Wednesday, October 26, 2011


6 months ago
It was worthwhile looking 6 months back to see what I thought then as against how things have panned out.

On 18-Apr-2011, I said that PIC (Pace) was at a crazy price. It's gotten a lot crazier since then, having falling 51% over a 6-month period, compared with the Footise, which is down 8.5%. It was trading on a PER of 6 then, and trades on a PER of 3.7 now. A combination of missteps, Japanese Tsunami and floodings in Thailand have really clobbered the shares. However, there doesn't seem to be any waning in demand for their products, so just about all the known problems should be fully priced in. Let's hope the world doesn't meet financial Armageddon. Score 0-1.

On 16-Apr-2011, I said that AQP (Aquarius Platinum) there was a lot of downside risk and that it was not undervalued. AQP is down 48% over that period. Bringing the score to 1-1.

On 14-Apr-2011 I said that GAW (Games Workshop) was undervalued. It is down 2.5% over 6 months, so it has beaten the Footsie. It is on an EV/EBITDA of 5.4, which looks OK. Score 2-1 (depending if you think going down less than the index is a "win").

On 11-Apr-2011 I said that BLT (BHP Billiton) was on a good price. Over 6 months it is down 23%, massively underperforming the Footsie. It is on a PER of 7.8, and if you can believe it, a PFCF of 3.8, and an EV/EBITDA of 2.2. How it performs is completely dependent on commodities. Clearly the market is very bearish on this. This will either prove to be a great buying opportunity, or a problematical value trap. Score 2-2.

On 09-Apr-2011 I looked at retailers. A number of them passed a "magic formula" screen. Referring to Dixons specifically, Kevin Murphy of Schroders argued that it retailers were trading at very cheap valuations. DXNS is down 13% over a 6 month period, which is worse, but not hideously worse than the index. I cautioned against overoptimism in this sector. There's been a variety of changes in the shares: DB -1%, SMWH +17%, NXT +15%, JD. -10%, DXNS -13%, HOME -54%. HOME has clearly been slaughtered. I own JD. which has performed broadly in line with the Footsie. Let's keep the score at 2-2.

On 06-Apr-2011 I selected a director deal that looked interesting. I decided upon ICP (Intermediate Capital). It is down 29% over 6 months. It is trading on a PER of 7.6. Not a brilliant pick on my part, although I am confident in the future. That brings the score to 2-3.

On 02-Apr-2011, I didn't actually say DPLM was a "buy", but concluded it was a pretty good magic formula company. It has declined 7.9% over that period. It's beating the Footsie, but only by a whisker.

So, rather a disappointing showing on my behalf. If there is a secret formula to investing, then I haven't demonstrated a possession of it. YTD, my personal portfolio has performed almost bang in line with the Footsie. My worst performer was PIC, down over 50%. Ouch. My best performer was CTN (Clearstream Tech) - for which I've just received my takeover money. It's awkward to calculate the exact gain, as I did buy in dribs and drabs.  Then there's BATS (Brit American Tobacco), which has soldiered on relentlessly. So, I've made some good choices, and bad, and it's difficult to argue that my performance has been due to anything but luck.

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