A few days into 2019, I removed Finsbury Food and MS International from the Share Sleuth portfolio and recycled the loot into XP Power and Goodwin, two existing constituents I believe are substantially undervalued. It is the first stage in a minor restructuring of the portfolio.
This is the fourth year that I have picked my top six shares, and each year I say the same thing. Although it is customary to provide tips at the beginning of the year, I do not think about investing in one-year increments. I look for companies that should prosper for a decade or more because there is something special about them, and I spread the risk by investing in a larger portfolio.
Computacenter (CCC): smart acquisitions drive revenues
Computacenter will report results for the full year to December in the new year and publish its annual report later in spring, but the signs are that the company will have followed a strong 2017 with a stronger 2018. In the first three quarters of the current year, it has reported revenue 11% higher than the same period a year ago – a figure that does not include the contributions of two acquisitions in September, right at the end of the third quarter.
I experienced one of those “Aha!” moments last Saturday, when I was reading an interview with novelist and author Matt Haig in the money section of The Times. Asked whether he invests in shares, he replied: “No. Too many numbers and indices. It seems a dull hobby and an inexact pseudoscience, like astrology. It’s like gambling without the stigma.”
Alumasc (ALU): winter woes
After five years of profitable growth, Alumasc suffered a reversal of unexpected intensity in the year to June 2018. Revenue fell 6% and adjusted profit fell 25%. Without the contribution of Wade International, a manufacturer of drainage products acquired during the year, revenue and profit would have fallen further, by 11% and 38% respectively.
This article was written in November for the December 2018 print edition of Money Observer. Market data and share prices are likely to have since changed.
Cohort (CHRT): defensive measures
Steady performance in terms of revenue and profit growth in recent years has hidden ructions at Cohort, a group of small businesses that supply technology and expertise to the armed forces, schools, councils and the police force. Flat revenue and modestly improved profit have come at the cost of the closure of one firm, the shrinkage of another and the acquisition of a third.
One of the mantras I see wielded by people seeking to improve their performance, be they sportsmen and women, musicians, business people or investors, is the idea of focusing on ‘process over outcome’.
On the last day of August I added more shares in Trifast to the Share Sleuth Portfolio. Trifast manufactures fasteners: nuts, bolts, washers, rivets and screws. The decision was the result of a happy – I hope – coincidence.
Motorpoint (MOTR) High performance, low margins
Independent motor dealer Motorpoint performed very well in the year to March 2018. Revenue increased 21 per cent and profit increased 34 per cent compared to the previous year, when it experienced a mini-slump after the Brexit referendum. Even that year, Motorpoint, which had only just floated on the stock market, was an impressive performer. Return on capital in the year to March 2017 was 13 per cent. In 2018 it was 18 per cent.