|
Kingfisher (LSE:KGF) has a board containing names of the great and the good from the European business world. When I analysed the company back in 2019 I found that there is no one on the board who learnt his/her trade through Kingfisher trading. No one who had worked in home improvement or DIY retailing. How, I wondered, are they supposed to know what it’s like to serve customers on the shop floor, drive the vans or share lunch with the lowest employees?
Even now the non-executive part of the board consists of people who are busy running other companies, with keen interests in other industrial sectors, or are the semi-retired. But they each receive a large remuneration package. I wondered in 2019 what it must be like for middle and senior managers - having gone through the Kingfisher graduate programme and working their way up - to find that none of their own is considered worthy of adding their voice to boardroom discussion? A firm needs a managerial cohort in depth. It needs experienced, wily executives at all levels drawn from a pool of talent that continuously being developed. When a handful of these “home-grown” people reach the highest levels in the organisation they are far more likely to benefit from the respect of those they work with at lower levels in the organisation. They know the subtle tricks of the retail game; they know the characters up and down the hierarchy; they know when a plan is feasible or pie in the sky; they know how to play one supplier against another. Surely, this implicit knowledge and this respect of colleagues is to be valued? If there are no experienced insiders at or near the top it sends a clear message to aspiring younger managers. That message is: take your talent elsewhere, the chairman of the board is only interested in those picked from talent pool outside of your industry. So I was sceptical in 2019 that the newly appointed CEO, Thierry Garnier, could handle this company. His claim to fame is the building of Carrefour’s Asian business in China, having spent 22 years in Carrefour’s retail empire. The other fresh executive board member, Bernard Bot, brought in to be CFO, had worked in tech, McKinsey and an airline. Disadvantage overcome However, the turnaround in the last three years has proved my scepticism ill-founded. They have greatly improved the company’s profits, and steadily grown the business. I’m particularly impressed by their stick-to-the knitting attitude. They are not coming up with fancy schemes to take over other companies in search of “synergies” or growth. Rather, they keep doubling down on numerous incremental improvements to operations, and as they put it “consistent execution”. For example:
0 Comments
Conventional earnings numbers do not generally adequately allow for the fact that with some companies profits cannot be taken out if it is to maintain its unit volume of output, spend enough to maintain its economic franchise (e.g. on working capital, new machinery, marketing, service quality, employee training, etc.) and invest in all value enhancing projects.
Some firms need to invest so heavily in these items that little of the conventional earnings can be given to shareholders. Owner earnings is more useful than conventional earnings for getting to the amount shareholders can take after allowing for necessary investment to maintain the quality of the business. Kingfisher has an impressive history of conventional earnings relative to the current share price. Here I’d like to see how it shapes up under the owner earnings approach. Owner earnings With owner earnings we’re trying to obtain the earnings that, in future, would be left for shareholders after the managers’ use of the cash generated to pay for items of expenditure to maintain the strength of the economic franchise, maintain unit volume and to invest in all value-generating projects available. Depending on circumstances, the owner earnings figure may be the same for every future year or on a steadily rising (or falling) trend. Naturally, owner earnings are impossible to obtain with any degree of precision because many of the input numbers are merely educated guesses about the future. Despite this imprecision it remains an important method for thinking through valuations. Owner earnings analysis is about future cash available for shareholders to take out of the business. But the only evidence we have available is past data. We start with that, and then use qualitative analysis to judge whether to simply project forward the past pattern or modify the previous trend for future orientated thinking. In the following we use what the company actually invested in new working capital items and in new fixed capital items, and what they spent on marketing, R&D and staff training etc. already deducted from the P&L. What the analysis really requires is the amount necessary to maintain the quality of the economic franchise, unit volume and invest in value generating projects. To start with we make the bold assumption that what was spent by the managers was also the necessary amount. When we move to forward-looking analysis to value the firm we need to make another bold assumption on the real amount needed to invest in new WC, fixed capital items, etc., in the future. The historical analysis helps us make that judgment. Owner earnings in the past........ Kingfisher’s shares (LSE:KGF) have fallen from 440p in 2014 to 237p. But average earnings per share over the last thirteen years have been 22.2p, giving a cyclically adjusted price earning ratio of 10.7. Dividend yield is 5.2%.
Why has Mr Market pushed the share down so much? Here are some common justifications for dramatic share price declines, even for those companies with a history of high EPS and dividends:
My judgement: I see the strategic positioning of Kingfisher’s main businesses as reasonably strong. True, they were hit by problems a few years ago, but, as Warren Buffett once observed of companies, these are local excisable cancers rather than needing a Pygmalion transformation. Indeed, many cancers have been excised, it seems. The full quote related to short-term problems at GEICO and American Express which permitted Buffett to buy them when cheap: “The GEICO and American Express situations, extraordinary business franchises with a localized excisable cancer (needing, to be sure, a skilled surgeon), should be distinguished from the true “turnaround” situation in which the managers expect - and need - to pull off a corporate Pygmalion.” (1980 Letter to BH shareholders). While I’m not saying that Kingfisher has “extraordinary franchises” it does have some strong businesses.
The rewards realised by shifting the firm to having common product lines, new IT and operational cost savings were more limited than originally thought; while the costs of change, in terms of managerial distraction, staff redundancy and compensation, were all too evident. The French businesses seems to have been run for short-term target numbers aimed for by pushing up prices, thus damaging the low-price consumer franchise. But since 2019 things have been turned around by new senior managers, most notably in France.
Piotroski factor analysis I’ll start by using Joseph Piotroski’s nine variables. These, when taken as a whole, are useful to indicate whether financial distress risk has risen in the last year or so. A low score – say 3 or 4 – would suggest a deterioration in the firm’s ability to withstand shock. The indicators fall under three headings: (1) Profitability; (2) Leverage, liquidity, and source of funds, and; (3) Operating efficiency Profitability factors If the firm is profitable and produces positive cash flow it has a capacity to generate funds internally. A positive earnings trend suggests an improvement in the firm’s ability to generate positive future cash flows.
2022: £737m/£12.4bn = 5.9%. Third Piotroski point.
The last two newsletters described the strong market positions held by Kingfisher (LSE:KGF) in the UK and Ireland with its B&Q and Screwfix brands ("banners"). Today I turn to its other businesses ranging from Poland to Iberia.
Poland Castorama Poland has grown gradually from sales of just over £1bn in 2011 to £1.5bn today. There are 90 stores, putting it in first place with about 30% market share. The Polish team is currently expanding its urban park small-store concepts (800 – 2,000 sq m) under the Castorama Smart banner Profits are a respectable £135m before deducting tax and central costs. Allowing for say £20m of central overhead allocation and about 20% for tax, we might estimate after-tax profits to be £92m. If this was our estimated earnings power perpetuity then present value would £1.15bn at a discount rate of 8%. As well as showing great strength in operations Poland has the virtue of owning 80% of its stores. This property was valued at about £700m recently. France France is where Kingfisher has made serious blunders, taking its eye off serving the customer, while focusing on its “transformation programme”. It also employed local managers who seemed to push up prices to the point where consumers decided to shop elsewhere. If you look at the facts, it is not as bad as some would have us believe. Profits did fall but still profits were made, even in the bad years – over £160m. And now they have risen to over £220m. Turnover is the same as it was eleven years ago, and higher than in 2016 so customers are starting to come back to the stores (93 Castorama's with an average store of 12,376 sq metres; 123 Brico Dépôt with an average store with 6,910 sq metres). And the managers in France have already implemented the plan of “Every Day Low Prices” to compete more effectively. And cut staff numbers by 5% Taking the numbers from the table: if we make the bold assumption that profit after-tax, after-central cost and after-exceptional deductions in future years is around £130m (based roughly on 2022 and 2021’s total retail profit minus one-third), then this division’s value might be £1.6m using an 8% discount rate. Seventy-five percentage of the French sites are owned by Kingfisher, which were recently valued at £1.3bn. The repair work is advancing As well as increasing LFL sales by 14.8% over the last two years the company has .... It is frequently said of the Kingfiaher Group (LSE:KGF) that “a sum of the parts” valuation would total to much more than the current market capitalisation. What then usually follows is a statement to the effect that the company should be broken up, with a particular focus on liberating the “jewel in the crown” Screwfix.
I question that logic, especially given the much greater degree of integration painfully forged across its markets in the UK, Ireland, France, Iberia, Romania and Poland in the last four years. It will be costly to split it now (redundancies, new IT, new senior teams, logistics networks, etc.), and many of the hard fought-for buying synergies will disappear. Far better to do something much more mundane and long term: concentrate on doing the ordinary extraordinarily well. Don’t go dashing off looking for growth with dramatic sounding strategic moves, just get on with day to day improvements in every aspect of the business, from product selection to keeping a close eye on competitor pricing and tactics. This has been a slow-growth company over the last thirteen years, with turnover not even keeping pace with inflation, and earnings per share much the same in the most recent five years as in the five years before that. The question is: if the past thirteen years is representative of the future in terms of earnings power, would we be content to buy these shares at 250p (MCap £5.04bn)? Average EPS is 22.2p, giving a cyclically adjusted price earnings ratio of 250p/22.2p = 11.3. (That is an earnings yield of 8.9%) The CAPE is less than the average for UK shares which is good, but it is not in single digit territory, so is not well and truly a bargain. We’ll have a look at owner earning numbers later, but my preliminary impression is that little additional investment is needed in working capital and capex if the company maintains its no-growth trajectory, so we could, perhaps, imagine all of the reported earnings flow coming to shareholders. An 8.9% earnings yield these days is not to be sniffed at. More than half of that is already coming from the 5% dividend yield; the remainder is likely to come from dividend growth and using future surplus cash to repurchase shares. Note the total paid out in dividends and buybacks has averaged £329m in the last five years, that is 15.7p per share or 6.3% of the current share price. Of course, if the directors can identify projects able to generate goodly rates of return shareholders will support the investment required, lowering near term cash flow to shareholders, but shifting the company to positive growth in earnings and a more rapidly rising dividend. But, in judging whether these shares are good value much depends on the strategic positioning of the various operations – are they strong businesses, or even franchises? Is there some pricing power? To shed some light in this area I’ll look at each market in turn: United Kingdom and Ireland......... I’m sorely tempted to invest in Kingfisher (LSE:KGF) despite the fear of a major downturn in the home improvement market. It’s a company that's been forced to cope with some serious problems in recent years – many of which were self-inflicted But the fairly new (appointed 2017-19) management team seem to have revived the company by concentrating on continuous improvement within Kingfisher’s circle of competence and competitive advantage.
Despite the recent jump in underlying profits its market capitalisation has fallen from £10bn to £5.2bn. Kingfisher remains the strongest player in big-box general DIY sheds (B&Q in the UK & Ireland, Castorama in France and Poland, Brico Depot in Romania). It is also a very significant retailer of building tools and materials to professional tradespeople, especially through its fast-growing Screwfix and the B&Q TradePoint (and similar schemes in other countries). The third area is the supply of home improvement products at discount prices – Brico Depot France, Brico Depot Iberia. These banners hold either the number one market position in their respective countries, or number two. We in the UK are familiar with Screwfix dominating the capital-light trade counter service and B&Q dominating the consumer home improvement market in towns up and down the country. Kingfisher’s average earnings per share over the last thirteen years are 22.2p. With its current share price of 250p this gives a cyclically adjusted price earnings ratio of 11.3. Dividend yield is 12.4p/250p = 5%, which, it seems to me, is unthreatened by the risk of financial distress. The directors are committed to a “progressive, sustainable dividend policy” (2022 Report) In addition to the £254m to be paid out in dividends in respect of trading for the year to the end of January 2022 the group has bought £300m of its own shares. Thus we see that this £5.2bn MCap company is so cash generative and has so much cash in the bank that it can hand over £554m to shareholders via proposed dividends and the ongoing share buyback programme in one year. Kingfisher has no borrowings alongside £823m of cash, combined with a history of cash flow from operations north of £700m year after year. It also has £2.8bn of freehold property on the books. Being a (fairly) fast stock-turn retailer, inventories are covered by credit obtained from suppliers. Is it reliant on DIY? In the past, in addition to selecting shares, I’ve invested in properties for re-development, and so I’m familiar with using B&Q’s TradePoint: I (or an employee) can pitch-up at a B&Q outlet, select goods and take them away after showing the card. I get “trade prices”, and up to 60 day’s credit, with a neat monthly bill. TradePoint customers pay the same as ordinary shoppers until they reach the threshold of £250 in a month. After that, a 5% discount is applied. Reach £1,000 and 10% is knocked off for the rest of that month and the next three months. Admittedly, for many items e.g. a truck load of bricks, prices are often lower elsewhere. Why, you might ask did I spend so much at B&Q and Screwfix when builders merchants can be cheaper? I also had accounts with three builder’s merchants and bought a lot from them. Firstly, builder’s merchants are not always cheaper – Kingfisher can be competitive on some things. Second, builder’s merchants are great for buying a truck load of heavy items – blocks, insulation, plasterboard, etc. Play one off against the other and prices can fall significantly. But builder’s merchants cannot stock a wide range of the less heavy items – dozens of different light fittings, kitchens, doors, paints, baths, tiles, flooring, etc. That is where B&Q and Screwfix really come into their own. They stock thousands of items to choose from. Thus, Kingfisher has a loyal customer base in tradesmen of all descriptions. It is certainly not for DIY enthusiasts only. Last year TradePoint sales were £834m, which was a mere 20% of B&Q’s overall turnover. But it is growing fast - over the last two years TradePoint increased sales by 33% LFL, and has a target to reach £1bn. Screwfix does however put it in the shade; it already sells £2.3bn pa. So, why did the shares fall? In 2016 the newly appointed CEO, Ms Véronique Laury, launched her big strategic idea to transform the group from one where product ranges and sourcing varied from one country to another. The plan was to have a common set of product lines in France, Ireland, Poland, etc. As well as having “unified” products, the company would have “unique” products that competitors did not stock. There was also to be a one IT system across the Group, and some operational cost savings. The promise was that the company could reap a benefit amounting to £500m per year, raising profits from the £700m range to more like £1.2bn. It would cost up to £800m to implement all the changes, but it would be worth it in the end. Making the short-term sacrifice more palatable was the offer of over £600m returned to shareholders over three years by way of share buybacks. This was on top of the annual dividend of around £230m. True to her word, £630m was spent on share repurchases – and the balance sheet remained strong. At the same time dividends per share rose from 10p to 10.82p. So that is all good. What was not so good was the poor performance in some parts of the empire. In particular, both Castorama and Brico in France suffered from poor management. French sales flatlined for ten years, not even keeping pace with inflation. And operating profits from France fell from over £400m in 2012 to just £164m in the year to January 31, 2020. It was even worse in the, much smaller, Russian and German operations, which were closed. But things have perked up in France under the new management after Laury’s resignation in 2019. Sales there are now up to £4.5bn, and profits £221m. In the UK sales overall ha....... Solar
Lightsource has been building solar projects since 2010 with various partners. It is still led by Lightsource’s founder, Nick Boyle. It changed its name to Lightsource bp when bp bought a 43% shareholding. So far it has developed 5.4GW in 17 countries (enough to power 5m homes). They have a target of 25GW by 2025. Lightsource bp develops and builds projects. Often the projects are simply bought after being established by others. It will also manage them afterwards. It will often continue to own them but is willing to sell an asset. Some examples:
BP Pulse Since 2019 bp has almost doubled its EV charging points to more than 13,000 worldwide. The managers see enormous growth potential in both charging and shops/stations, what it labels “convenience”, with plans to double 2019’s earnings from convenience and mobility to $9 - $10bn in 2030. By then there will be more than 100,000 bp charging points. Already almost half of bp’s EV charging points are fast or ultra-fast. It also supplies charging points to fleet operators and expects this business to increase 100-fold by 2030. EV charging has been loss-making as it invests heavily in expansion and is not expected to be profitable until 2025. Convenience sites amount to 20,500 currently, with 2,700 of those regarded as “strategic convenience sites” meaning a “food for now and food for later” offering, such as M&S Food stores (at 300 sites). Murray Auchincloss, FD, 3 Nov 2021: “if you wanted to measure returns the general statistic we hold is, if you get 10% utilisation on a faster charger, you’ll make a 10% return. That’s just for pure electrons themselves. It’s about convenience as well. And when somebody goes to charge their car, they spend probably 8 minutes, as opposed to 4 minutes. And hopefully they come in and get a nice cup of Wild Bean coffee and a sandwich and that will certainly enhance those returns.” Bp Pulse has the UK’s largest EV public charging network and is to expand its ultra-fast charging (UFC) infrastructure across the UK, with a series of new EV-only hubs. Charging around 50p per KWh The charging hubs will play a key role in helping to achieve bp pulse’s aim to double the size of its network in the UK to 16,000 charge points by 2030, with a particular emphasis on ultra-fast chargers. The total amount of charging on the bp pulse network is set to grow 30-fold by 2030. bp and Volkswagen Group have agreed to a strategic collaboration, with plans to develop ultra-fast charging (UFC) at bp retail sites in the UK, Germany and elsewhere in Europe. The partnership would give EV drivers greater confidence in being able to access nearby, reliable, quality charging options. bp estimates that approximately 90% of people in the UK and Germany live within a 20-minute drive of a bp or Aral site. The network would be integrated into VW’s cars, making finding and paying for charging easy. It would also be available for other EV customers, improving access to UFC more widely. bp pulse for commercial operators. For example, Uber drivers in London can now access dedicated fast chargers in the heart of Central London. The new multi-charger hub on Park Lane already has 10 rapid 50kW chargers, with a further 12 being added soon. bp intends to open hundreds of similar hubs across London and other UK and European cities by 2030. Aral This is bp’s market-leading fuel retail brand in Germany. It has begun the roll-out of ultra-fast charging points at its retail sites. Now operating under a new name, ‘Aral pulse’. It already has 500 ultra-fast chargi........ Gas
Production of natural gas in liquid form by bp is about 0.1 million barrels of oil equivalent per day. It intends to double output by 2030. Output of natural gas is over 5,000 million cubic feet per day. For comparison, the UK consumes about 7,700 Cub ft/day. Bp obtains its gas from a wide geographical area – see table. Sources of gas 2021 UK US Canada S America Africa Asia Aust Natural gas liquids produced (thousands of barrels of oil equivalent per day) 5 70 0 4 7 2 Natural gas (millions of cubic feet per day) 236 1,197 2 1,260 1,332 1,279 0 Examples of activity:
The managers of bp plan to invest in “transition growth businesses” (the green stuff) up to 40% of total capex by 2025 (to around $5bn), and to 50% by 2030. This is an increase from about $2 - $3bn today. A large part of that will be wind power. The company is planning to have 50GW of renewable generating capacity by 2050, and “remains confident of achieving 8-10% levered returns for those investments” (bp Update on Strategic Progress 8 Feb 2022) Renewables (wind, solar, hydrogen, bio-fuels) statistics 2020 2021Feb 2022 Renewables installed in year, GW (1 GW supplies electricity for roughly 1m homes) 1.5 1.9 Developed renewables (solar + wind) to FID, final investment decision, GW 3.3 4.4 Renewables pipeline America, GW 6.3 16.2 Renewables pipeline Asia Pacific 0.8 1.4 Renewables pipeline Europe 3.7 5.3 Renewables pipeline Other 0.1 0.2 Pipeline by technology - Offshore wind 2.2 3.75.2 - Solar 8.7 19.4 To put the numbers into context, the UK generates 21% of its electricity offshore, enough to power 10.8m homes (about 10 GW). One rotation of an off-shore wind turbine will power a home for a day. The UK Government intends to greatly increase wind power to 50GW, and bp are well placed to supply a good proportion of that power. Over the last five years there has been a 65% reduction in capital costs for offshore wind. Irish Sea The bp-EnBW partnership in 2020 was awarded 3GW (1.5GW net to bp) in the Irish Sea for 60 years (Morgan and Mona) East Coast of Scotland Awarded 2.9GW in 2020 United States offshore In 2020 bp teamed up with Equinor to develop offshore wind projects with four assets in two existing leases on the US East coast. Bp invested $1.1bn for a 50% share in Empire Wind lease (2GW) and Beacon Wind (2.4GW). The JV signed a 25 year purchase and sale agreement with NY State Energy to take 2.5GW of the power Off Aberdeen Leases were won in the 2022 round of auctions by the bp-EnBW JV for a fixed foundation site 60km off Aberdeen, to generate 2.9GW (The Marven project). Aberdeen is to become bp’s global operations and maintenance centre of excellence for offshore wind. Investments include infrastructure ports, harbours and shipyards, including four ships to support EnBW-bp’s wind projects across the UK. Japan Marubeni/bp partnership for offshore wind, with bp buying a 49% stake in the proposed project. Other projects could follow as Japan was targeting 10GW of offshore wind by 2030 and 30-45 by 2040 – these might be increased after Ukraine-Russian war. The next newsletter looks at bp's other green businesses In 2020 bp retired its time-worn classification of its activities into “upstream” and “downstream”. In its place it now has four business groups:
The following table gives some impression of the relative weights in terms of sales and replacement cost earnings. There was a dramatic fall in overall sales in 2020 when fossil fuel prices were low; then a strong bounce back in sales of oil products and gas in 2021. Oil Most of bp’s oil is refined in-house resulting in much larger external oil product sales than crude oil sales. Turnover of oil products and profits from oil crude and products varies tremendously from year to year depending on commodity prices. The group is in the middle of a major divestment programme which means between 2020 and 2025 it’ll sell off around $25bn of assets (bp’s MCap is $100bn), mostly oil and gas fields and facilities. Already $15.5bn has been raised with another $2 - $3bn expected in 2022. However, this does not mean that oil and gas are being abandoned. About $5bn per year is spent on oil capex and another $3 - $4bn on gas capex; and $1 - $1.5bn on refining and trading capex. So oil and gas still accounts for the bulk of the annual $14 - $16bn Group capex. That makes sense given the expert projections for global oil demand being stable for many years yet. The world consumes around 100m barrels per day (bp contributes about 2.5m b/d), and the industry needs to invest to offset the normal 5m-6m b/d normal rate of field decline. While oil and gas exploration and development is less than it has been in the past it continues, but with a greater emphasis on higher returns. Bernard Looney, CEO commented on his continued commitment to oil and gas in December 2021, “We brought on seven [O&G] projects this year, and will bring on projects next year, and the year after that. We will start up new oil fields, but only ones that have the best carbon intensity, only ones that have the best economics, the shortest paybacks, the highest returns…oil and gas will continue to be needed…and we will use those cash flows to help us to make the transition”. Despite this commitment, Looney says that net-net production of O&G will go down by 40% through this decade; 20% by 2025, 40% by 2030. The 2020 Annual Report described the shift of resources within the company: “As part of our net zero ambition, we aim to increase the proportion of investment we make into our non-oil and gas businesses. We plan to increase investment in low carbon from around $750 million in 2020 to $3-4 billion by 2025 and to around $5 billion a year in 2030 [total group capex is expected to be $14 - $16bn per annum through to 2025]. The aim is to be net zero across its entire operations on an absolute basis by 2050 or sooner…to be net zero on an absolute basis across the carbon in its upstream oil and gas production by 2050 or sooner… disciplined investment to support growing returns and to focus on highest-quality barrels…high-grading of the portfolio; plans and expectations that bp will not undertake exploration activity in new countries…Overall, bp transition and low carbon capital expenditure in 2020 was around 20% of the capital mix, and by 2030 we expect it to be as much as 50% of our capital expenditure” It is thought that the breakeven oil price for bp is $40 per barrel. With oil prices more than double that the company generates an enormous amount of cash. Tomorrow we'll look at the gas and wind energy parts of bp. Following a strict caution-first value investing approach I sold a lot of shares before and during the first Covid wave. The pile of cash was very useful later in 2020 and 2021. The shares bought in those years have generally risen nicely – see first table.
Since the start of 2022 I’ve sold out of a number of companies so as to have about one-third of the portfolio in cash – a comfort in these troubled times with potential for inflation-induced or war-induced recessions (see newsletters written 3rd – 16th February). The majority of the cash is expected to be invested in property abroad to give our family more options in a Putin-crazed world, but a goodly proportion will be looking for a home in deep value shares in a period of extreme flux. A list of all the shares I bought in the crisis (Newsletters published at the time of each purchase set out my rationale for buying) Company Purchase date Purchase price Divs to 31.3.22 Price 31 .3.22 Return to 31.3.22 Smiths News 18.3.20 £0.151 1.15p £0.338 131% Character 5.6.20 £2.52 20p £5.70 134% McCarthy & S 1.10.20 £0.718 0 Sold 7 Dec 2020 £1.185 65% Cap&Counties 6.11.20 £1.032 0 Sold 19 Aug 2021 £1.743 69% Dewhurst “A”11.11.20 £5.94 23.25p £7.00 22% MS Inter 16.12.20 £1.292 10p £2.60 109% Wynnstay 29.12.20 £3.405 15p Sold 24.3.21 – 3.2.22 £5.58 68% Lloyds Bank12.3.21 £0.4169 1.24p £0.4708 16% J Smart18.3.21 & 24.3.21 £1.253 3.22p Sold 7 Feb 2022 £1.575 28% Fletcher KingFeb20–May21 £0.3265 0.5p Sold Sept 2021 – Feb 2022 £0.40 24% Orchard Funding 7.6.21 £0.568 3p £0.52 -3% Caffyns 22.6.21 £4.65 7.5p £5.00 9% Highcroft 22.7.21 £8.75 22p £9.50 11% Town Centre Sec 10.8.21 £1.426 1.75p Sold 2 Feb 2022 £1.581 12% bp 26.1.22 £4.006 4.1595p £3.78 -5% AVERAGE 46% Longer run performance Nine years ago that I left a tenured professorship to concentrate on investment. Back then the FTSE 100 was around 6,600. It is now 7,550 – a slow rise. In addition, there have been dividends of around 3% per year. I believe the numbers in the tables below show that I have outperformed, which is quite a relief given the salary and security sacrifice I made nine years ago. The tables display the results (so far) of all the shares bought for the portfolios I’ve been writing about in my newsletters. The comments I made at the time explaining the rationale for each investment are available for you to read in older newsletters - there is nowhere for me to hide from my appraisals I made three, four or seven years ago – all the errors of omission and commission are there in broad daylight. I present the returns after taking the hit on broker costs, stamp duty and bid/offer spread. (Some of you have joined us recently so, in case you are not familiar with them, I briefly describe the criteria for my portfolios following the portfolio performance tables.) The 2013 Net Current Asset Value, NCAV, portfolio Company Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 French Con. 25.7.13 £0.3047 zero Sold July 2015 £0.4378 44% Caledonian T 25.7.13 £0.70 zero Sold April 2020 for £1.391 99% Fletcher King 6.8.13 £0.30 14.25p Sold June 2016 for 46p 101% Northamber 22.8.13 £0.287 1.6p Sold Oct 2016 £0.303 11% Titon 5.9.13 £0.379 6.5p Sold May 2016 £1.06 197% Mallett 12.11.13 £0.7682 12.7p Sold Nov 2014 £0.60 -5% AVERAGE 75% The 2014 NCAV portfolio Company Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Holders Tech 10.10.14 & 3.11.14 £0.47 1p Sold March 2017 £0.33 -28% Airea 4.11.14 £0.1195 0.9p Sold Sept 2016 £0.309 166% Northamber 17.11.14 £0.4265 0.7p Sold Oct 2016 £0.303 -27% Caledonian T 30.12.14 £1.39 zero Sold April 2020 £1.391 0 AVERAGE 28% The 2015 NCAV portfolio Company Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 PV Crystalox 15.1.15 £0.122 zero Sold Dec 2016 £0.237 94% Arden Partners 1.9.15 £0.422 1p Sold May 2018 £0.364 -11% Northamber 4.9.15 £0.443 0.4p Sold Dec 2016 £0.303 -31% AVERAGE 17% The Buffett-style portfolio This type of share is rarer than the others, and so I combine all years. Company Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Dewhurst 9.4.14 £3.18 70.5p Sold February 2020 £7.217 149% MS International 9.10.19 £1.723 13.50p £2.60 59% Character 20.1.20 & 5.6.20 £2.811 28p £5.70 113% Dewhurst 11.11.20 £5.94 23.25p £7.00 22% MS International 16.12.20 £1.292 10p £2.60 109% AVERAGE 90% (I bought some more of Dewhurst in June 2014 at £3.11, December 2014 at £3.75, November 2017 at £5.46, February 2019 at £5.54 and April 2019 at £5.64. These were sold Feb 2020). Modified price earnings ratio portfolio 2015/16 Company Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Haynes 11.2.15 £1.159 33.5p Sold 2.10.19 £2.9175 181% AGA 11.3.15 £1.002 zero Taken over June 2015 £1.456 45% Hogg Robinson 10.4.15 £0.4709 2.37p Sold June 2016 £0.656 44% MS International 3.7.15 £1.86 46p £2.60 65% BHP Billiton 24.9.15 £10.43 127p Sold May 2018 £16.90 74% TClarke 5.11.15 £0.7916 13.61p Sold Feb 2020 £1.1215 59% Premier Farnell 8.4.16 £1.222 3.6p Taken over 20.6.16 £1.632 36% AVERAGE 72% The AGA holding was doubled 30 April 2015 at a price of £0.9466. Modified price earnings ratio portfolio 2017 Company Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Braemar 28.6.17 £2.848 20p Sold June 2018 £2.639 0% Caffyns 10.8.17 £5.012 52.5p Sold July 2020 £2.389 -42% Connect/Smiths News 27.9.17 £1.046 11.95p £0.338 -56% MS International 14.11.17 £1.84 30p £2.60 58% AVERAGE -10% The 2017/18/19 NCAV portfolio Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Caledonian Trust 7.11.17 £1.23 zero Sold April 2020 £1.391 13% J Smart 30.1.19 £1.13 4.14p Sold Mar/Apr 2020 £1.101 1% Northamber 6.12.19 £0.504 0.3p Sold Mar 2020 £0.5717 14% AVERAGE 9% More Caledonian Trust shares bought in February 2019 at £2.29. More J Smart bought 30.4.19 at £1.16 The 2018/2019 modified price-earnings ratio portfolio Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Connect/Smiths News 14.6.18 £0.285 5.25p £0.338 37% N Brown 17.8.18 £1.42 9.93p Sold Sept 2021 £0.557 -54% Spaceandpeople 31.10.18 £0.224 0.5p Sold Dec 2020 £0.128 -43% Tandem 2.4.19 £1.59 9.49p Sold Aug 2020 £3.707 139% MS International 6.6.19 £2.22 20p £2.60 26% Character 25.10.19 £3.506 33p £5.70 72% AVERAGE 30% More Connect Group shares bought in February 2019 at 40.86p, March 2019 at 38.29p and May 2019 at 39p. More N Brown bought May 2019 at £1.30. The 2020/21/22 modified price-earnings ratio portfolio Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Wynnstay 7.1.20 & 29.12.20 £3.33 29p Sold 24Mar 2021 – 3 Feb 2022 £5.58 76% Daejan 5.2.20 £52.90 zero Sold 21 Feb 2020 £79.41 50% Connect/Smiths News 18.3.20 £0.151 1.15p £0.338 131% Lloyds Bank 12.3.21 £0.4169 1.24p £0.4708 16% bp 26.1.22 £4.006 4.1595p £3.78 -5% AVERAGE 54% The 2020/21 NCAV portfolio Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 McCarthy & Stone 1.10.20 £0.718 0 Sold Dec 2020 118.5p 65% Capital & Counties Properties 6.11.20 £1.032 0 Sold 19 Aug 2021 £1.743 69% J Smart 18.3.21 & 24.3.21 £1.253 3.22p Sold 7 Feb 2022 £1.575 28% Fletcher King Feb 20 – May 2021 £0.3265 0.5p Sold Sept 2021 – Feb 2022 £0.40 24% Orchard Funding 7.6.21 £0.568 3p £0.52 -3% Caffyns 22.6.21 £4.65 7.5p £5.00 9% Highcroft 22.7.21 £8.75 22p £9.50 11% Town Centre Securities 10.8.21 £1.426 1.75p Sold 2 Feb 2022 £1.581 12% AVERAGE 27% The return reversal portfolio Purchase date Purchase price Divs to 31 Mar 2022 Price 31 Mar 2022 Return to 31 Mar 2022 Havelock Europa 20.5.15 £0.14609 zero Sold Dec 2016 £0.0915 -37% AVERAGE -37% Brief description of criteria for the portfolios Shares are allocated to portfolios designed around ideas flowing from research conducted when my PhD students and I asked the question “what works in investment?” These investigations were often inspired by the ideas of great investors such as Benjamin Graham. More detail on these ideas is presented in earlier posts (if you put key words into the search box those Newsletters will appear). Net current asset value, NCAV, criteria
Return reversal
|
Prof. Glen Arnold
I'm a full-time investor running my portfolio from peaceful Leicestershire countryside. I also happen to be UK´s best selling investment book author and a Financial Times Best selling author. Originally, I wrote all my ideas out in full on this website. Now that ADVFN publish them they are entitled to display the full version for six months – you can see them here. Thus can I only post the first few paragraphs here for anything younger than six months.
I write 2 to 3 newsletters per week - investing is about making the right decisions, not many decisions. Categories
All
Archives
December 2021
|
RSS Feed