Portfolio Update: Victoria Plc heads for the exit; Armour Group Added

697 days after first buying into Victoria (LON:VCP) , I've let the old girl go. During that time I gained 18% in total, which works out at about 9% annualised. The departure of Victoria means that the UKVI fund no longer holds any of the old asset based valuation companies. These were companies where the balance sheet was bomb proof, where there was little debt, good liquidity and not much else; other than a very very low price for those assets. 

The company has a 10 year ROE average of 6.7% and a 3 year average of 4.2%. This combined with a price/book value of about 0.4 means that my returns yield estimate (ROE10 divided by p/b) is about 14% which put it at the bottom of my current holdings by that measure.  On that basis, and using my new rule of one buy/sell decision each month, it was sent back into the wild on December 6th, to be replaced by something completely different.

On January 6th I put 4% of the UKVI ‘aggressive’ fund (aggressive being a new term outlined here) into £AMR at 7.46 pence.  The 4% came from existing cash from the sale of Victoria.  At the time Armour came top of the UKVI valuation table, with a ‘returns yield’ of about 40% and according to their web site “Armour Group is the UK’s leading consumer electronics group within the home and in-car communication and entertainment markets”.

The company trades on the AIM index, which I’m not so keen on as they have live outside of the tax haven of an ISA wrapper, so it’s not for those investors who only have money in an ISA, but I have a little bit outside the wrapper so that’s okay.

The key data are as follows:

ROE10 = 9.2%, ROE5 = 7.5%, ROE3 = 5%, P/B = 0.18, market cap = 5.3M

As is typical of many value investments, the trend in earnings is downward, but that’s fine as earnings mean reversion is one of the main causes of share mispricing.  Typically companies rebound faster and better than expected.

This leaves my cash position at about 14% which is spot on the current cash target.  The cash target for the ‘aggressive’ portfolio being half that used in the ‘defensive’ portfolio described in detailhere.

As ever, please check out the trades, portfolio and performance pages. 

I’ve also added a new page for the new soon to be up and runningTrade Alert membership service, which will allow interested parties to ‘mirror’ my trades.