SIF February review: Crash landing for easyJet + steady trading for Sirius Real Estate

Tuesday, Feb 26 2019 by
10
SIF February review Crash landing for easyJet  steady trading for Sirius Real Estate

Are markets cheap at the moment? Valuation figures for the major indices suggest to me that there are pockets of value out there.

At the time of writing, the FTSE SmallCap index boasts a forecast P/E of 11.8 with a dividend yield of 4.4%, according to Stockopedia. For the big cap FTSE 100, the numbers show a P/E of 13 and a yield of 3.9%.

After a decade of quantitative easing, investors seem to have become accustomed to buying the dips without much hesitation. Last year’s sell-off created some apparently attractive valuation opportunities. So far this year, the market seems to be back in buying mode. The FTSE All Share index is up by about 7% and my SIF folio has gained 6%:

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That’s not to say there aren’t risks out there. Brexit remains on the horizon. A US-China trade war could cause problems. And Warren Buffett said in his latest shareholder letter that “prices are sky-high for businesses possessing decent long-term prospects”. Mr Buffett thinks that he’s unlikely to make a major acquisition this year, although he is hopeful of making smaller equity investments.

My recent experience has been similar. Hardly any companies are passing my screening tests for value, quality and momentum at the moment. Earlier this month my screen results contained just one stock, a record low. That total has now increased to five, although SIF already owns four of them.

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I note that Berkshire Hathaway now has a $112bn cash pile. My Fantasy Fund’s (virtual) cash pile is growing too. It currently stands at £378,424, or 27% of the folio. Like Mr Buffett, I want to make sure that I never risk running short of cash. But I do hope to put slightly more of my fund’s cash pile to work as the year unfolds.

More on that next week, when I hope to find a new stock to buy.

First, it’s time to review holdings that have been in SIF for nine months or more. Only two companies fit the bill:

  • easyJet (LON:EZJ) - the orange-topped budget airline needs no introduction. But is it heading for a crash landing?

  • Sirius Real Estate (LON:SRE) - this German firm operates business parks in Germany. I’m a fan of this stock, but…

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Sirius Real Estate Limited (Sirius) is a real estate holding company. The Company is engaged in the investment in and operation and development of commercial property to provide smart and flexible workspace in Germany. The Company has a portfolio of approximately 60 business parks across Germany. The Company invests in mixed-use commercial real estate assets in Germany, which are sub-divided into offices, storage, production and workspaces, and has over 1.4 million square meters of the total lettable space. The Company's properties include Sirius Business Park Wuppertal, Sirius Business Park Schenefeld, Sirius Business Park Rostock, Sirius Business Park Mainz, Sirius Business Park Pfungstadt, Sirius Business Park Offenbach, Sirius Business Park Neuss, Sirius Business Park Nuremberg, Sirius Business Park Hamburg, Sirius Business Park Berlin, Sirius Business Park Kassel and Sirius Business Park Markgroningen. more »

LSE Price
70.3p
Change
-0.1%
Mkt Cap (£m)
725.8
P/E (fwd)
13.1
Yield (fwd)
4.7

easyJet plc is a United Kingdom-based low-cost airline carrier. The Company operates as a low-cost European point-to-point short-haul airline. The Company operates through its route network segment. The Company operates on over 820 routes across more than 30 countries with its fleet of over 250 Airbus aircrafts. The Company's total fleet of aircrafts is split between 156-seat Airbus A319s, 180-seat A320s and 186-seat A320s. It is also focused on operating its fleet of A320neo aircrafts. The Company's bases include the United Kingdom, Switzerland, Italy, France (Paris, Charles de Gaulle, Lyon and Toulouse), Amsterdam, Venice, Oporto, Lisbon and Barcelona. It operates in airports, such as Gatwick, Edinburgh, Nice, Milan Malpensa, Venice Marco Polo, Naples, Basel and Geneva. The Company offers a mobile application-only proposition, targeting customers wishing to switch flights at short notice on the day of travel, and also offers pre-purchased in-flight vouchers. more »

LSE Price
966.24p
Change
3.1%
Mkt Cap (£m)
3,723
P/E (fwd)
10.0
Yield (fwd)
5.1



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


4 Comments on this Article show/hide all

Mark Midmore 26th Feb 1 of 4
1

The problem with the airline sector is the lack of protection from external factors, from politics, fuel prices, strikes, exchange rates, etc. that can damage a well run business. You only have to look at the easyjet share chart. There was a big rise in share value after the last recession but since its been up and down from highs close to £20 to lows of closer to £10. If you can gauge it right you can trade the peaks and troughs, but that's not easy.

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InvestorJohn 26th Feb 2 of 4
1

Hi Roland - Nicely written article thanks for the effort

I still hold Easyjet (LON:EZJ) happy to hold for the income for now

Would you be willing to publish all of the 15 criteria that you are using to screen for the SIF portfolio? I would be interested to see how they look... some seem similar to a Slater growth screen

I also hold Sylvania Platinum (LON:SLP) and Morses Club (LON:MCL) so we must both be looking in the same place...
Thanks,

John

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JohnEustace 26th Feb 3 of 4
1

In reply to post #452288

InvestorJohn, if you follow the link to the screen results you can make a duplicate of the screen and then you can see and play with all the criteria.
https://www.stockopedia.com/screens/stock-in-focus-screen-113218/

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Roland Head 27th Feb 4 of 4
1

In reply to post #452288

Thanks John - Jim Slater was certainly an influence when I developed the screen because his focus on growth at a fair valuation appeals to me. But the screen includes a number of other factors aimed at capturing momentum, quality and value.

As the other John says, you can find full details here: https://www.stockopedia.com/screens/stock-in-focus-screen-113218/

Re. Morses Club (LON:MCL), I was pleased to see that the shares have held up well following last week's news of the proposed takeover of Provident Financial (LON:PFG) by Non-Standard Finance (LON:NSF). I feel that this is a short-sighted and self-serving deal that may carry more risk and complexity than is being suggested.

I suspect the approach for has been engineered by Neil Woodford and NSF founder John van Kuffeler (who previously ran PFG). These two seem likely to be the main beneficiaries of the combination, in my view. I'm not convinced that it's a good deal for smaller shareholders, especially not PFG shareholders.

I'm glad to be invested in Morses Club, which I hope will continue to benefit from the turmoil at Provident. I feel Morses has been a good operator since its flotation. Unlike NSF, it has already delivered strong returns for shareholders.

Cheers,
Roland

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About Roland Head

Roland Head

I'm a private investor, analyst and writer on stock markets, with a particular fondness for free cash flow, dividends and value. My main interests are UK and US stocks. I also have an interest in (profitable) commodity stocks.  I have passed the CFA Level 1 exam and hold the CFA UK Investment Management Certificate (IMC). One of my investment interests is developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. In earlier life, I worked as an engineer in telecoms and IT. The rules-based and quantitative approach required for this kind of work undoubtedly influenced my investing style.  I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a very large and now defunct Canadian telecoms firm.  more »

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