My investment non-mistakes in 2012: Part 3

Sunday, Jan 06 2013 by

Right, following on from part 2, let's wrap this up:

7) Halfords - HFD

I first bought Halfords (LON:HFD) in 2011 at ~295p on a very simple thesis. The share price had fallen significantly after 2011 profits were a bit disappointing (and it too has the 'retail' stigma attached to it), however HFD offered a) a business with high long term ROEs, b) a large yield of over 7% at the time and c) a low historic P/E. I thought that the decline in profit was likely to be relatively short term and the company would carry on growing in the future as it also had an auto garage business that was expanding to offset the retail slowdown.

I didn't really expect what happened next, when profits looked to have another year of -20% falls. I'm still not entirely sure what caused it, but the share price reaction was to knock a further ~35% off the price down to ~190p. I topped up again, at 210p, but was still kind of unsure as to why profits were falling so fast. Halfords then decided on a CEO swap, and together with a big boost in cycling sales from the British Tour de France success the share price swung back up as high as 355p. I got pretty lucky as I sold out completely at 351p basically because the shares looked much worse value given profits were still expected to fall significantly and, importantly, I don't really get why the decline is so drastic nor why it should reverse. I'd be interested to hear if anyone has any further light to shed on this situation.

8) Staffline - STAF

I don't have a great deal to add on Staffline (LON:STAF) beyond Paulypilot's summary of his meeting with management here and MaxCashflow's share competition write up here. It ticks the boxes of a) good long term growth b) decent level of management ownership and c) an attractive valuation. It's gone up ~30% since I bought it so I've trimmed a bit at ~300p but I still hold a good chunk for the longer term.

9) 21st Century - C21

£C21 is an interesting one. I got in to this quite late, making my first purchases at 17.8p (including the 3.5p return of capital) as it has quite a nice growth story but without a sky-high P/E. Carmensfella has a good write up here which is well worth a read. The really interesting thing for me is the number of very good investors who own large chunks of this share. The historical numbers probably aren't a good guide for the future here as so much has changed in the past few years after activist investor Peter Gyllenhammar effectively revamped the management and focused the company on its products which had achieved product/market fit and were beginning to grow rapidly.

Naturally, the next thing that happened after making my purchase was the shares tanked on no news. Actually, I consider this to be one of the great strengths of small caps. Share price volatility without fundamental volatility allows bargains to be had from time to time, and I took advantage here and added a lot more at 10p. As they declined even further to 8.5p I wanted to make a big top up but I knew Carmensfella had scheduled a meeting with management in December so I told myself I'd wait till then, learn more about the company, then add if I was still very confident. Sadly I never got this chance, as the share price recovered and the meeting never happened because senior management were busy with meetings in France (They have next to no sales in France at the moment, so this is kind of a good sign!) and they released this trading statement that really sent the share price up - which probably wins the record for most apologetic 20% rise in profits I've ever seen :)

Even at the current price of 14p, the shares are only trading on ~10x 2012 profits which seems far too harsh for a company that considers 20% growth disappointing. I'm planning to hang on in here and benefit from the growth and/or the re-rating it deserves.

10) Robinsons - RBN

Robinson (LON:RBN) I bought pretty much entirely as an asset play. It seems clear they have a lot of land on the balance sheet which isn't reflected at its true value. Aimzine has a good write up here (you may need to register to read it, if you even can anymore, as they have now merged with investors champion). I also liked the side-story of them rationalising their business to focus on the profitable, higher margin "secondary packaging". In the end though, I sold out after a decent rise to ~120p (I first bought at ~90p) as I realised that, while the asset backing was nice, I probably wouldn't see any of it for a long, long time. To quote the Aimzine article:


"We see our substantial non-core land and property holdings as part of a long-term disposal process.  We will be looking to sell at the most opportune moment in the property cycle and in our opinion this may not arrive for at least five, perhaps even fifteen years from where we are today."


I don't really fancy management trying to time the property market, especially since they bottled their timing in 2005-2007 and it's not as though someone rings a bell at the top to let then know when to sell! After the rise, I decided that I didn't really fancy being around here for the long term as the ROEs the company earns aren't great (they are largely in a capital intensive commodity business after all) so at a forward P/E of 12 and a ~3% dividend yield I reckoned I could find better value elsewhere.

Right, that's all the shares that have contributed to my positive performance this year. I still hold a number of shares from 2012 that haven't really gone anywhere or I've bought recently and haven't moved (ALLG, JD., MGNS, KENZ, LCG, SIV) which I'll get round to discussing in 2013.

Disclosure: I own shares in STAF, C21, ALLG, JD., MGNS, KENZ, LCG, SIV


Filed Under: Value Investing,


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Staffline Group plc is an outsourcing company. The Company is engaged in provision of recruitment and outsourced human resource services to industry and services in the welfare to work arena and skills training. The Company's operating segments include the provision of temporary staff to customers and the provision of welfare to work and other training services (Employability). It provides managed workforces to the logistics, e-retail, manufacturing, driving, agriculture, food processing and support services sectors in over 250 locations in the United Kingdom, Eire and Poland. The Employability segment includes the Avanta and Eos brands and Government contracts, which offer Work Programme, a contractor in four regions in England; Steps to Success, a contractor in Northern Ireland; Youth Guarantee (MyGo Centre), and Ministry of Justice Transforming Rehabilitation in Warwickshire and West Mercia. The Company also provides training services through Elpis, Learning Plus and Skillspoint. more »

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21st Century Technology plc is a United Kingdom-based company. The Company's principal activities are in the road and rail based public transport vehicle sector. The Company is a specialist service provider of closed-circuit television and monitoring systems to the fleet and network operators in the bus and rail industries. The Company has two geographical segments: the United Kingdom and International, which includes Scandinavia and other European Union. The Company's subsidiaries include 21st Century Technology Solutions Limited, which is engaged in the sale and installation of CCTV and other monitoring devices and 21st C. Scandinavia AB, which is engaged in CCTV installation and project management. more »

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All Leisure Group plc provides a range of escorted tour and cruise holidays. The Company operates through two segments: Cruising, which includes the Voyages of Discovery, Swan Hellenic and Hebridean Island Cruises brands, and Tour Operating, which includes the Travelsphere, Just You and Discover Egypt brands. Travelsphere is a tour operator specializing in escorted holidays for couples. Just You is a tour operator specializing in escorted holidays for mature passengers travelling on their own. Voyages of Discovery operates in the United Kingdom, the United States, Canada, Australia, New Zealand and South Africa. Swan Hellenic offers year-round, destination-led cruises on a leased vessel mv Minerva. Hebridean Island Cruises operates the five star cruise vessels Hebridean Princess along with a limited program of European River cruises. Discover Egypt's customers take a packaged holiday to Egypt that includes seven-night Nile cruises between Luxor and Aswan, flights and accommodation. more »

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  Is Staffline fundamentally strong or weak? Find out More »

2 Comments on this Article show/hide all

Miserly Investor 6th Jan '13 1 of 2

CantEatValue - fantastic! I really enjoyed reading your down to earth trilogy so thanks for taking the time to write it all up. Overall it seems as though you have had a very satisfactory year :)


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CantEatValue 7th Jan '13 2 of 2

Cheers MI! Yes, it's been a good year for me (beginner's luck!) - although my "investment mistakes of 2012" post reminds me I can still mess up with the best of them!

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About CantEatValue


Part-time private investor predominantly in micro-cap UK equities or anywhere I can find inefficiencies.


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