I have the pleasure of belonging to three investment dining groups. One meets for breakfast near my home in Richmond, Surrey, providing a brisk, appetite-building walk along the Thames towpath. The second meets for lunch at a gastropub just off Sloane Square; and the third over dinner at an old established gentleman’s club around St James’s.
We enjoy the camaraderie, the food and the latest stock market gossip. I tell the occasional joke — although with my very conservative, infrequently traded portfolios sometimes I feel I am the joke.
Many new opportunities are suggested, but I am rarely tempted, certainly not by exploration or mining stocks. While most of my colleagues are shrewd and experienced investors, my observation — and this extends right across the private investor spectrum — is just how few investors have any consistent approach or structure to their portfolios. It is all about chasing the next hot tip or the latest bargain opportunity. Not surprisingly, they end up with a very mixed portfolio and with an equally mixed performance.
My belief is that to be successful one needs some consistency of focus and discipline. As readers will know, mine is with profitable, dividend-paying, cash positive, low-debt small-caps. Others I know stick to large-caps or particularly sectors where they develop real expertise and knowledge such as health or biotech.
While short-term performance has never overly concerned me, it is pleasing to have achieved 14.5 per cent capital growth in the first four months of 2017, excluding dividends. As usual, I have made very few changes, just twice adding to my Isa holding of exhibition and events company Tarsus, with no sales made.
Looking back over the year so far, the highlight has unquestionably been the outstanding performance of Treatt, the fragrances supplier, which is now my largest holding, worth 40 per cent of my total Isa. No way am I selling any! I cannot remember another company ever having two bullish trading updates within a month of each other. “The Board now expect to exceed its revised expectations for the full financial year”, was one encouraging declaration.
It is very satisfying when such a longstanding holding starts to deliver in a big way. Most of my shares are indeed “long fused”. One hopes that others will blossom and achieve the “double whammy” of profits growth and upward re-rating. Many existing holdings have already grown spectacularly and are highly rated such as James Fisher, Gooch & Housego, Nichols and FW Thorpe.
The potential of others such as Air Partner, Concurrent Technologies and Quarto is still to be fully recognised. All three reported results recently. Air Partner’s ambition is to become a world-class global aviation services group. Originally focused on air charter broking, with 20 offices globally (it doesn’t own any aircraft itself), acquisitions mean that 10 per cent of underlying profit before tax now comes from consulting and training. Evidence of its entrepreneurial creativity came with last month’s tie-up with Camper and Nicholsons International, providing a one-stop shop for luxury air and sea travel. The latest results indicate significant growth with a 7 per cent dividend increase.
Concurrent Technologies, an Aim-listed company based in Colchester but with operations in India and the US, is below most investors’ radar. It designs and manufactures embedded computer products of a rugged nature at the leading edge of technology. Three-quarters of turnover, is exported with 60 per cent going to the US, where it is involved in many highly classified strategic programmes. Of its group turnover, 65 per cent is accounted for by defence, with telecoms at 21 per cent.
Since its premium products command high margins it was no surprise to see that cash in the business, plus deposits, rose to nearly £8m and a 10.5 per cent dividend increase. Concurrent should be a big beneficiary of President Trump’s increases in defence spending.
Quarto, the publishing group, believes it has “a unique opportunity in a fragmented industry to become the dominant publisher of illustrated books globally”. It currently sells non-fiction books across 50 countries in 39 languages from a catalogue of 10,000 books on food and drink, art and craft, pets, cars and travel. Some 58 per cent of annual sales are from its backlist, with a growing footprint in the expanding market of children’s books.
Quarto recently announced a partnership with an Argentina-based publisher to launch a new Spanish language imprint — there are 550m Spanish speakers worldwide. Although group debt is much higher than I would like, it is well-backed by the value of its substantial catalogue of titles, and indeed should be steadily reducing. Only capitalised at £54m with a 4 per cent dividend yield and on a single figure price/earnings ratio, it offers considerable potential — I hope.
John Lee is an active private investor and author of “How to Make a Million — Slowly”. He is a shareholder in all the companies indicated
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