Portfolio performance since I started counting (31/03/16) 149%
(Calculated on (current portfolio – starting portfolio) divided by starting portfolio).
Return YTD 3.6%
After a good start for the year both April and May have been tough. Though there was quite a bit to like in May.
Given things were tough and Mr Market was going to do his stuff whether I enjoyed it or not I spent quite a lot of both late April and early May reviewing my holdings and trying to reset my estimate of intrinsic value. This was in part helped as a number of my holdings had results out in the period which allowed me to update numbers and in some cases get a clearer understanding both of what I knew and what I did not.
These revaluations get fed into my control spreadsheet and using mainly the MoS calculation, but also the confidence (in my valuation) ratings I have been adding to the holdings with the biggest differential from intrinsic value. I plan to broadly continue to do this for the next few months, with the following caveats;
-as a general rule I try not to keep dipping in or out of a share for at least 3 months after my last sale or purchase
-the above is ignored if there is genuine specific news that relates to the company.
-I am a little more flexible on the 3 month criteria if the holding is under 1% of the portfolio as I do have another broad operational rule that after 6 months of first purchase any holding should be closely reviewed with the intent of moving up to 1% or out of the portfolio.
New Holdings
ATVI- Very much a Buffett copy this looks to be a decent business with some short term reputational issues holding back the share price. These are being sorted and the company looks undervalued. On top of this MSFT have put in a bid. Which if it comes off will be a relatively quick gain. So 20% upside, almost nil downside as I can hold for a while. I bought $79.14, current $77.30. MSFT bid $95. 0.6% of portfolio
CROX – The show brand has been generating good returns and paying down debt. It benefits from the wfh movement as people can wear what they want, rather than more formal styles, and increasingly it has become seen as acceptable in some workplaces such as hospitals.
As such the business was on its own merits genuinely interesting, but perhaps not a deep value play. That was until it bought, using a lot of debt, Hey Dude for $2.5billion. At which point the share price fell dramatically. Now personally I am not much impressed by the Hey dude offering but clearly the Crocs management was. I am guessing the reasonably cheap price point moving into a cost of living situation was attractive.
It is not a major position for me being only 0.4% of the portfolio. But it is one I think could be interesting. However my average in price is $70.34 and the current price is now $55.58. So it is one I am looking at with a view to adding to.
CVX – I like to have at least one big oil company. I had sold Conoco as it had hit my valuation and sold Shell as it seemed determined to continue its longstanding misallocation of capital. In my screen Chevron came up marginally the best bet. In at an average of $171.18 0.8% of portfolio
SQZ – I only sold out of SQZ a month or so ago as I thought that despite the great cash generation potential the FD was writing some incredibly poor hedging contracts. Really value destroying. But then the share priced dropped significantly and I got interested again and the Chancellor announced his windfall tax and the share price got hammered. The company went from a market cap of circa £500m to £270m in very short order based on the windfall tax and I do not understand why, as it would seem that as a UK investor Serica may be able to avoid most of the tax. Regardless tax in or tax out that company now seems to be trading at not much more than a PE of 4. And that is with tax in. Hedging strategies continuing to be awful and significant cashflows utilised for already mentioned infrastructure (which in reality I think may be tax beneficial). So now at bargain levels I have bought some. Average in 307p, current price 251.5p. 1% of the portfolio.
Sales
COP – Hit my target price, earlier than I expected. Took profits. Gain 55%
IDHC – One of the companies that I reviewed and went back over the results and the additional information released in the last few months. In the end whilst I like the underlying business I am not able to properly assess how much of the current results is short term Coronavirus related. If I stripped this back the MoS got very tight so I decided to sell. 12% loss
SHELL –One of the things I look for in a business is a decent rate for ROIC. Shell seems to be determined to use cashflow from assets with a 10% ROIC to buy assets with a sub 5% ROIC. There are a couple of activists involved but Shell seems to be incredibly value destructive so I have opted out. 18.5% gain
URNM – I have been trying to better understand the Uranium market. After 6 months I don’t so whilst I think it is very important for future energy delivery I am not confident that I have an advantage as an investor so sold. Loss 10%
Reductions
BPM – I do think BPM is undervalued and management have been buying a bit more. But the company is largely waiting on Mr Marsh to divest/reduce his holding before it can do many of the things that a less closely held company would. I have no idea as to when that catalyst event will be and there is a cost to sitting and waiting as a 20% return in one year is a lot more valuable than a 20% over 5 years. Particularly in an inflationary environment. Avg price in 241p 3.1% of the portfolio.
Adds
BATS – Valuations vary but the dividend is very solid and the regular cashflow is of interest to me. Avg price in £29.45 3.2% of the portfolio
CGEO – It is a long way away and Russia has already annexed significant parts of the country. But the sale of the water business shows value and the management team are very clear about how they arrive at the NAV and at the moment CGEO trades at less than half NAV and makes money, with a positive cashflow. It is just too deep value for me to stay away. Avg price in 501p 2.6% of the portfolio.
GAW – I thing the problems are largely overstated and the opportunities underrecognised. The company continues to spin off cash and return it to shareholders. Perhaps given the irregularity of outflows a little difficult for a fund manager to hold. But I only answer to the wife. So added on weakness once I had completed my intrinsic value review. Avg in £84.30. 0.7% of the portfolio
JSE – Came out with a report in February laying out its planned production, its planed capital expenditure and its cost per barrel. Even putting in quite conservative estimates this does seem undervalued. Now it is always possible that I misunderstood what I have read. But I do notice some wise names appearing on the register. One of the shares that after I did my intrinsic value review I felt I had to buy. Avg in 100.5p. 1.6% of the portfolio
TEK – Was feeling that this was very undervalued. And so added. Avg in 30.63p and 1.5% of the portfolio. However a recent capitalisation seems to me to have been poorly done. So possibly good company, less good management. Still well below my estimate of intrinsic value but I have reduced this.
TGA – Decent update. It’s big problem remains getting the product to the port. Added a few. Avg in now 452p 4.6% of the portfolio
VTU – Great results and whilst management admit they were one off even at a decent discount this is hard to see as a 5* PE business. Particularly when there is private equity interest and increasingly industry models that drive success to larger players. Avg in 52.6p and 2.5% of the portfolio
VTY – A lot of fund managers do not like builders. I think in part because builders have done appallingly in down times. However I do believe that all the big boys have learnt many of the lessons of the past and that the UK remains significantly behind on supply. So a PE of 7 and a dividend yield of 6.6%. What’s not to like. Avg in 891.1p and 1.3% of the portfolio. Good results released for last year and so far the trading updates have been very much along the line of we are selling them as fast as we can build and for more money than we expected.
Big Fallers
AEO, AAPL, MPAC, SOM,
Big Gainers
CGEO, JSE,