riding growth and momentum and that now this is slowing ESG is likely to underperform the market as a whole but provide a real opportunity to "sin" investors. This is well covered in a recent MoneyWeek Podcast.
Big Fallers
BPM, MPAC,
Big Gainers
AEO, GOOGL, AAPL, CAPD, COP, CGEO, GLEN, LDG, MSFT, PILS, PPHE, SQZ, TEK, TGA, TET, VTU.