Good morning,
It's Jack here with Friday's SCVR. Any suggestions or talking points just drop by with a comment while we wait for the RNS statements to come through.
Some interesting tidbits from either end of the Quality spectrum this morning: on the one hand, renowned quality investor Lindsell Train has opened a position in Experian, the world’s largest credit data company.
With a forecast PE ratio of 35.8x and a forecast PEG of 3.1x, it’s one I’ve consistently pushed to the back of the research pile for being ‘too expensive’. But in the long term, quality shines through so perhaps I’ve been too dismissive of this valuation in the past.
It’s the third new position at Lindsell Train this year following FeverTree (edit: and PZ Cussons - thanks iwright7!).
And then, further down the scale, we have news that shareholders are revolting over Restaurant Group’s CEO pay plans. After years of underperformance as a result of price gouging and tired brands, this group actually emerged with some credit following its clear-eyed appraisals of lockdown and some useful models of the potential impact.
It has also used this period to fit a couple of years’ worth of turnaround into a couple of months - but it’s obviously not out of the woods yet. It’s a much riskier bet with a potentially higher payoff than either of Lindsell Train’s picks. A totally different and much riskier proposition.
If society normalises on a 1-2 year view then RTN might be left to pick up the pieces after a ‘grand reset’ in the Leisure sector. But the downside risks are much greater too.
It could be a bumpy ride over the next few months with a few big variables: not just the scale of any increase in COVID cases, but the government and economic reaction to those rises, as well as potential news flow around Brexit developments.
I do note that Bank of England governor Andrew Bailey said last week that risks to the UK economic outlook remain ‘very much to the downside’. Meanwhile in the stock market volatility clusters - what happened in March can happen again - so we’d do well to keep our wits about us when making investments in this environment. But as Dale Winton would say, 'you have to be in it to win it'.
With the weather…
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