Opinions seem to vary on the outlook for the market at the moment. I’ve seen some commentators suggesting a crash is overdue, with others saying that shares are now looking more reasonably priced to buy.
Personally, I expect to be a net buyer personally over the next few weeks. But one of the beauties of my SIF strategy is that I don’t have to make such difficult decisions. Instead, I simply follow the rules.
After several weeks of rather limited results, my main SIF buying screen is starting to offer a more diverse choice of stocks. The company I’m going to consider this week is Finsbury Food (LON:FIF). I held this cake and bread maker in SIF in 2020, but sold in October with woeful timing:
No one likes to see a chart like this, but it happens sometimes. What I think is important at this point is to neutralise the psychological bias that’s trying to tell me it’s too late to buy. This may be true, but there’s no reason why it must be true. The market has no memory. If a company’s performance is improving, it may still offer value at a higher share price.
Solid trading
In this case, I can see some reason for optimism. Finsbury shares are still below pre-pandemic levels, but the business seems to be performing pretty well.
The group - which supplies baked goods to supermarkets and the foodservice clients - said that revenue rose by 2.3% to £313m during the year to 26 June. Adjusted earnings for the year rose by 15% to 9.1p per share.
Net debt halved to £13.1m, while dividends were resumed at 2.4p per share for the full year. That’s 30% down on pre-Covid levels, but a useful payout all the same.
These results reflect strong demand from retailers over the last year and highlight Finsbury’s limited exposure to foodservice. This has proved fortunate.
Another positive is that the company was able to continue delivering new growth initiatives last year, despite disruption caused by Covid-19. Additions to the group’s manufacturing footprint included a new frozen dough ball facility in Manchester and a 50% capacity increase to artisan bread production.
Management say that ongoing innovations are “in line with consumer trends”, such as vegan and gluten-free cakes…
