I’ve bought Dewhurst “A” non-voting shares (LSE:DWHA) at a price of £5.94. This is after selling all my A shares in March at £7.22. I explained back then why I sold in a 2nd March newsletter “not because I judged it to be over-valued but because I wanted to rebalance my portfolio so as to have more cash available for post-Covid purchases.” This turned out to be very useful – see recent purchases of Capital & Counties Properties and McCarthy & Stone.
In March I added that I didn’t think the Dewhurst A’s were seriously over-valued, but wanted to take a very cautious approach through the pandemic, “The Dewhurst A’s were selected to be turned into cash because they were trading close to intrinsic value, not because Mr Market had pushed them up beyond a reasonable level. Ordinarily I would have held on to the Buffett-style investment when it traded near – or even slightly above - intrinsic value. But we do not live in ordinary times. I judge the supply and demand shock of Covid to the world macroeconomy to be so great that I feel much more comfortable with a large buffer of cash”.
So, I’m relieved to have bought back into this excellent company at a lower price (by 18%) at a time of economic revival on the back of vaccines.
Dewhurst has a strong economic franchise, managers who are both competent and behave with high integrity toward all shareholders, good accounting numbers and the shares are available at a low price relative to past earnings and a reasonable expectation of future earnings (its “earnings power”).
I bought Dewhurst shares at various prices over the last six years: April/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. Newsletters setting out rationales for those purchases can be found at those times: 12th – 22nd Dec 2014, 15th June 2015, 14th – 17th Dec 2015, 25th – 27th July 2017, 21st, 22nd Nov 2017, 3rd – 5th Jan 2018, 20th – 24th July 2018, 25th – 30th April 2019, 19th – 23rd Dec 2019, 2nd March 2020.
Brief description of the firm
Dewhurst is over one hundred years old, started by the grandfather of the current brothers who command both share control and operational control. It manufactures its own components for lifts, ATM’s and other keypads, and for trains. It also sells other manufacturers’ electrical and other components to the trade (such as lift repairers), and supplies handrails for escalators and various traffic products such as large road bollards.
Richard and David Dewhurst have decades of experience in this field: Richard, age 63, joined in 1985 and has been Chairman since 1991; David, aged 58, Group Managing Director joined in 1987. They are supported by a longstanding, loyal, professional team.
Over the last two decades they have grown profits both by organic means with an almost obsessive interest in design prowess and manufacturing efficiency, and by a measured acquisition strategy of companies supplying (generally) complementary products. Often these acquirees have a long association with Dewhurst as suppliers or customers - the managers know each other in this small engineering world, and the Dewhurst brothers know the weaknesses and strengths of the firms they are acquiring from the perspective of suppliers or customers.
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