YTD I am 11.3% up. But let me be clear I do not know how to invest in that short a time period so reviewing results on that basis is very unwise. Since inception my portfolio is up 85.6%. And that too is possibly too short a time period.
My top performer was PPHE, but I had great results from MPAC and TET. (Both of which I had reduced my holding in in October). I also had material gains in AENA (Spanish airports-mainly), AEO (events), $GOOGL, $AAPL, $AAXN (Tasers and digital policing), $DIS, FXPO (Iron Ore), CGEO (Georgian Conglomerate), LGEN, MNG, $MA., REDD (Van hire), RELX (Kidney disease diagnosis), $V. In short a lot of my portfolio benefitted from the vaccine uplift.
Having met with a seasoned investor who gets direct access to the fund managers by dint of the size of his investments with BG I added to my holding in BGCG. He is impressed with the mangers of the fund and like me thinks that a Chinese investment is a good idea over the next 5-10 years. My average in is now 466.6p. Though at current levels circa £5 I do wonder if there is not an element of overvaluation. However my strategy is not to trade for 10% gains.
I added to my holding in Paypal following the Q3 results. These were ahead of expectations on almost every metric, but particularly for user growth which is almost double the management forecast for the start of the year. Paypal is a network effect business, the more who use it the more will use it so the growth rate is very encouraging. That being said the market reacted by selling down the shares so I felt it was a buying opportunity. This is not a value investment but a GARP one. As Paypal has fallen since my first buy in the average buy price is now $181.
APF A Q3 trading update led to a 5% fall in the share price. However predictions for Q4 were again positive. I have a concern that Q3 results were promoted earlier as including a pick up and whilst one might be visible you need to both look from the right direction and with a rosy tint. Both of the next 2 quarterly dividends were confirmed and whilst the company is solidly able to pay these the debt situation was discussed in the TU and potential moves to a hybrid debt. Presumably from an acquisition with a partner taking on a portion of debt financing for upside. I am happy holding with currently a circa 5% nominal loss but want to see a clearer direction of travel in the business, ie delivery of more positive results before I change my position. In the end I would like management that tell me about the business rather than sell me about the business.
$ALB delivered well above expected results for Q3, but the business did worse than last year and judgement still seems to be out and I saw nothing to cause me to add. The whole situation seems somewhat unclear with the company not guiding for 2021 but at the same time saying volumes would remain the same across the industry as existing capacity was significantly utilised. To my mind this would suggest the potential for price rises but this doesn’t seem to have been guided to. In fact management suggested prices may be weaker. Price rises were also possibly indicated by statements that customers were taking their 2020 Q4 orders. Why is this news unless they might not, and if they might not why would they do so other than to avoid a 2021 price increase? As it is my level of understanding remains low.
It is fair to say that the Lithium sector is doing well from an expectation that Biden will promote the renewables sector.
$AAXN beat on most metrics for Q3. The only area that gave me concern was that the reporting contains quite a lot of adjusted numbers. On a GAAP basis this is a lossmaking business. That said with sales increasing by 27% YoY and the contracted SAAS style revenue doubling every two years and margins at 50% there is a lot to like. The company also started supplying the US DoD. I put in a small add. My average in is now $115.81.
$LTHM had a poor Q3 result largely missing expectations. It was however buoyed by possibly taking on a contract to supply Tesla and taking on mines associated with this contract. However these mines provide spodumene from which Lithium is produced and currently LTHM’s expertise is in the brine method of production so they are not presumably adding a lot of technical value to these mines. So lots of news and I am currently 15% up (08/11/20) but not a share I want to buy more off.
Whilst I expect CGEO to remain undervalued due to it being a foreign company, in a jurisdiction not famed for the rule of law or political stability and with an FX rate I decided to add before the Q3 2020 results as I cannot but think that the company is undervalued by more than 20%, possibly a lot more (following the Q3 results the price to NTAV is circa 0.5) and so I want eventually to get my holding above 1% of the portfolio over time. I also have to say that the level of information it gives out is both impressive and confidence building. Though as various frauds have demonstrated it may be completely false. A fuller write up after the CGEO results is on the blog. I have now added a further small buy to get over 1% and the share price has helped a bit. Average in price now 418p. I have almost no other opportunities than on the numbers look better traditional “value”.
LGEN came out with a solid trading statement and an update on its plans for dividends and capital management going forward. I guess people were hoping for a more aggressive dividend statement as the shares lost value. But for me a commitment to keeping the dividend level, currently delivering a yield of 7% and growing it slowly over time, whilst increasing the firms capital base sounded eminently sensible and I added to my holding. This moved my average in price up to 224.3p. But it will allow me to catch the YE dividend and the company itself is lowly rated on a PE between 7-8 so the yield looks tatsy and the downside seems limited.
$DIS came out with better than expected Q4 results, thereby delivering better than expected Full Year results. Overall the results were dire with very much performance or non performance being as expected with Coronavirus. Cash generation was good, but in large part because they spent $1bn less on developing US parks. This is in part one off, but mainly delayed expenditure. Clearly a vaccine will benefit the house of mouse though the company has now past 70m viewers for Disney+. Whilst many of them are there under offers if content can be generated they will remain. With the move to a more digitally focussed C suite most analysts seem positive on the company.
Added some FCSS. I have been thinking a bit more about portfolio allocation recently and whilst I am still equity focussed within that focus how should I be set up. As part of this I do want some increased level of non-UK and whilst the US is probably a little behind where I want it to be the Chinese portion certainly needs bolstering. I do not intend to use my knowledge of individual Chinese companies (low) to do this so will be doing it via the already acquired BGCG and FCSS. I may even add another though the fund I wanted is not quoted via the first 2 platforms I looked at. And to be fair 70% of the Chinese market is uninvestable rubbish the residual 30% is probably significantly overlapped with 3 trusts.
Bought an opening position in CAML. Whilst I think the push by the UK government towards electric vehicles by 2030 is ill advised and reflects more a desire to leave a legacy than joined up environmentalism one factor I do note is the repeated commentary that there may well be insufficient copper should the electric car take off. As such I did wonder about buying a Copper ETF but have decided that for the moment my initial copper position will be in CAML. Mkt Cap is circa £340m, with an Enterprise value of £390m and at 7% an EPV of £870m. Price to NTAV is 1.4. However being very commodity based I do query whether the apparent MoS is as secure as this seems. In reality electric cars are only likely to be a relatively small demand side for copper, it has been known as “King Copper” for some time before EV’s. But I do think that establishing supply lines as Coronavirus and the Lithium players has shown can lead in the medium term to quite significant price fluctuations. Now that I have skin in the game I will be doing further research. Avg in price 200p.
SOM came out with an above expectations Trading Update. With a market Cap of £160m and £20m of cash the forward PE is somewhere between 8 and 10, which does not seem high for a business that should be largely unaffected by Covid19. I see some loss of business as large offices are not put up, but equally some growth as distribution depots and smaller offices are. From my perspective the initial success of some of their new offerings was particularly welcome. As such I opted to increase me small holding. My average in price is now 265.4p.
Polar Capital put out Interim Results. Largely only 2 things matter with a fund house the AUM, as this is what all the fees get charged on, and the cost base. The problem for the shareholders in many fund house is that they increase the AUM and then give all the added value to the staff via payroll and bonuses. It is a pretty standard shareholder takes the risk staff take the benefit model of most of the financial services.
As it is AUM has gone from £12.2bn to £16.4bn which is very appealing. 34.4% increase. But PBT has only gone up 8%. Which suggests that costs are rising faster than revenue. This may of course not be the case we do not know when the AUM increased, if it all came in the day before then of course there has been no time for fees. But POLR did not inspire me to buy and the company has got near my valuation which also means I will not buy as I like an MoS.
AV. Continues to deliver on its promises of reorganisation by selling its Italian business. Whether there is a real clear profitable strategy under all this remains to be seen but the new CEO is demonstrating that she, unlike many of her predecessors, is prepared to get actually deliver on the changes she has laid out. Also of note is that AV. Trades on a lower multiple of all the metrics it gave out for the Italian transaction. I thought about adding but the company is now within 20% of what I have estimated as fair value.
TET provided their full year results to September 2020. I have written in more detail about these separately on the blog. Good company, high valuation.
APP delivered very poor ½ year results. Unfortunately it is hard to say whether the business is just significantly poorer and how much of the fall back was due to Coronavirus. The ½ year to September is not APP’s strong period but these results were grim reading. The only high points (and these might be better thought of as less low), were management reporting that the current situation was in the mid point of their covid aware planning and the reinstatement of the previously suspended dividend suggesting management have confidence going forward. Though at 0.4p (previously 1.5p) I think it’s at least as much show as reality.
The situation remains that at £57m market cap with £25m of free cash APP only needs to start routinely delivering a mediocre result on the level of Revenue it still has (£27m for the ½ year) for the business to easily justify the valuation. A growth in revenue or a better return on it would prove the valuation very low. Sadly these results do not make it clear what scenario should best be modelled. I will continue to hold pending greater clarity but I do not expect to add at this time.
Sold some MPAC. Good company with good management but it had got to be too large a % of my portfolio. I try to limit much beyond 10%. MPAC had gone to 15% so I took a little back. It remains my largest holding. Profit circa 180%. I am happy holding as the current price is not above fair value and if the company can continue to deliver on some of its initiatives it has further to run.
RENX put out its Q1 2020-21 results. The company is developing a kidney disease monitor and it is still in the early stages of development. As such the company has circa $82m and is burning cash at $10m a quarter. The RNS was broadly a reiteration of the companies previous RNS on progress to date. I am concerned that the directors have an alternative vehicle Verici DX and as such their best ideas and full attention may not be on RENX. I am also concerned that whilst the partnerships validate the area the company is in and the worth of their approach they are not a validation of the economic model. My holding remains small and I am not currently adding.
LOOK finally produced the much delayed 2019 accounts. Bottom line the company probably made a little money at the operating level but when you take into account imparement of goodwill (£30m) and costs relating to the FCA investigation (£15m) lost £42m. The shares will not relist until the interims are released and that is stated for December as is the expectation of a big loss in H1. So no grounds for optimism there. Also it has to be said that whilst much can be made of the procedural accounting issues and in the accounts much was, the fundamental issue is can the business sell and service cars at a profit and this was comparatively poorly covered by a very tick box set of accounts.
ARTL put out ½ year results to September 2020.
Mkt Cap £87m
Cash £62.8m
Liabilities £10.2m
Leaving £34.4m of value to be supported by
£15.9m Of Investment Property. Recently independently revalued
£10m To reflect any overstatement
£19.7m of investments in JV and Assocs revalued to reflect current conditions
£15m To reflect worsening scenario
£37.5 Of performing loans backed by reasonable LTV
£1.4m Cash as collateral for the FX loans
And not including £6m owed in India by a JV partner who is proving unreliable.
So £34.4m of mkt cap being supported by £63.9m - £80m of assets. Even for a poor rating for the management who will keep paying themselves throughout the crisis this continues to seem undervalued and I have added. Giving me an average in price of 163p.
As always this is not intended as investment advice always DYOR.