I've made quite a few changes in my portfolio recently so thought I'd better do an update to keep track of my thoughts. Here's my portfolio as it currently stands:
I started top slicing KENZ as the price rose for portfolio balancing reasons, with sales at £4.10 and £4.48, but I sold out of my holding at £5.84 entirely after they disclosed that a few bid offers had been turned down. Looking back over my (short) investment history, I realised I'd repeatedly made the wrong decision in potential bid situations (CHG and LCG come to mind). To combat this, I've come up with a new heuristic for dealing with them - I imagine that there's no bid, then take whatever action I would do anyway had the price just risen to that market price regardless. That generally means that at least top slicing is necessary, but in this case I felt that KENZ was close enough to what I'd consider fair value such that I sold out completely to invest elsewhere. Given a ~50% rise from my average cost for KENZ, this investment played out well.
However, I changed my mind and bought in at 115p after taking a second look recently. Their interim results were impressive, with profits continuing to grow, only a small exceptional charge and FCF above reported earnings. Combined with this, the order book was up 19% year on year, continuing the impressive growth management have made in engineering services. The nature of the work they do (essential maintenance & renewal) gives me more confidence that profits will be less cyclical and their margins are high given the sector, confirming higher than normal barriers to entry from other firms bidding…
