Value Investing Portfolio Review: Aga Rangemaster, Airea, Enterprise Inns, Hampson Industries

Sunday, Feb 20 2011 by
Value Investing Portfolio Review Aga Rangemaster Airea Enterprise Inns Hampson Industries

At the end of January my fund was down over 1% taking the rolling one year figure to 13%, slightly lagging the FTSE 100. 13% is down a long way in relation to the December one year figure (22%) but that's due to what happened last January rather than in this one (last year's was much better).  The goal as ever is to out-perform the FTSE 100 by an annualised 5% in any rolling 5 year period, but it's more of a hope than a goal. Having a returns goal in stock market investing is a bit like having the goal of it being sunny tomorrow. The current effort to increase the number of holdings to twenty stumbled slightly as two companies were sold and two were bought, as detailed below.

Sold - AGA Rangemaster (LON:AGA)

Somewhat surprisingly, AGA turned out to be the 'least undervalued' company on a quantitative basis and its sale returned 22% in only three months.  I bought AGA using version 0.1 of my evolving scoring system, which is a quantitative model to sort and screen stocks for further analysis. I'd say about 80% of any buy decision is based on this score with the remaining 20% going to soft qualitative research. The model looks for equity selling cheaply relative to its historic earnings and AGA certainly fitted that description.

My quantitative research is quite limited and if you like that sort of thing you will find many better exponents of it listed on the web site. When doing this soft research I typically ask just four things:

  1. First, is the company that I'm buying now substantially the same company that produced the historic earnings? It can often be the case that valuable assets are sold off during restructuring and a special dividend pays out the proceeds to shareholders. In that case the company is not the company that earned the historic returns and so the numbers are misleading. As far as I could see the AGA I bought was more or less the AGA of the last 10 years, minus their foodservice company which they sold in 2007. 
  2. Second, why are the shares so cheap? For AGA the drop in share price started in late 2007 and seemed to be directly tied to the recession rather than anything specific to the company. 

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This article is for information and discussion purposes only and nothing in it should be construed as a recommendation to invest or otherwise. The value of an investment may fall and an investor may lose all their money. Any investments referred to in this article may not be suitable for all investors.  Investors should always seek advice from a qualified investment adviser.

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Airea PLC is a United Kingdom-based specialist flooring company. The Company’s primary activities are focused on manufacturing, marketing and distribution of floor coverings, through its brand burmatex. Its burmatex brand is a designer and manufacturer of contract carpets and carpet tiles. It offers a product range spanning fiber bonded, structure bonded, loop pile, cut pile and textured loop pile carpet in sheet, tile and planks, as well as specialist barrier and entrance matting products. It also focuses on the designing and manufacturing of products to meet needs of architects, specifiers and contractors for the education, leisure, commercial, retail, residential, healthcare and public sectors. The Company also exports its products to Europe, the Middle East countries and to Asia-Pacific regions. more »

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Ei Group plc, formerly Enterprise Inns plc, is a leased and tenanted pub company in the United Kingdom. The Company includes a portfolio of businesses comprising a range of operating models and trading styles. Its businesses include Ei Publican Partnerships, Ei Commercial Properties, Ei Managed Operations and Ei Managed Investments. Its Ei Commercial Properties business manages a developing portfolio of assets, which it leases to third parties on commercial property terms. Its business also provides asset management support for its leased and tenanted, and managed house businesses. The Ei Managed Operations business manages approximately 100 pubs with over 30 trading under its Bermondsey operation and approximately 70 under its Craft Union operation. It also develops standalone and residential sites on land that is surplus to pub requirements. The Company has over 4,400 properties that are run as leased and tenanted pubs. more »

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

1 Comment on this Article show/hide all

Murakami 21st Feb '11 1 of 1

Just adding the corrected fund link here -

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About UK Value Investor

UK Value Investor

My name is John Kingham and I'm the editor of UK Value Investor, a blog and investment newsletter for defensive and income-focused value investors. I'm also the author of The Defensive Value Investor.I invest mostly in large and mid-cap dividend-paying stocks. My investment goal is to build and maintain a high yield, high growth, low risk portfolio. more »


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