GuruScreens - upgrades & downgrades - June 3rd

Tuesday, Jun 03 2014 by
GuruScreens  upgrades amp downgrades  June 3rd


We are initiating a regular column to provide a running commentary on stocks which have passed in and out of the popular ‘guru’ screens on Stockopedia. This column should constitute a starting point for further DIY research and enable investors to keep on top of changes to the stock screens.

Growth at a reasonable price with Produce Investments

A potato growing company called Produce Investments (PIL) has just qualified for the both the Zulu Principle and the Naked Trader screens. It exhibits the characteristics of a classic growth stock at a reasonable price, with respective trailing and forward P/E ratios of 5.8 and 7.1, despite the fact that earnings per share have grown by more than 1,300% this year. Sales have also grown by 25%, while earnings are expected to grow by another 16% over the next twelve months.

PIL’s cheapness could perhaps be attributed to weather related issues that affect potato price volatility. On the other hand, the company does meet Jim Sater’s qualitative criteria of offering ‘something new’, in this case, a new acquisition. On 16 May, PIL’s announced plans to acquire The Jersey Royal Company. Management insists that “Jersey Royals are a widely recognised brand in the UK”, and the takeover could strengthen the company’s product offering and broaden its consumer base.  

Produce Investments (PIL) also meets another qualitative Zulu criteria, namely a positive outlook from the chairman. PIL’s interim report for H2 2013 noted that “the business continues to perform ahead of expectations, with integration plans completed ahead of schedule.” Management also insists that the company is “on track to meet market expectations for full year.”

The next CAN SLIM winners?

While the GARP screens filter for growth shares that are still cheap, the William O’Neil CAN SLIM screen filters for growing companies, regardless of their price, in the hope that growth persists and the share price continues to appreciate. Helical Bar (HLCL) and Provident Financial (PFG) have both qualified for the CAN SLIM screen. Helical is engaged in property investment. Its earnings grew by 795% last year. Provident is a sub-prime lender, which saw earnings grow by 11% over the same period.

Both stocks meet O’Neil’s qualitative criteria in that they could benefit from new industry trends.…

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Produce Investments PLC is engaged in growing, sourcing, packing and marketing potatoes, daffodils bulbs and flowers. The Company operates through three segments: fresh, processing and other. The Fresh segment comprises the sites, staff and assets that grow, source, pack and deliver fresh produce to customers, ranging from large retailers, wholesalers to small private businesses and this segment covers potatoes, daffodils and bulbs. The Processing segment comprises the staff and assets that supply pre-prepared potato products, which are ultimately sold as ingredients for food manufacturers. The Other segment comprises seed sales for both the United Kingdom and export, and traded volume where the Company acts as an intermediary between the farmer and the end customer. The Company is vertically integrated with activities covering seed production, own growing, processing and packing with supply to the retailers, wholesale and convenience sectors. more »

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Helical plc, formerly Helical Bar plc, is a property investment and development company. The Company's segments include Investment properties and Developments. The Company's Investment properties segment includes the properties, which are owned or leased by the Company for long-term income and for capital appreciation, and trading properties, which are owned or leased with the intention to sell. The Company's Developments segment includes sites, developments in the course of construction, completed developments available for sale and pre-sold developments and interests. The Company's portfolio is primarily targeted towards London. The Company's development properties include London offices, London residential, regional offices, regional retail, retirement villages and land. Its investment properties include London offices, retirement villages, regional retail, regional industrial/logistics, regional offices and land. The Company operates in London and Manchester offices. more »

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Provident Financial plc is a United Kingdom-based non-standard lender. The Company's divisions include Vanquis Bank Limited (Vanquis Bank), Consumer Credit Division (CCD) and Moneybarn. Its segments include Vanquis Bank, CCD, Moneybarn and Central. The Company serves non-standard credit customers with a range of products from credit cards and car finance, to home credit and online unsecured, and guarantor loans. Vanquis Bank is engaged in the provision of credit cards. CCD is engaged in home credit business in the United Kingdom and Ireland. CCD includes Provident, which offers home credit loans; Satsuma, which is an online instalment loan product, and glo, which is a guarantor loans product. Moneybarn is engaged in the provision of vehicle finance. Its subsidiaries within CCD are Provident Financial Management Services Limited, Provident Personal Credit Limited and Greenwood Personal Credit Limited. Its Central segment includes its subsidiary, Central Provident Investments plc. more »

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  Is LON:PIL fundamentally strong or weak? Find out More »

6 Comments on this Article show/hide all

sminers 4th Jun '14 1 of 6

Nice idea, I will keep an eye on this. Will it become a regular column or will it be in the strategies menu?

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Alex Naamani 4th Jun '14 2 of 6

Hi, thanks for this. We will be producing a similar sort of article on a regular basis, probably every two weeks. Best, Alex

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dasv 4th Jun '14 3 of 6

I think WINK meets the zulu screen criteria too.

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Paul Scott 4th Jun '14 4 of 6


Another excellent article, thanks!
Funnily enough, Produce Investments (LON:PIL) has come up on my radar recently, and I was discussing it with a successful investor friend over lunch, who is very keen on it.
My main reservation is that its activities are such that it's probably always going to be on a low PER rating, as a basic food producer lacks any excitement factor for investors, and you always worry about them being squeezed on price by supermarkets.

M Winkworth (LON:WINK) - the worry there is whether profits are sustainable, as it's heavily reliant on the London property bubble.

Nationwide Accident Repair Services (LON:NARS) - has a big pension deficit, always something to look out for, as they don't seem to be picked up in any of the screening metrics, but can be a huge drain on cashflow.

Camkids (LON:CAMK) - Chinese. Enough said!

Thanks again, and I shall look out for these articles on a regular basis, a very good theme I think for generating stock ideas for us to DOOR!

Regards, Paul.

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Alex Naamani 5th Jun '14 5 of 6

Many thanks Paul,

I guess this brings us to the Hunter vs. Farmer debate.

The stock 'hunter' would of course point out the flaws you highlight above. On the other hand, the stock 'farmer' would argue that if you buy all the stocks that meet quality, value and momentum criteria, your investments should do well - in general.

Indeed, some 'dodgy' stocks do perform well, perhaps because the market is never 'perfect' and remains unable to exactly match a share price to its intrinsic value. Even Globo, despite the bear raid and poor cash flow, is still up 18% on last year.

Stock 'farmers' would therefore argue that seeking perfection in a stock leads to missed opportunities.

What do you think?


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cig 5th Jun '14 6 of 6

In reply to post #83799

I think the farmer vs. hunter issue is orthogonal to the methodological choice.

Different methods of course will sometimes disagree on what is good or not, but you can apply them all as broad or narrow as you want. Mechanical Bull has recently posted an example of Stocko's method applied the "hunter" way, with a ultra concentrated portfolio, and you could very well "farm" a Scott-100 portfolio (picking the 100 best stocks from Paul's universe, according to Paul's own criteria).

Farmer variants will typically have similar behaviour to their hunter methodological cousins, with tamed volatility (so doing less well in good times for the methodology, and less badly in bad times, with less exposure to one off exceptional single stock events, good or bad).

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 Are LON:PIL's fundamentals sound as an investment? Find out More »

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