My Stock in Focus screen has provided slim pickings in recent weeks. The last time I added a stock to the SIF portfolio was BHP, on 15 October.

As has happened several times before over the past three years, valuation and momentum seem to be the main stumbling blocks. 

  • Valuation: Removing my requirement for an earnings yield (EBIT/EV) of 8% or more increases the number of stocks returned by my screen from seven to 27.

  • Momentum: Similarly, if I disable my requirement for 1-year relative strength to be greater than zero, then the number of results increases from seven to 18.

I’m not too concerned by this. As SIF is a trading strategy, I only want to buy when valuations look attractive and there’s evidence of positive momentum.

However, I do allow myself some leeway at times like this. This means I can still buy stocks which look attractive but have higher valuations or lower growth rates than I’d usually accept. One such company that’s come onto my radar this week is PVC window and building product manufacturer Epwin (LON: EPWN).

A star turnaround?

It’s worth pointing out that shares in this AIM-listed company are still trading below the level at which they listed in July 2014. Epwin got off to a strong start but then ran into problems in 2017, when the group’s pre-tax profit fell by nearly 50% to just £12m. 

The group was hit by a nasty cocktail of rising input costs and problems relating to the administration of former AIM firm Entu, which went into administration in August 2017.

Epwin and Entu both floated on AIM at around the same time and had some shareholders in common. Paul Scott explained the situation in more detail here - all we need to know today is that Entu retailed some of Epwin’s products, leading to a significant bad debt when Entu went into administration.

It’s fair to say that the failure of Entu coloured my perception of Epwin. I’ve now realised this may have been unfair. Epwin is a very different company and recent trading has been strong. The firm appears to be a significant manufacturer in this sector, with a somewhat differentiated product range and a solid portfolio of B2B brands. 

Stockopedia’s algorithms like Epwin too. The group’s shares currently boast a StockRank of…

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