SIF Folio: Packaging looks cheap but will Macfarlane box up a profit?

Tuesday, Dec 18 2018 by
24
SIF Folio Packaging looks cheap but will Macfarlane box up a profit

Another week, another second chance. Last week Carr’s Group rejoined the SIF folio and I explained why I’m hoping for a better result this time.

This week, another stock has reappeared in my screening results. Packaging firm Macfarlane (LON:MACF) was a SIF stock from May - November 2016. It wasn’t an especially successful trade, closing with a 10% loss. But as I commented at the time, the company did deliver “a solid operating performance” during the period.

Macfarlane shares went on to double bag between November 2016 and June this year. But the firm’s share price has since fallen by 35% to 75p from this summer’s 52-week high of 114p.

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At this level the shares look quite reasonably priced to me, so I’m keen to see if they qualify for a repeat investment.

How I selected this stock

I know that a number of you like to follow my screening results. So I’ll start with a quick word about how I selected Macfarlane, even though it’s not the highest-ranked new stock in my SIF screen results:

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I’ve crossed out in red all of the companies that are already in the portfolio, or which duplicate those which are. That left two choices:

I was tempted by HICL, as this is a stock I quite like from an income point of view. This group owns stakes in a wide range of infrastructure investments in developed markets around the world.

HICL doesn’t specifically invest in renewables. But it is run by the same investment manager (InfraRed Capital Partners) as portfolio holding The Renewables Infrastructure Group. I also felt that there was some potential overlap with Costain and Sirius Real Estate, both of which are already in the portfolio.

On balance, I decided that packaging firm Macfarlane might be a better choice in terms of diversification.

An under-appreciated business?

It’s not just Macfarlane that’s been falling recently in the packaging sector. I’ve noticed that peers of all sizes have taken a battering. FTSE 100 firms Mondi and DS Smith have also fallen heavily in recent months.

I guess these businesses do carry a…

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Macfarlane Group PLC is a United Kingdom-based company, which is engaged in designing, manufacturing and distribution of packaging products. The Company's segments include Packaging Distribution, which is engaged in distribution of packaging materials and supply of storage and warehousing services in the United Kingdom, and Manufacturing Operations, which is engaged in designing, manufacturing and supplying of self-adhesive labels to a range of fast moving consumer goods (FMCG) customers in the United Kingdom, Europe and the United States. The Company's business operates approximately 18 Regional Distribution Centers (RDCs) supplying customers with a range of packaging materials and services. The Company's Macfarlane Packaging Distribution serves in various sectors, such as Internet retail, third party logistics (3PL) and aerospace. Its Macfarlane Labels serves in various sectors, such as health and beauty, food and household goods. more »

LSE Price
106p
Change
1.0%
Mkt Cap (£m)
165.4
P/E (fwd)
12.9
Yield (fwd)
2.5



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


1 Comment on this Article show/hide all

FREng 21st Dec '18 1 of 1
1
(You can see these component scores by going to the sector page for a stock and clicking on the relevant rank)

Thanks for explaining this. I have been searching for the way to do that, without success!

Best wishes for the new year.

Regards

Martyn

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About Roland Head

Roland Head

I'm a private investor and writer on stock markets, with a particular fondness for free cash flow, dividends and value. I also have an interest in commodity stocks.  I 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 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 large and now defunct Canadian firm.  more »

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