Share Watch: looking beneath the bonnet of four good businesses

In Share Watch, our Share Sleuth Richard Beddard evaluates four stocks.

As well as soul-searching about System1, I have investigated two companies for the first time and two members of the Share Sleuth portfolio this month. Let’s take the newcomers first...


IntegraFin operates Transact, an investment platform for financial advisers and their clients. By consolidating peoples’ investments in one place, it simplifies record-keeping, reporting and trading.

Judging by the numbers, IntegraFin is a terrific business; and judging by the annual report it controls its own destiny, because the company says it does not outsource “any material component” of the service.

IntegraFin would be a top scorer, were it not for a high valuation (the share price of 385p values the enterprise at about 30 times adjusted profit in 2019) and the possibility that growth might be harder to come by in the future now that investment platforms are ubiquitous.


In its own words, this is the clear market leader in heat treatment of metal components. Sheer scale gives it the capacity to take on all sizes of job and provide a consistent service around the world, giving it advantages over local competitors.

The company has been highly profitable since the financial crisis and increasingly sells high-margin specialist heat treatments that may make it more resilient when demand falls in the many markets it serves. That expectation is being tested now. During the half-year to June 2019, Bodycote reported a sharp decline in sales to European car-makers and a small decline overall. Profit for the half-year fell 6%.


Trifast shares some of the advantages of Bodycote and maybe some of its customers. It too supplies manufacturers around the world, but with fasteners (nuts, bolts, rivets and screws). Since the financial crisis, Trifast has made itself more indispensable by working with its biggest customers to design and source fasteners specifically for their production lines. While the industry is fragmented, Trifast has a global footprint, unlike many of its competitors.

Despite these strengths, Trifast will struggle to maintain profitability if demand slumps for cars and domestic appliances, its biggest markets. At its annual general meeting in July, the company reported that lead times on parts for the auto industry had lengthened. Trifast will only deliver stock when the customer needs it – so the order book may be healthy, but as the company is building up stock or manufacturing less, it will take longer to fulfil orders. That could be a sign of trouble to come.

Solid State

Solid State is an acquisitive group of electronics companies divided into two divisions, manufacturing (Steatite) and distribution (Solid State Supplies). In the year to March 2019, the company made its biggest acquisition so far; as usual, it wants the next one to be even bigger, perhaps a distributor with a European footprint. A European technical sales force would facilitate overseas growth, but an acquisition of this scale will require it to raise money from shareholders.

Long-serving chief executive Gary Marsh’s record at acquiring businesses that go on to make decent returns is good, and even though his ambitions might require a leap of faith from loyal shareholders, I rate Solid State a solid 7.6.

Solid State sits just outside my favourite five shares list, which this month comprises the same five shares as last month. Victrex has moved up the list because its share price has weakened. Victrex supplies highgrade polymer and, like Bodycote and Trifast, it is experiencing reduced demand, particularly from customers in the auto and electronics industries.

It could be a tough year for companies in the supply chains of the world’s biggest manufacturers, which is something to think about because my favourite five includes another, XP Power.

Share Sleuth’s favourite five

Score   Name Description Interactive investor link
9.7 XP Power Manufactures power adapters for industrial and healthcare equipment
8.5 Cohort Manufactures military tech. Does research and consultancy
8.5 Victrex Manufactures PEEK, a tough, light and easy to manipulate polymer
8.3 Howden Joinery Supplies kitchens to small builders
7.7 Judges Scientific Buys and operates small scientific instrument manufacturers

Notes: Shares are scored out of 10, according to five criteria: profitability, risks, strategy, fairness and value (25/07/19)

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