Last time, I looked at Tesco & Dart Group[1] - one company I like the look of but haven't bought, and one company I'm starting to like the look of less but hold having bought it many moons ago. Today, it's another company which has been with the portfolio since inception - the perennially under-the-radar Plastics Capital, and the more recent portfolio addition of Vertu Motors. Both companies released full-year results in my little hiatus, and thus now present me with a great reason to reacquaint myself with what's going on and decide whether I still think they're wise holdings.

Plastics Capital

I really liked Plastics Capital's business model when I 'bought' it way back in June 2011, and I still like it, though with more expressible reasoning now. I like Plastics Capital because they dominate a number of very niche industries, holding large market shares in things like plastic ball bearings, crease matrices (used in the production of cardboard boxes) and hose mandrels. These are ludicrously specific things, and by nature they lend themselves to a small group of small companies producing them. Like investing in the small cap space, I suspect a company investing in a small industry is likely to find more inefficiency and more potential for supernormal returns on capital. In some ways, you might even think of Plastics Capital as an investor itself - they're acquisitive, and their results say they want to continue to be acquisitive, buying more businesses in the same framework they already have.

Results are broadly in line with market expectations, judging by the relatively small price movement, and now place the group on a worst-case P/E of about 20, and a best-case P/E of about 14. The discrepancy arises from the amount of amortisation you feel it's appropriate to exclude from that figure; things like customer relationships, IP rights, trademarks and technology are all being amortised at different schedules, and investors should be cognisant of that before ever placing too much trust in a misleadingly certain headline profit figure.

This might seem quite expensive for such a small company, and I think you'd be right. It's no longer obviously cheap, and in hindsight I didn't buy it at a huge discount to (what I'd now estimate as) its…

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