SIF Folio: Will Luceco light up my returns?

Tuesday, Sep 24 2019 by
13
SIF Folio Will Luceco light up my returns

In recent months my Stock in Focus (SIF) fantasy fund has become more heavily tilted towards small-cap growth stocks than in previous periods. This isn’t deliberate, it’s just the result of my screening process, which is finding more opportunities among smaller firms than their larger peers.

The recent additions of renewable energy investment trust TRIG and Pershing Square Holdings have helped to tilt the folio’s bias back towards mid caps. 

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I’m quite pleased with this, as my personal preference is for more of a balanced mix of small and large caps. I welcome the stability and income that’s often available from larger stocks. 

However, this week marks a return to small cap territory with lighting and electrical accessory specialist Luceco.

Bright light or burnt out?

Electrical accessory specialist Luceco has a market cap of £145m and trades in the FTSE SmallCap index. It was founded in 2004 and went public in 2016. 

The group’s products include LED lighting and other wiring products. These are sold under brands including British General, Luceco, Kingfisher Lighting and Masterplug. 

As far as I can see, Luceco’s product ranges are biased towards fitments for industrial and commercial buildings. The UK consumer business is said to represent about 25% of sales.

Stockopedia has a positive impression of this stock, awarding it a StockRank of 93 and Super Stock status. However, I note that past volatility means the algorithms also rate the stock as Highly Speculative:

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Looking at the firm’s share price chart, it’s not hard to see why Luceco has earned this speculative tag:

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The shares crashed at the end of 2017 when the firm issued a profit warning whose recognition had been delayed by inventory valuation errors. This was then followed by a further downgrade in March 2018.

However, the company has a new chief financial officer who appears to have got the house back in order. Recent half-year results showed a robust return to profit:

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Graham covered the recent H1 results here, noting that the recent run of upgrades may be over and suggesting the stock looked fair value. He suggested that macro risks were off-putting. These are valid concerns, in my view. 

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Luceco plc offers a range of brands, including Luceco, BG Electrical, Masterplug and Ross. The Company's products include Luxpanel, Epsilon and ambient lighting. Luceco light emitting diode (LED) lighting provides commercial and domestic lighting solutions. BG Electrical is a wiring accessory manufacturing brand, which serves electrical trade and specifiers. BG Electrical's products include White Rounded Edge, Nexus Flaplate Screwless, Nexus Metal, Nexus Storm, Nexus Grid and Metal Clad. Masterplug supplies portable power equipment through do-it-yourself (DIY) outlets and street retailers. Masterplug offers products under various categories, including indoor power, such as plugs and adaptors, sockets, chargers and cables; outdoor power, such as case reel, weatherproof box and extension leads, and workpower, such as trailing sockets, inline connectors, cassette reels and cable reels. Ross offers a range of audio visual and home entertainment products. more »

LSE Price
89.4p
Change
0.2%
Mkt Cap (£m)
143.4
P/E (fwd)
11.2
Yield (fwd)
2.3



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


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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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