February 2018 Portfolio Update

Wednesday, Feb 28 2018 by
19

Well that was an exciting month after the relative calm of January and 2017 as a whole. For a few days there I was a worried at just how fast the market was falling but for the life of me I couldn't believe that we were on the cusp of a recession - the actual economy, of which the market is a forward-looking reflection, is just performing too well at the moment. In fact I believe that globally we're on the cusp of some excellent growth although we've opted out of this bonanza by miring ourselves in the Brexit swamp. Anyway a moderate amount of trading action took place this month as I reacted to various trading updates and result announcements.

Purchases

Keywords Studios Bought 1620p - Feb 18

As mentioned in last month's update I took a position here on the basis that the share price seemed to be in a holding pattern in lieu of any news. Well the trading update came out, as mentioned below, and a decent volume of buying pushed the price up by almost 9%. While in some ways it's annoying to buy more shares after the price has gone up I prefer to look on this as valuable confirmation that the company is trading well. From a technical perspective I can see that a break-out above the all-time high of 1661p might be a trigger to buy and, as it happens, the price looked to be heading through this "barrier" on the day after the update. It didn't quite make it, as the market in general tanked, but I'm happy enough to top-up at this level.

Games Workshop Bought 2180p - Feb 18

Given the gyrations of the stock market recently I thought that I'd take a look at which of my holdings had fallen the hardest and appeared good value. While Games Workshop is only my 6th worst performer it is, also, down by 24% from its 52 week high despite being on a ridiculous forward P/E of 12.5. I understand that the good times won't last forever but with a very recent trading update raising expectations yet again, and another dividend in the pipeline, I can't see much to dislike here. I also believe that the 2019 forecast of a 20% drop in profits just doesn't stack up although it would be interesting to see a broker note covering the reasons…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Keywords Studios Plc supplies localization and localization testing services. The Company's segments include Localization Services, which relate to translation and cultural adaptation of in-game text and audio scripts across multiple game platforms and genres; Localization Testing, which involves in testing the linguistic correctness and cultural acceptability of computer games; Audio/Voiceover Services, which relate to the audio production process for computer games and includes script translation, actor selection and talent management through pre-production, recording and post-production; Functional Testing, which relates to quality assurance services provided to game producers to ensure games functions as required; Art Creation Services, which relate to the production of graphical art assets for inclusion in the video game, and Customer Support, which relates to the live operations support services, such as community management, player support and associated services. more »

LSE Price
1247p
Change
-4.3%
Mkt Cap (£m)
811.5
P/E (fwd)
24.3
Yield (fwd)
0.1

Games Workshop Group PLC designs, manufactures and sells fantasy miniatures and related products. The Company's segments include Sales channels, Product and supply, Central costs, Service centre costs and Royalties. The Sales channels segment includes Trade, which sells to independent retailers and includes magazine newsstand business and distributor sales from its publishing business (Black Library); Retail, which includes sales through retail stores, its visitor center and global exhibitions, and Mail order, which includes sales through its Web stores and digital sales. The Product and supply segment designs and manufactures products and incorporates production facility in the United Kingdom. The Central costs segment includes its overheads, head office site costs and costs of running Games Workshop Academy. The Service centre costs segment provides support services and undertakes strategic projects. The Royalties segment includes royalty income earned from third-party licensees. more »

LSE Price
4828p
Change
-0.8%
Mkt Cap (£m)
1,569
P/E (fwd)
22.9
Yield (fwd)
2.9

Henry Boot PLC is a land development, property investment and development, and construction company. The Company sources and acquires land; promotes planning consents; acquires, develops, manages or sells investment properties and service constructors with plant; runs its Private Finance Initiative (PFI) project, and refurbishes and constructs buildings. Its segments include Property Investment and Development, which includes property investment and development and trading activities; Land Development, which includes land management, development and trading activities, and Construction, which includes its PFI company, plant hire and regeneration activities. Its subsidiaries include Hallam Land Management Limited, Henry Boot Developments Limited, Stonebridge Projects Limited, Henry Boot Construction Limited, Banner Plant Limited and Road Link (A69) Limited. more »

LSE Price
248p
Change
4.2%
Mkt Cap (£m)
330.2
P/E (fwd)
8.5
Yield (fwd)
4.3



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15 Posts on this Thread show/hide all

Howard Adams 1st Mar '18 1 of 15

Damian

A nice update I enjoyed reading it and contrasting it to my own experiences.

I look forward to future updates.

Regards
Howard

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gus 1065 1st Mar '18 2 of 15
1

Hi Damian.

Thanks for the update. I hold a few of the stocks you cover and it is interesting to read your thought processes. I note your throw away comment at the end about Burford Capital (LON:BUR) being sharply down recently on no news. They’re currently back at about the level they were last July when they released their interims (which were pretty spectacular) prompting a sharp mark up in price. With their full year results due on or around March 14th I’m thinking of topping up my holding on the basis that they have recent history of significantly beating market expectations (probably the kiss of death!). Any more detailed views on your side?

Gus.

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Damian Cannon 1st Mar '18 3 of 15

In reply to post #331838

Hi Gus,

Thanks! With Burford Capital (LON:BUR) I basically agree. The interims were excellent and current forecasts are for 100p in earnings (which would be 82% growth and a P/E of 14.5). If they hit this mark then I'll be very happy and they must be close given that they would have to have warned otherwise. The tricky bit is that they refuse to provide forecasts and perhaps they really don't know if they're going to meet market expectations but I find that hard to believe.

In addition there was the Jan announcement regarding a tripling of investment compared to 2016. Given the track record so far, and a buoyant environment for legal financing, this should hopefully drive further growth. Finally the bond announcement a few weeks later referenced high demand and a need to scale back investors - suggestive of a company/sector in high demand.

On the whole then I think that they're in a good place and could easily surprise on the upside. I am tempted to top-up as well but I'll probably wait for the results in order to have confirmation of how things are going. Enticing though.

Damian

Blog: Ambling Randomly
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covkid 1st Mar '18 4 of 15

Thanks Damian - really interesting to see your thinking................

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donald pond 1st Mar '18 5 of 15
1

There has been one RNS on Burford that Invesco are reducing. It is easy to make a persuasive narrative that weakness in the SP may be caused by fund managers selling to meet redemptions, and the share price weakness has nothing to do with the underlying company. However, a single holding announcement isn't enough to be certain of that explanation. BUR is one of my biggest holdings and I expect a sharp rerating after the results in 2 weeks, but who really knows.

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Damian Cannon 1st Mar '18 6 of 15
1

In reply to post #332023

Thanks and I hope that it's somewhat useful/interesting. I've certainly found that writing down my reasons for buying/selling, along with my thoughts on trading updates, forces me to be a lot more honest about my action/inaction.

In the past I've reliably fooled myself, or just plain forgotten, why I was in various shares and that's usually ended badly. In future I'll be able to look back on my contemporaneous thoughts and make a change to my process if an investment goes pear-shaped (or that's the plan anyway).

Damian

Blog: Ambling Randomly
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gus 1065 13th Mar '18 7 of 15
1

In reply to post #331998

News out this morning that Burford Capital (LON:BUR) have sold (with recourse if the award is annulled) their interest in the Teinver suit for $107m (vs. invested value of about $13m).

https://www.investegate.co.uk/burford-capital--bur-/rns/burford-sells-teinver-investment-for--107-million/201803130700064879H/

More about liquidity/financing than transfer of risk given the recourse provision, but the return multiple demonstrates the potential of this market. Interesting that they chose to make a separate announcement on this today rather than roll it into this week’s results announcement due tomorrow.

Gus.

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JohnEustace 13th Mar '18 8 of 15
1

In reply to post #337413

The Teinver sale will be in the first half 2018 results rather than the full year 2017 numbers that are being announced tomorrow. I think Burford Capital (LON:BUR) like to keep things as clear and distinct as they can given the difficulty many analysts and investors have in understanding their business.
It’s reminiscent of the announcement of the Petersen case sale last year.

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shipoffrogs 13th Mar '18 9 of 15

In reply to post #337453

The realised gain will be shown in the 2018 results. I suspect they'll show an unrealised write up in the 2017 accounts - the timing of this sale would have been determined by the directors and seems very coincidentally close to tomorrow's release of figures.

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nickwild 13th Mar '18 10 of 15

Big mistake with IQE sale.

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Damian Cannon 13th Mar '18 11 of 15
1

In reply to post #337413

It seems like a very sensible transaction which de-risks the investment and provides some ready cash.

I particularly like this line in the statement: "It is efficient for us to move investments into the secondary market as they mature, and obtain liquidity to continue to make new investments at the rapid pace we are currently experiencing."

It sounds as though this market is really maturing and Burford Capital (LON:BUR) are, perhaps, seeing as much new business as they can handle.

Damian

Blog: Ambling Randomly
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Damian Cannon 13th Mar '18 12 of 15
1

In reply to post #337498

Ha ha! Yeah it does look that way but you can't win them all. I should have stuck to my plan of waiting until the release of their results...

Blog: Ambling Randomly
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JohnEustace 13th Mar '18 13 of 15

In reply to post #337478

I think the simple explanation for the timing is that the directors were busy finalising the 2017 results and wanted to get that done before making their decision on the Teinver sale.

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JohnEustace 13th Mar '18 14 of 15
1

Also it occurs to me that they  may have done it this way to avoid showing a specific unrealised gain in the 2017 accounts as that would go against their policy of never disclosing the carrying value of their individual investments 

So close the accounts and get them signed off first, then agree the Teinver sale so it falls in 2018.

We’ll see in the  morning

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gus 1065 14th Mar '18 15 of 15
1

Results posted.

https://www.investegate.co.uk/burford-capital--bur-/rns/full-year-results-2017/201803140700066352H/

eps up 127%, one of many highlights. This is one mother of an ambulance chaser ......

Gus.

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