SIF Portfolio: A close focus on Vitec Group

Wednesday, Nov 01 2017 by
17
SIF Portfolio A close focus on Vitec Group

It’s now been six weeks since I added a stock (Alliance Pharma) to the SIF portfolio. This is partly because I was away for two weeks. And a further two weeks were occupied by my month-end reviews.

But through all of this I haven’t seen any stocks in my screening results that would have been suitable additions to the portfolio.

The main problem is that the only qualifying stocks which aren’t already in the portfolio overlap too much with existing stocks. And the rest of the market is simply too expensive or slow growing to pass my screening tests.

I’m not concerned by this, as I do have a rule for this situation. When this happened last year, I developed a Jim Slater-inspired ‘relaxed’ version of my standard stock screen. This lowers the threshold for two key criteria in the SIF screen:

  • Earnings yield is reduced from 8pc to 6>pc

  • Rolling PEG ratio is increased from 1.2 to 1.3

The purpose of this is to allow me to add shares to the portfolio during buoyant market conditions. I’ll accept a more demanding valuation, while not diluting any of my quality or momentum-related criteria.

My hope is that this will balance the risk of paying too much with the risk of missing out on bull market gains. One other advantage is that by following this rule, I’m prevented from trying to call the top of the market and shift into cash. That’s not something that would be acceptable in my rules-based scenario, even though it may soon become tempting!

I’m allowed to consider stocks from the relaxed screen after I’ve been unable to add stocks from the regular screen for four consecutive weeks. As we’re now in this situation, I’ve turned to my relaxed screen this week.

Slim pickings - one choice

There aren’t many suitable choices. But one company that I am prepared to consider is technology firm Vitec. You may not have heard of this £500m company, but if you’re a keen photographer or work in broadcasting then there’s a good chance you’ve used its products.

Vitec owns a group of brands producing a wide range of audio-visual equipment and accessories.

Example brands include Manfrotto, Gitzo, Lowepro, Anton/Bauer, Autocue, Paralinx, Camera Corps and Colorama. Products include robotic camera systems, mobile power…

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Vitec Group PLC is a United Kingdom-based provider of image capture and content creation solutions. The Company operates in three divisions: Imaging Solutions, Production Solutions and Creative Solutions. The Company designs, manufactures and distributes high performance products and solutions including camera supports, camera mounted electronic accessories, robotic camera systems, prompters, light emitting diode (LED) lights, mobile power, monitors and bags. The company operates in three divisions imaging solutions, production solutions and creative solutions. It provides small high definition (HD) monitors, Teradek transmitters, tripods, Anton/Bauer batteries, JOBY GorillaPods and audio capturing products. more »

LSE Price
1075p
Change
-0.5%
Mkt Cap (£m)
489.3
P/E (fwd)
11.0
Yield (fwd)
3.8



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


2 Comments on this Article show/hide all

Howard Adams 3rd Nov '17 1 of 2

Roland

I think you are right to add Vitec (LON:VTC) to your portfolios (I don't hold yet, but will look again on Monday).

Although it went Ex Div 21/09/17 which is often accompanied by a share price drop in line with the yield, encouragingly, the SP rose whilst an RNS 22/09 announced acquisitions of JOBY and Lowepro from DayMen Group and Acquisition of RTMotion as detailed in this RNS https://www.stockopedia.com/share-prices/vitec-LON:VTC/news/vitec-group-plcthe-acquisitions-urn:newsml:reuters.com:20170925:nRSY6330Ra/

The share price rose from 932p (22/09) to 1105p (04/10) on the news. These offer confidence that Vitec (LON:VTC) is rated by the market. Additional confidence might also be drawn from 20/10 when the interim dividend was paid out and yet the SP rose from 1088p to 1130p. Its moved sideways since but at 1131p at time of writing.

Roland, did these acquisitions factor into your thinking at all?

EDIT PS Oh ..... just looked at Director's dealings on Hargreaves nearly £1.4m drawn out by CEO and a Senior VP in Oct 2017. Also, £566k+ of insider sell trades in March 2017.

http://www.hl.co.uk/shares/sha...

I think I'll dig a bit deeper if I can to see who shareholders are. Sadly this is not divulged on the investors section of the website.


Regards
Howard

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Roland Head 3rd Nov '17 2 of 2
1

In reply to post #236338

Hi Howard,

Thanks for your comment. I haven't looked into these acquisitions in detail, but as a general rule I think that Vitec (LON:VTC) has made a success of acquisition-led growth. So I'm broadly supportive of further acquisitions, as long as they don't change the formula or overpay.

As regards the director selling, it's a substantial sale but I'm not massively concerned in this case. Both the CEO and the other big seller in October still have very substantial holdings in the firm.

Also, if I was in the position where much of my wealth was tied up in my employer's business, I'd want to cash out some chips periodically. I don't think it's necessarily a warning flag.

I tend to think that major purchases are more significant, as these are discretionary buys by company insiders -- often a bullish signal (although sometimes an orchestrated PR effort).

Regards,

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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