Bill1703
29 Dec 2017
2017 Top 10 Stocks - Q4 & FY update That's it for 2017, in market hours anyway, so it is time to tot up the final results for my previously published 2017 Top Ten... Q1 was not bad (in the end)... Q2 better, outperforming decently... Q3 not so much, a bit of a struggle throughout... and now a reasonable (if selective) Santa rally has delivered (belatedly) a decent enough Q4. It all means a positive absolute return for the year (+1.6%), albeit another good quarter for wider markets means I have underperformed the FTSE 100 by nearly 6% (and around 7% vs FTSE All-Share).But it's not the full story - I went heavy on income plays, with dividends (including a couple of "specials"
delivering a further 5.7%, around 50% more than the UK market yield. So I can point to a total portfolio return of 7.3% for the year - still below the 12% or so returned by the main UK indices, but somewhat nearer respectability - and preserving my status as (distinctly) average fund manager... making you some kind of return on your money, but not actually managing to beat, or even meet, an index.Star performer, after a pleasing (albeit slightly suspicious) late run, was one of my small-cap speculatives, Bonmarche - up 60% for 2017! Then, at the other end of the size scale, comes Vodafone, an 18% return reflecting a year of solid success... just ahead of Card Factory (up nearly 17% after a rollercoaster ride), although CARD just edges out VOD in total return terms (+26% vs +24%). After that, a good Q4 sees Whitbread end the year up 6%, after 'promising' something much worse for most of it. But that's it for gains, and 4 "winners" out of 10 doesn't really cut it, I concede. Both Sainsbury and Braemar ended near enough where they started (down just under 3%), but thereafter the disappointments pile up like roadkill... Imperial Brands falling 11%, ITV losing 20%, Stagecoach giving up 24% and Capita's year of woe and warnings means it brings up the rear, some 25% down - with some small solace that it's the only one I still don't own for real (but watch this space!) How to rationalise this performance picture? Well, looking back at my original post, it seems I predicted it up-front a year ago - I quote... "a vague attempt at balance and diversification across the list, though it's probably still a bit too exposed to the UK economy - and hence any further Brexit downturn. Probably inevitable, given my usual bias towards 'value' and aversion to buying into momentum."The hope was that the Brexit 'deal', and consequent UK economic outlook, would clarify - and while there's finally some sign of that now, for most of the year it's remained mired in the mud of uncertainty and ungentlemanly exchange. There is also the (related) theme of 'Value' staying out of favour - albeit with 'green shoots' starting to appear just as the snow comes tumbling - and getting ever cheaper over the year as the market found reassurance in "reassuringly expensive" havens of 'Quality' and 'Momentum'. So what for 2018? "Double-down" on the combo of cheap UK and underappreciated Value, in the expectation (or 'hope'?) that "this time NEXT year, Rodney".... or capitulate and jump on the market bandwagon, trusting the wheels stay on for another 12 months? Anyone following my thoughts for any length of time will know the answer ... but either way, all will be formally revealed in due course with my Top Ten for 2018 - as I always promised, and likewise enourage others to participate.FWIW my own 'real' portfolio fared better for 2017, up c.11.5% (total return of c.15%). Very nicely outperforming FTSE 100 (+7.6%) and All-Share (+9.0%) in both price terms and their total returns of some 12-13%, though lagging the Global Market return of 20%. Given I've owned 9 of my "Top Ten" stocks for most of the year, and that I didn't set out to pick bad stocks, you can deduce that much of my performance came from unexpected quarters... as good an advert as any for diversification - of one's own thought processes and
long term hold
28 Dec 2017
Re: Interims The stock is flying here .. anyone have any idea why?
long term hold
22 Nov 2017
Re: Interims Very good numbers .. and the stock hit 116p at one stage today before falling back .. interesting !
Bill1703
20 Nov 2017
Re: Interims "... Looks pretty good, what will be the reaction?"Muted, I would say... effectively no change from last week's closing level, as we speak.I agree, the results at least look good, pretty much on all key metrics... but with a couple of caveats, in terms of the underlying direction of the business. They are still recovering from a pretty significant slump, hence the positive "growth" figures have to be viewed in the context of the lower previous base... and within the H1 figures, Q2 was quite a bit weaker than Q1. The latter is pretty much in line with the general industry experience, of course, but it's still a trend the market will latch on to, as is its way.All that said - plenty of evidence that new management has a firm grip on the key moving parts of the business, and that financial performance is responding to this.One big positive for me - extremely strong FCF in H1. Almost certainly exceptional and likely to fall back in subsequent periods, driven (partly) by big positive working capital improvement - but still, it's further (and possibly underappreciated) evidence of this renewed management grip on the business.Still too cheap for me, in the context of both delivery to date and the evidence of management control - but we will doubtless now have to wait to see how they get through Xmas.
gamesinvestor
20 Nov 2017
Interims Looks pretty good, what will be the reaction?Financial Highlights:· Total revenue up 5.0% to £97.8m (FY17 H1: £93.1m)· Combined LFL sales growth 4.3%; store-only LFL sales up 1.6%, online sales up 38.6%· Product gross margin remained level with the same period last year· In line with Board expectations, profit before tax of £4.2m (FY17 H1: £2.0m)· Basic EPS was 6.8p (FY17 H1: 3.1p)· Inventory levels at £23.5m compared to £24.8m at the end of FY17 H1· Net cash of £14.9m at the half year end (FY17 H1: £9.8m) · Interim dividend of 2.5 pence per share (FY17 H1: 2.5 pence) Operational Highlights:· Grew market share in a difficult trading environment· Improved cross-functional working has led to progress in each of the Company's five key strategic areas - product, online, loyalty, stores and systems/processes· Product highlights include a relaunched, higher quality, more authentic, denim range· Strong online growth, driven by multiple improvements to customer experience and supported by stronger product ranges· Successful launch of in-store ordering takes Bonmarché a step closer to being a true multi-channel retailer and is popular with customers and store colleagues alike· Progress continues on system upgrades expected to deliver longer term operational and customer experience improvements
Bill1703
03 Oct 2017
Re: 2017 Top 10 Stocks - Q3 update Having now reached the end of Q3, it is again time to "own up" on YTD performance for my previously published 2017 Top Ten... Having just edged ahead of the market by end Q1, and outperforming decently over Q2, I am disappointed and (moderately) shame-faced to report that Q3 has been a struggle, pretty much throughout. The portfolio is still just about above water in absolute terms YTD (+0.3%), but with the markets holding onto modest gains over the quarter, it means I am now underperforming the FTSE 100 by nearly 3% YTD (and around 4% vs FTSE All-Share).Star performer is now Card Factory, and not for the first time - despite recent wobbles, up 22% YTD. But after that, success stories are thinner on the ground than they were - it's perhaps relevant that the original 'speculative' plays, Braemar and Bonmarche, come next (up 13% and 9% respectively), and then decent returns are sustained by both Capita (up c.6%, albeit well down on where it was at Q2) and Vodafone (up around 5%). So half the portfolio is at least showing gains... and I probably also get a "pass" with Whitbread, which is breaking even, near as dammit (-0.3%). But after that, the tale of woes unfolds in chunky increments... Sainsbury down nearly 5%, Imperial Brands a full 10%, ITV losing 15% (at least, better than it was) and Stagecoach still lagging the lot, now just over 20% down. For full disclosure, I continue to own 9 of the 10 stocks (to varying degrees of 'happiness'), and while Capita remains on the "watch and wait" list, I have yet to bite... maybe in Q4? Maybe not...Needless to say, I remain optimistic for Q4 - well aware that I am now in the 'last chance saloon' when it comes to salvaging my performance (and my pride), for the 2017 'competition' at least. I will not deny outright ropey stock selection, at least in one or two cases, but I think there is a wider theme at play... 'Value' still out of favour and just getting cheaper as the market hides in reassuring (and "reassuringly expensive" 'Quality'. As such, it's a broader tide that I think will turn - and indeed it could at any time, and with it (I am sure) my portfolio... but whether it'll be by the end of Q4 or later, we can only now hope and wait. But a big juicy takeover bid wouldn't do any harm... surely all of ITV, IMB and VOD cannot end yet another year without the long-rumoured (and long-overdue) tap-on-the-shoulder!? Until such time, it will likely remain the familiar story of (distinctly) average fund managing - just about managing to avoid losing your money, but failing to beat an index...
Kool Keith
27 Jul 2017
update Good update, hence the 9% increase as I type.Total sales for the 13 weeks ended 1 July 2017 increased by 7.6% against the corresponding period in FY17. Store LFL sales increased by 4.2% and online sales increased by 39.0%
Bill1703
19 Jul 2017
Re: 2017 Top 10 Stocks - H1 update "Bill - do know how big an expense this is, an what length of leases they have committed to?"Games - looks like roughly £20m for stores (land and buildings) operating leases. I have glanced through the latest Annual Report - no disclosure I can see on total or average lease length, etc. Other than some vague comments on "sensible" rental rates and "flexibility", ability to close stores as required, etc.They also refer to IFRS16 (the accounting change your refer to), which they'll have to report under from FY 2020... easiest to just quote it directly:"This amendment is effective for the 52-week financial period ending 28 March 2020 and will require a significant change in the accounting and reporting of leases for the Group. The standard will require lessees to recognise assets and liabilities for all leases, with the exception of low value leases or where the lease term is 12 months or less. The impact on the Group is currently being assessed and it is not yet practicable to quantify the effect of the standard on these consolidated financial statements."
gamesinvestor
19 Jul 2017
Re: 2017 Top 10 Stocks - H1 update ""Sure, it's a fairly big expense...""Bill - do know how big an expense this is, an what length of leases they have committed to?Games
Kool Keith
14 Jul 2017
Re: 2017 Top 10 Stocks - H1 update Thanks Games for posting the questions and thanks Bill for the detailed reply.
Bill1703
14 Jul 2017
Re: 2017 Top 10 Stocks - H1 update Games - perfectly pertinent questions, for the most part! And the need to ask them tells you why it trades on the valuation it does - and why my own modest position is quite consciously a speculative one! But on balance, I feel the medium-term risk/reward is in my favour..."... with 327 shops here, how big an expense are the operating leases, which will need to be capitalised at some point when they change the rules in 2019?"Sure, it's a fairly big expense... though the 2019 change is a major red-herring from a market context IMHO. It's an accounting change and economically neutral, it's something we've known about for a long time, and investors - and rating agencies - have been looking at the underlying picture for years. So I don't see any value impact from 2019... I recall other 'big' accounting changes over the last 30 years or so, which saw a lot of apprehensive debate in advance, but which proved to be total non-events in valuation terms.Then there is the debate... are leases a liability at all, or an asset (see the Wolfson treatise on this from Next's most recent report). It's sensible to keep an eye on the potential liability, of course - but not to ignore the earnings and cashflow generated from them, as long as you are trading profitably. I think the key (again, as per Wolfson) is to maximise the flexibility of your lease portfolio, so that periodic downturns can be managed. And the supply/demand economics of high street leases will only improve as more retailers go to the wall or otherwise vacate..."Given that profits and cash have halved over the last couple of years, how long (controversial statement coming) before they go bust, if they can't turn it around?"Would be foolish to say that BON will definitely survive while saying, as I just have, that various others will not... If I was certain, I'd be buying a lot more of it than I have! But they have a rock solid balance sheet, no debt nor pension liability, and still generate good cash even on reduced profits. I'd say they are in a better place than many - but clearly not immune, if sales are indeed in inexorable decline (though trading has been more stable in the most recent period). "... like for like sales are falling over 4% at the last count, which seems dangerous with such high operational gearing... implying that they are not only losing LFL sales, but they are building up an even bigger potential deficit by adding new stores, somewhat naievely I consider. Given also that costs have risen in all areas except distribution, it doesn't look like they have someone at the helm who knows how to impact that side of the business."I take the point about falling LFL, though less so on new stores - particularly where these are secured on more attractive lease deals (as above). On costs, all retailers are facing most of the same multiple headwinds (inter alia: the NLW, higher COGS due to GBP depreciation, business rates), but there is every reason to expect these to drop out of the equation - if not actually reverse - pretty quickly.FWIW market forecasts indicate pretty decent growth in EPS for both this year and next... clearly I'm not going to bet the farm on this, but if they do achieve anything close to this, I think a significant improvement in the current rating will be an inevitability. "Also does the new CEO (an ex-buyer) have sufficient gumption to get the online business (where most retail profits seems to be heading) up to a decent level -- and do over 50's shop online enough to make a difference?"On the first, only time will tell - they are making reasonable progress online, but as you say, it's still a small part of the overall biz (as it is, to date, for most retailers). And as for the over 50s - an interesting question, and one I have some first-hand experience of! My impression is, a 50 year-old today is shopping a lot more online than a 50 yr-old five years ago, and the 50 yr-old of five years time will
gamesinvestor
14 Jul 2017
Re: 2017 Top 10 Stocks - H1 update Bill -- with 327 shops here, how big an expense are the operating leases, which will need to be capitalised at some point when they change the rules in 2019?Given that profits and cash have halved over the last couple of years, how long (controversial statement coming) before they go bust, if they can't turn it around?12 months -- 2 years?What's worrying here, if you are a shareholder of course, is that despite increasing revenue from £179M from 2015 to £190M in 2016-17 - like for like sales are falling over 4% at the last count, which seems dangerous with such high operational gearing.During that period, net income has exactly halved and costs have risen sharply, implying that they are not only losing LFL sales, but they are building up an even bigger potential deficit by adding new stores, somewhat naievely I consider. Given also that costs have risen in all areas except distribution, it doesn't look like they have someone at the helm who knows how to impact that side of the business.Also does the new CEO (an ex-buyer) have sufficient gumption to get the online business (where most retail profits seems to be heading) up to a decent level -- and do over 50's shop online enough to make a difference?Online grew 2.2%, but that's peanuts and I'm guessing from a very low % of overall sales.Games
Bill1703
30 Jun 2017
2017 Top 10 Stocks - H1 update Having reached the end of Q2 and therefore H1 2017, it is time again to "own up" on YTD performance for my previously published 2017 Top Ten...Having just edged ahead of the market at the very end of Q1, the list has spent most of Q2 outperforming decently, albeit somewhat erratically with different stocks putting in a strong run at different times, only to fall back again. But despite a weak-ish end to the quarter and first half, I am pleased to report that it is still up 4.4% overall YTD (vs +3.1% at end Q1)... outperforming the FTSE100 by 2.0% and the All-Share Index by a slightly slimmer 1.0%.Star performer is now Capita - would you believe - up a full 30% YTD (and of course, the only one of the Top 10 I still don't own myself). The erstwhile magnificent Card Factory (+17%) has lost some of its lustre but holds on to a solid second place. After that, other decent returns were recorded by Vodafone and Bonmarche (both up c.9%) and Whitbread (up 5%). Braemar and Sainsbury's have just about held onto positive gains (up 1-2%), albeit a tad below the market, while my three "losers" are now Imperial brands (-3%), ITV (-12%) and Stagecoach (-13%, most of it in recent days - annoyingly - post underwhelming figures). For full disclosure, I continue to (mostly) happily own nine of the 10 stocks - I may now have missed the boat with Capita, though wouldn't be amazed to see it track back again with a number of outstanding issues still to play out. And I have recently doubled up on my holding of ITV, which is looking more and more the outstanding value play for H2 2017 (and a nice overseas take-out bid wouldn't go amiss).Even in the current fragile and nervous market I remain optimistic for H2 - though I should probably bite your hand off for another half of marginal outperformance... god knows, it's good enough for most professional managers (and better than many can manage), and my fees remain highly "competitive" (I know my worth, or lack thereof).
II Editor
20 Jun 2017
NEW ARTICLE: Stockwatch: A 7% yielding bid target? "Value opportunity, or trap? Discount clothing retailer LSE:BON:Bonmarche is paying a 7.1p dividend for its latest year to 1 April, implying a yield of 7.2% both for this year and next.Profits and like-for-like revenues are down as Bonmarche ..."[link]
Bill1703
03 May 2017
Re: Congratulations Bill Well, Casa, they've certainly had a bit of a bounce... how sustainable this will prove is anyone's guess.At least, in my 2017 Top Ten they have gone from chief laggard to the top of the class (+24% YTD) in short order. This was always going to be a speculative and potentially binary one, either far too cheap, or oblivion...Difficult to say exactly what's behind it, some kind of reappraisal post trading update, and possibly some genuine institutional buying as a result... My contacts in retail analyst world tell me it's a "c*** business", but no reason to think it's going bust... for now. In which case, the SP trend makes sense and there could well be more to come, but hard to say what the upside scenario is from here. I am happy holding my (deliberately small) position here, but conviction and confidence is necessarily measured!
