SIF Folio: Another win for Miton but what’s gone wrong at Bilby?

Tuesday, Mar 26 2019 by
SIF Folio Another win for Miton but whatrsquos gone wrong at Bilby

It’s nearly the end of March, so this week I want to carry out my regular review of stocks that have been in the SIF folio for nine months or more.

I don’t normally comment on newsflow from portfolio companies during their time in the portfolio, but I do want to make an exception for building services group Bilby (LON:BILB), which has been a complete car crash of an investment so far.

Stocks for review

In June last year, I only added one stock to the SIF folio, small-cap asset manager Miton (LON:MGR). This well-regarded firm is now the portfolio’s oldest holding, and the only one that satisfies my minimum holding period of nine months.

As a result, I need to check whether these shares still pass all of my screening tests. If not, then the stock may have to be sold this week.

Miton (LON:MGR)

Original coverage 05/06/2018

It’s worth noting that this is Miton’s second stint in the SIF fund. The first ended profitably with a 46% total return. The stock is showing a more modest profit this time round, but even that’s a relief after some big losses recently.

Miton’s 2018 results appear to have given investors the injection of confidence needed to buy a few more shares. The share price rose by more than 10% on the day and has maintained that gain so far.

Big inflows: It’s not hard to see why Miton’s results were well received. While big cap asset managers like Standard Life Aberdeen are suffering hefty net outflows, investors are still queuing up to deposit cash with Miton. Assets under management rose by 14% to £4,376m last year, despite a £466m negative return from the group’s investments.

Short-term dips like this are inevitable for an asset manager. You cannot deliver absolute positive returns in all circumstances. Although percentage of Miton funds in the first or second quartile for performance fell from 87% to 81% last year, I remain confident that the group’s long-term results are likely to be above average.

Miton’s business performance has certainly been strong. The group’s operating margin rose from 22.2% to 24.3% last year. Return on equity rose from 8.3% to 11.6%.

Risks? The credibility of investment boss and small-cap specialist Gervais Williams plays a…

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Miton Group plc, formerly MAM Funds plc, is an investment management company. The Company provides fund management services. Its funds are invested in a range of asset classes under various investment mandates, including multi-asset, equity and portfolios of collective investment schemes. Its product range includes equities, such as CF Miton UK Multi Cap Income Fund and FP Miton Income Fund; multi-assets, such as CF Miton Cautious Multi Asset Fund and PFS Miton Cautious Monthly Income Fund; fund of investment trusts, such as CF Miton Worldwide Opportunities Fund, and closed-end funds, such as The Diverse Income Trust plc and Miton Global Opportunities plc. Its subsidiaries include Miton Group Service Company Limited, which is a holding company and central services provider; PSigma Asset Management Holdings Limited, which is an intermediate holding company; Miton (Hong Kong) Limited, which is a marketing company, and Miton ESOP Trustee Limited, which is a trustee company. more »

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Bilby Plc is a building services company serving local authorities, housing associations and domestic customers. The Company operates through provision of support services segment. It provides outsourced services to the public and private sectors. The Company and its subsidiaries operate in the gas heating, electrical and general building services industries. The Company's building services include internal and external building maintenance, refurbishment and conversion projects, living solutions, domestic and commercial plumbing, bathroom plumbing and installations, ground works and roofing. Its electrical services include testing and commissioning services, and installations. Its gas services include servicing and repairs, fault finding, system upgrades, meter connections, full central heating systems, boiler installations and cooker installations. The Company is a holding company for P & R Installation Co Ltd, Purdy Contracts Ltd, DCB (Kent) Ltd and Spokemead Maintenance Ltd. more »

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

9 Comments on this Article show/hide all

leishylegs 26th Mar 1 of 9

Hi Roland,

Thanks for your article - thought provoking as usual.

I share your pain on Bilby having bought at a similar time and sitting on a similar loss. What with that and Superdry I now consider founders selling significant holdings/all of their holdings as an absolute red flag now. So it has been a painful lesson learned.

My holding in Bilby is within my SIPP and with the value rank so high now I have mentally written the share off and will just sit tight and see if over the coming years things can be turned around sufficient to recoup some of the losses. I am in no hurry.

That said, it has been a dilemma these last few months as to whether I should have cut my losses much earlier and invested the funds elsewhere - in hindsight, I definitely should have.

I think it will be a long road back with Bilby, with no guarantees!


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coniston 26th Mar 2 of 9

Thanks Roland.
Have noticed not many stocks to choose from with the proceeds,with falling momentum will you increase cash position until such times allow or relax the rules!!,or maybe increase % holdings in those that qualify with a more concentrated portfolio.

| Link | Share | 1 reply
Edward John Canham 26th Mar 3 of 9


Not a fan of stop losses but a system/philosophy that watches a share fall from 127p to 28p without doing anything seems fundamentally flawed.

I know what you're trying to do and I applaud it and find your articles very informative and useful - but surely even a quants based buy and hold system should allow for profit warnings/ disasters etc and not keep for a fixed period of time in extreme situations. I have a similar problem with the NAPS scenario.

Bilbly may recover - I've held in the past but got out when circumstances changed - there is a minor possibility Bilby (LON:BILB) is worth zero due to MoD contract reparations and its debt - I would not be holding just because it is not yet due for review even if I had little time to study my portfolio.


| Link | Share | 1 reply
Roland Head 26th Mar 4 of 9

In reply to post #462088

Hi Phil,

There's no doubt in my mind that the prudent thing to do would have been to sell Bilby (LON:BILB) at the first sign of trouble; in this case the founder share sale or else the first profit warning. Your comment about seeing such a loss without taking any action is well made. In a discretionary portfolio, I wouldn't have let things get this far without actively taking a view - i.e. selling or averaging down.

However, my policy with SIF is not to introduce ad hoc changes to the rules and to minimise manual intervention. So I've stuck to the rules - at some cost, in this case.

I should point out in some other scenarios, riding out dips has proved a more profitable strategy. So it's not a black and white situation.

I'm mulling over whether to introduce a rule to simulate the effect of a stop loss, as this facility isn't available in the Stocko Fantasy Funds. But like you, I'm not a fan of selling at an arbitrary level for no other reason than because the price has moved.

What I may do instead is give myself the option of selling immediately after a "threshold event" - such as a profit warning or perhaps a founder sale... If I do make any changes to the rules, it will be in April when the portfolio is due for its annual review.

I don't have any insight into the MoD situation, but I would tend to agree that any further bad news from this level could result in a total loss for shareholders.

Regards, Roland

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Roland Head 26th Mar 5 of 9

In reply to post #462078


Although I do have a "relaxed" version of my standard screen which adjusts my valuation criteria slightly, my general policy is to allow cash to build if no new stocks present themselves.

However, my screen is showing signs of life, so I'm hoping to be able to make another new purchase next week!



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Roland Head 26th Mar 6 of 9

In reply to post #461978

Hi Richard,

Thanks for your comment. I agree that Bilby (LON:BILB) looks cheap based on both past and forecast performance. I mentioned my concerns about the current broker forecasts in the article -- I'm not convinced they're reliable anymore.

As for ValueRank, the stock does look very cheap based on its historic performance. My concern is that this business may no longer be able to repeat such a performance. I don't really know how likely this is or exactly what has changed in the P&R division, where the problems seem to lie. But I am concerned.

I agree with you re. founder sales. Two founding directors sold up and walked, with no apparent notice. I'm surprised the firm found institutional buyers for the stock, especially good quality names like Miton (LON:MGR)

Perhaps they felt that soaking up the stock was the best way to prevent the share price collapsing...


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Funderstruck 26th Mar 7 of 9

Hi Roland; I enjoy your reports & find them helpful. I sold my investments in fund managers when the mkt started to fall the first week of Oct on basis that investors would start to pull out. Since Feb i have been considering getting back in and MGR was one possibility but still holding off; many are still diving others in consolidation with just a few making slow progress; i consider the market will continue to be volatile for a while.

I did look at BILB at end of 2017 but concluded it was too small for me and it was a labour intensive Contract business , so put a Red note on my chart & left it. The ride up to July would have been nice but looking at it again consider i would have got out at 100p in Sept.Easy to say now but it would have been following my usual exit strategy.

I do have one portfolio where i have tried holding for the long term,,,and it hurts. For a couple of years i have listened to the Long Term arguments & appreciate the compounding of interest ( which is why that portfolio is mainly Stalwart divi stocks, so i am being paid for holding on but it has convinced me that i shall not apply the principle in future, not that it is wrong , just wrong for me. The worst example is CARD down 48% not covered by the excellent divi.
I tend to agree with your other commentators as to why you do not have an exit plan for extreme conditions; and see that you will be looking at some possibilities.

Wishing you every success with the SIF Folio,

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michael1962 8th Apr 8 of 9

Sorry to hear of your loss, I have a number of -50% ers in my portfolio and I struggle sometimes as to what to do with them, wait and hope or cut and lose. My travails are all caused by ignoring fundentals and buying in at too high a price and I suspect others have the same issue. Spookily enough, Bilby's fundamentals now look appropriate to be taking a punt and I shall.

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michael1962 9th Apr 9 of 9

took a punt and up 18% since i bought yesterday - i reckon this one will recover in a year or two.

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

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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