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Decision Journal
galumay:
I decided to add to the ADA holding, price has been drifting around the low $2-90's so it averaged the cost down a smidge and was an allocation of cash from dividends and tax return.
I have also been having an internal battle trying to decide whether to sell some holdings to move the capital into better quality investments, both in the SMSF and the personal portfolio.
I have been mulling over selling ANZ, WES, QBE, MOC, CAB & WPP, I bought ANZ & WES because they are 'blue chips' and i thought at that stage I needed some blue chips in the portfolios. In hindsight they have both gone sideways for a couple of years and I dont see any likely growth in the short to medium term. QBE I bought because I thought I should own an insurer, hopefully I am getting over these compulsions to hold specific sectors!
MOC, CAB & WPP are all in the personal portfolio, CAB I should have sold when they were well over $4, would be happy to take a small loss and move the capital to a better home. MOC has been another sideways drifter, I worry about the exposure to the housing 'bubble' and would probably be more comfortable not holding. WPP i bought when they were SGN and it was a turn around punt, I thought they had been unduly re rated and presented opportuinty for a quick profit. In the end the profit (turn around) took longer than i expected, picked up some divvies on the way but I dont have a compelling belief in them long term.
So far the only move has been to sell WES, made a very small profit plus the divvies over the time invested.
The capital is probably going to find a home with my latest discovery from research, REH, Reece the plumbing supplier, great financials, another fully valued company at current prices but as with ADA and TNE, strong recurring growth means the premium is likley warranted, again nearly debt free, great cash flow conversion, very well run business, very tightly held by family management. All the things I like to find!
galumay:
Sold WES for $43.905 and bought REH for $44.975. My prediction is that REH will demonstrate more growth in earnings and hence SP while also being more recession proof than WES.
Continuing to consider selling ANZ & QBE in the SMSF and ANZ, CAB & WPP in the personal portfolio.
galumay:
VRS - I have found a new company that I really like the business, in the mining services sector but well diversified.
The core of the business is a roll-up model of acquired premium survey companies, so surveying, design, town planning etc.
They also provide non process infrastructure construction and maintenance services for government, resource and related industry sectors. In-house capabilities cover design and construction, hydraulics, maintenance, communications and asset management. This was the core of the business before they developed the strategy of entering the Surveying sector via the acquisition roll-ups.
The metrics all look good for the business, the only issue i discovered in my analysis was
"so far the only real concern I have is that the profit for last year is inflated by about 100% or $10m by tax benefits- including a one off due to overpayment of tax previously.
I have tried to price the impact of the tax benefit. Overall the income statement shows tax benefits of $9.75m, when you break this down its hard to separate out the way the $7m tax credit impacts the bottom line - the AR says the impact is $4.2m on income and $4.2m as a deferred tax asset on the balance sheet. (which i can't get my head around, I suspect they are offsetting the $3m tax that otherwise would be owing)
I have assumed an impact of $4.2m on NPAT which means when you take the one off out EPS drops to 5.8c from 7.4c
It still looks very cheap on those metrics, I just wonder how the market will react when the next report shows a significant drop in NPAT due to the normalising of tax benefits.
(Posted elsewhere & quoted)
I will enter by picking up a small parcel in our personal portfolio.
galumay:
Sold out of ANZ in the SMSF, that allowed me to build a larger position in TNE which had fallen since my initial entry, and also take a new position in SDI, a dental products manufacturer. SDI is basically a family business gone public, all the things I like, very tightly held by owners and managers, low debt, solid profitable business, flying under the radar due to small size of company.
It was brought to my attention by an online friend and fellow investor who lives in China, Andrew and I share a number of investments in various companies and obviously have a similar investment strategy. I have spent a month or so researching the company and although its already had a strong run in SP, I think there is plenty of growth to come. Bought in at $1.055.
I have an IV of around $1-1.20 based on past earnings and cash flow.
galumay:
A decision that I didnt document - and was more impulsive than I have trained myself to be, AHZ released an announcement that they had received FDA approval for one of their improtant medical valve repair patches and the market spiked up, as this seemed to me to be final confirmation that real profitability was arriving and it was moving from being a speccy to an investment grade company, and as our average cost of holding was higher than the price AHZ was trading at, it seemed the right decision to average down the overall cost of our positions in the SMSF and personal portfolio.
I ended up getting more at $0.465 which reduced our average cost to nearer $0.50. The shares traded as high as $0.55 and I was congratulating myself on my decision!
Then 2 days later they released great news about further success with the herpes vaccine trials and I fully expected another leg up in the share price - but it just kept falling and settled back around the $0.40 mark - something I now realise it always seems to do after good news - jumps up and then settles back in the previous range - this is the second time I have been cought with this behaviour by AHZ's share price so I am obviously a slow learner!
Today the 4c released and they fell hard again! Nothing but good news in the 4C and on track for cash flow positive by the end of the year. I resisted the temptation to find some capital to buy more at $0.375 - they will probaby drop back to even lower based on previous experience!
Correct! they have traded about 33c in the mean time up to the end of the year message from the company - which really had no news, just confirmation of guidance and they popped back up to 36-37c
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