With spare cash to invest, Richard Beddard explains why he is investing further in a holding in the portfolio.
Owing to high valuations across the board and because, despite frantic efforts, I have dug up no new companies to invest in, there were only two high-scoring additions to the Share Sleuth portfolio open to me this month, both existing members that are underrepresented (See Share Watch for an explanation of how I score shares). They were Victrex, which accounted for just 2.2% of the portfolio, and Anpario, which is a slightly smaller holding.
Other high-scoring companies are ineligible for additional investment for one of two reasons. Either I have traded them recently, an example being PZ Cussons (see my column from the February issue of Money Observer), or Share Sleuth already has a substantial allocation, for instance to XP Power.
Surge of power
A surge in the share price of XP Power has made it the second-biggest Share Sleuth holding at 8.1% of the portfolio’s total value, sufficient to consider taking some profits, but its high score suggests it is still undervalued, so I would have been a very reluctant seller. If I were to reduce the size of a holding, Games Workshop would have been first up against the wall. A score of 6.4 is average for the portfolio, but it is the biggest holding, accounting for 8.4%. To maintain diversification, it should probably be cut down to size.
That decision can wait, though, because Share Sleuth has spare cash, and my preference is to keep the portfolio fully invested. This month, I elected to invest a further 2.5% in Victrex, which makes PEEK – a light, durable and valuable polymer that is used, often in fairly small quantities, to replace metal components where performance is critical. It’s hidden in many products we take for granted, including smartphone speakers and spinal implants.
Why Victrex and not Anpario? I score Victrex more highly, and I have also evaluated it more recently, less than a month ago. Victrex is the world leader in PEEK production, with over 60% of the industry’s capacity, and it’s the only PEEK producer actively developing new applications for the material.
Partnering with manufacturers, or acquiring them, to develop products and supply the proof of superior performance takes time, but I think we can afford to be patient. Not only is Victrex highly profitable and financially strong, but the market for existing applications of PEEK should grow over the long term.
On 27 January, I added 173 more Victrex shares to the portfolio at a price of just under £22.96. The total transaction, including £10 in lieu of broker fees and just under £20 in lieu of stamp duty, cost £4,001, leaving the portfolio with a cash balance of £1,758. Victrex now accounts for 4.6% of Share Sleuth.
This month, I also re-evaluated Dewhurst, a manufacturer and distributor of lift components, and a Share Sleuth portfolio holding of more than 10 years’ standing. It is one of my favourite kind of shares: somewhat under the radar, probably because it doesn’t do much to sell itself to investors.
Having sold off Thames Valley Controls, a maker of lift control and monitoring systems, it is continuing its expansion in bread-and-butter components by adopting some of the products and policies of A&A, a highly regarded distributor it acquired in 2018, across many of its subsidiaries around the world. I gave the company a score of 6.9, which puts it on the cusp of good value. The Share Sleuth portfolio, though, is already fully invested.
Sleuth continues to power ahead
Rich valuations mean little choice
|Portfolio||Cost (£)||Value (£)||Return (%)|
|Since 9 September 2009||30,000||159,416||431|
|Companies||Shares||Cost (£)||Value (£)||Return (%)|
|TFW||Thorpe (F W)||2,000||2,207||6,500||195|
Notes: Holding increased Transaction costs include £10 broker fee, and 0.5% stamp duty where appropriate. Cash earns no interest. Dividends and sale proceeds are credited to the cash balance. £30,000 invested on 9 September 2009 would be worth £159,416 today. £30,000 invested in FTSE All-Share index tracker accumulation units would be worth £68,633 today. Objective: To beat the index tracker handsomely over five-year periods. Source: SharePad, 5 February 2019.