I made quite few new buys and sold off some of my bigger mistakes. As such this was probably the biggest churn month in my portfolio in the last 5 years.
Sold all of VTY. It had gone through my nominal stop loss which required a rethink as to whether to add or divest. After consideration and my thoughts last month I divested. Loss circa 30% after dividends.
Added to IHCU (Avg 605p) and ARTL (171p). Both still small positions, but I am more confident with them.
Took a new position in AENA. These are the almost Monopoly owner of Spanish airports and in the last few years have routinely been priced at €170+. I bought at €115.05 so am looking for a decent bounce over the next few years. They are historically cashflow positive, service a wide range of customers (across the country) and have the lowest landing charges in Europe. Based on normal operations the higher valuation is not excessive for a moated business with what is essentially toll road rights. Whilst there is clearly work to be done in repairing a balance sheet that will have been damaged by the C19 effects I think they could raise prices more to European levels if needed and Spain is the country with the second highest number of overseas visitors in the world and whilst the demand will have dropped the Spanish government will be doing what it can to return it and regional authorities need their local airports. So an underlying business with monopoly characteristics, strong demand in a few years, political support, product is a low price to customers with a good margin (EBITDA margin 65%) and strong cashflow in normal operations. With a 2-3 year upside of 45%+ on the share price.
Took a position in Paypal. Average in at $196.78 I have been a fan of 2 other “war on cash” positions in Visa and Mastercard. Both of these have performed well for me. However in the last set of results both Visa and Mastercard did not perform well but Paypal did, particularly relatively. But what enticed me most was the growth in small business / individual use. I think one of the features of C19 will be a lot of people working (either from choice or otherwise) for themselves. Paypal becomes a good vehicle for payments for these people in a way that MA. or V. does not. I have also seen in Asia quite large firms encouraging Paypal payments to avoid the higher charges of the card issuers. Whilst Paypal will compete with V. and MA. I am buying it as a complimentary asset with often a different type of customer in the cash replacement basket. I added more to the position later in the month on reading a report on the growth in Australia and Latin America with smaller merchants and individuals.
Polar Capital Automation and AI – In at £11.42 I am a big believer that we are still very much at the beginning of AI. I am however hard pressed to find good companies that I can invest in in the UK. I am therefore outsourcing this to a manager that I think has expertise (I have listened to a few recent interviews he has given and liked what was said. One or two names I new and agreed with the thesis) and more importantly has a capacity to find the right businesses outside the UK. I have therefore made a starter investment in the fund.
RDSB – I sold the remains of my RDSB holding. As the company increases its tempo in greenwashing I think it will make more mistakes. As BP has also joined the greenwash initiative I think the competition for green assets will only get more expensive. As such Shell’s intention to allocate resources into areas it does not know or has expertise in will not only be capital destructive but more expensive than initially planned. At the same time as there are other opportunities with managements driving their business towards their core competencies. (Loss circa 10% after dividends).
Took a small position in PALM at 11p – This is a small gold explorer/miner. The position is mainly a hedge against significant geopolitical tensions. That was one factor that had kept me holding Shell and when I sold that I wanted one related hedge, which I think this is thought it is a very small position.
FXPO – After the ½ year results I wrote a positive piece on FXPO in the blog and added to my holding (Avg in at 169p).
JOUL – produced its results for the year ending 31st May 2020. Turned a £13m PBT in 2019 into a £25m loss in 2020. Trying to claim the loss is mostly C19 related, but an element could be seen as taking costs now which will boost profits for the new CEO in the future. I hold under a Greenblatt screen. There was some progress on e-commerce and digital but not as much as I had hoped for. Will continue to hold but did not see anything to make me want to add.
APF – Anglo Pacific Group. The group provides cash to mining companies in return for future royalties. Current market Cap (at the time of writing) is £207m, with an Enterprise Value of £237m and an EPV at a discount rate of 8% of £475m. Now the recent trading update suggests that the EPV is significantly overstated but even reduced by 40% there is a significant upside in the shares and my interpretation of the TU is that a 40% discount may be harsh. Last year the company paid dividends of 7p against a current share price of 114.47p. I have made an initial buy with an update brief (114.47p). On the 27th August the company put out its ½ year results to 30th June 2020. These said nothing unexpected, neither good nor bad. Though they did give me a little more confidence in the position and its leverage levels. Average buy in is now 110.27p.
LGEN – Legal and General. Market Cap £13.5bn, Enterprise Value £4.5bn, EPV £25.2bn. Again the half year suggests that the EPV is substantially overstated, but again with a 40% discount there is solid value here. (230p)
MNG – M&G. £4.4bn Mkt Cap, £6.2bn Enterprise Value, £15.7bn EPV. Again not a business bathed in great news, but again not one I think overvalued against the MoS in the EPV. Half year results out on the 12th August looked more positive than I expected so the position was added too. Taking my average in price to 178p
REDD - Redde Northgate. £441m Mkt Cap, £877m EV, £794m EPV. I held shares in Northgate many years ago and it was well managed. However management changed and like many hire businesses this one began to be run less for the shareholders and more for management. In particular expanding so there were too many units needing to be hired. The merger of Redde and Northgate in February seems to have allowed the overall business to pick the best of both, to remove deadwood and to slim down its portfolio, which is hugely cash beneficial. The arrival of C19 is clearly going to have an impact, but if you can’t rent vans in the time when they are the only vehicle on the roads you have a problem. Also they should in fact pick up on the move to home delivery. The business has spent quite a lot of time on the last 9 months above 300p a share and I am buying in at 185.84p with 250p as my initial price target. Though as I understand the business better this may change.
POLR – 2 years ago I had never heard of POLR. Which probably says more about me than POLR, but in the last 2 years they have gone from nothing to ubiquity, I even have an investment in one of their funds. They tick a range of my favoured metrics, though not all. They also seem to have not only been creating a buzz, but capitalising on it with substantial fund flows into them. I have taken a small position whilst I build up my knowledge of the business. (Buy in at 520.19p)
Sold all of INFA – When I bought in this was an easy to understand gas storage project. With essentially a path to construction and monetisation. It then added a gas trading component that seemed to me to be less solid but within the bounds of related transaction possibly additive. It then began to morph into an energy project business, without having completed its gas storage and then morphed into a shipyard business with unrelated energy projects. Given the shipyard has failed under repeated owners and has become the largest part of the business I no longer feel this is the company that I thought I could understand and decided to sell my holding. Loss circa 35%.
Sold all of $BBBY – The initial thesis on this is that it was a sensible turnaround with a number of non core assets that could be realised to reduce debt or provide cash for working capital or shareholder returns and then C19 struck. I feel that I have to recognise that based in the UK I am not close enough to properly assess a business that has gone from a high MoS to a much lower one. The new world of retail means that almost every non digital offering is reduced in value and the way we will operate our lives is going to have substantial as yet unrecognised effects. I think the team assembled at $BBBY will deliver if anyone can but to hold this with conviction needs much more of a feel for the US than I have. About a $300 profit.
Bought a little APP (32.7p). Appreciate Group plc is a rewards company. Mainly aimed at working with corporates it also can do individuals for some products. The company usually trades in the 60p+ range and has been harshly hit by C19. This is a genuine hit and the expectation for the next half and full year figures is poor. That said they will (a) rise with retail, (b) have the capability to change their offering to meet customer requirements and (c) are increasingly providing their offering in a digital format.
Based on last years numbers (which may reflect where the company can be in the next 2 years, but probably not this year after c19), mkt cap is £60m with and EPV of £100m. There is £25m in the bank and an historic ROCE of 47%. I do not expect great news quickly, though there has been a new sign up with Iceland. But this seems to me to be a business whose offering is still relevant being heavily marked down for the results of one year. It is not a huge investment for me, but I am looking for a 50% gain on the position by Q4 2022.
CGEO (Georgia Capital) came out with some poor ½ year results. Though in most of its subsiduary businesses the underlying trade had come back almost as fast as it had fallen. With a robustly calculated (imho) NAV in excess of £7 and a share price of £3.75 I decided to increase my holdings in the company. My average in is now 401.89p. Clearly my earlier purchase was at a higher price. I am however more confident in the company and quite enjoyed the analyst/investor call where the Chariman seems quite willing to let analysts know when they ask what he considers to be a less useful question. This is a holding for a few years as realisation of asset value will be time consuming for CGEO.
Sold 12.5% of my AAPL holding. It is currently at a very full (imho) price. Average buy in was at $86.41 sold for $495.98. Only 9 weeks ago it was at $400 and the only real news since then was the share split initiative and the opening of the first wholly owned stores in India. Neither of these to my mind justify the $100 bounce in the share price. That said this is a great company with a great management and I am a fan of Fred Rowe’s approach of holding these sort of companies until one or other parameter changes.
Added some more $MSFT Now read probably 4 reports in the last 2 months mentioning just how much functionality has been or is being built into Office365. In particular how it is designed increasingly for the non-office based office and the sheer power of what is in, or will be in the product. In the end this, and usually Apple are the tech companies that do not get pulled to Capital Hill to explain their actions, but at the same time builds products that dominate markets, like Amazon, without the need for regulators to claim consumer protection. Though clearly other market participants will. This moves my average buy price on MSFT to $181.60 .
As always DYOR.