Sitting in a boat on the famous Hendersyde Beat of the Tweed during my salmon fishing week, I have plenty of time to muse about my stock market activities. Another blank day was in prospect with coloured, rising water and a few fish showing.
My mind wandered to the recent takeover of events company Tarsus, a holding which had just delivered substantial liquidity into my Isa, equivalent to 20 per cent of the total value. I always expected Tarsus to be taken over, but not so soon. An out-of-the-blue takeover of brewer Greene King also just recently happened at a substantial premium. Sadly, I didn’t own any personally, but had bought them for our family charitable trust.
My mind drifted to the parallels between salmon fishing and takeovers. As salmon do not eat in fresh water we will never know when they may take a fly or a lure. Similarly, as investors we never know when a takeover will happen. The moral in both cases is keep fishing and stay invested.
I have been on the receiving end of more than 50 takeovers during my lifetime (somewhat ahead of the 42 salmon I have caught over my fishing years). I now have the task of reinvesting my Tarsus proceeds — pleasurable in one sense but also quite challenging. Should I just continue with the same approach that has served me well over the years, or am I at an age where income is of increasing importance — perhaps to help with grandchildren’s school fees or, in the longer term, expensive care?
While in one sense capital and income are merged within an Isa, my accountancy discipline strictly prohibits me from spending capital other than in extreme circumstances. Of course, I rarely invest in anything other than dividend-paying stocks, recognising not only their compounding importance but also the message that the payment of a rising dividend tells us about a company.
After much deliberation I resolved to put 25 per cent of my liquidity into Legal & General, a similar amount into building my Vitec holding, and the balance primarily into “topping-up” existing holdings, plus one or two new modest additions.
To be able to purchase a company of the strength of Legal & General, in the region of 220p, on a yield of 7.5 per cent, was an outstanding opportunity, powering forward my overall Isa income — and pleasantly they have since risen nicely. Vitec, capitalised at £550m, is a business I am increasingly attracted to, yet few investors seem to appreciate or really understand it.
With the odd exception, it does not manufacture cameras itself, but its products embrace the “image capture and content creation” market, where it is a world leader. If we take coverage of sporting events, with camera shots from every conceivable angle, Vitec’s products and technologies are key components in this coverage. Next year, the Tokyo Olympics will see 100 of its staff working on TV and image delivery. Along with the US presidential election, this should certainly boost Vitec’s results.
In terms of technological advances, the purchase last month of Amimon, an Israeli developer of chipsets and modules for real-time wireless video transmission, puts Vitec at the forefront of the drive to eliminate expensive and unsightly cables on production sets and sporting events like golf tournaments. I view Vitec as being seriously underpriced.
I also added to existing holdings such as Air Partner, Anpario, Christie, Cerillion, Concurrent Technologies, Daejan, MP Evans and Park Group. I made modest new purchases in large-sized valve manufacturer Goodwin on an outstanding chairman’s statement; industrial property group Hansteen on a 6 per cent yield; and a rather speculative investment in Photo-Me following the interesting acquisition of Sempa, the leading French fruit juice vending business, and on a 9.5 per cent yield. The chairman and chief executive have recently also made purchases.
In addition, two old friends have returned to my Isa portfolio — the carefully stewarded Ziff family’s Town Centre Securities with a very substantial discount to assets and on a 6.4 per cent yield. Also, PZ Cussons, which has finally started to dispose of its lesser brands with hopefully more corporate activity to come.
No sooner had I reinvested my Tarsus proceeds, however, then along comes another unexpected takeover of insurance services company Charles Taylor — a significant Isa holding. Here we go again . . .
On the last day of my salmon fishing week I found success, catching a 13lb and a 10lb fish. So the salmon tally reaches 44 — but it still trails takeovers.
John Lee is an active private investor and author of ‘Yummi Yoghurt — A First Taste of Stock Market Investment’, focused on teenagers and novice investors. He is a shareholder in all the companies indicated
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