I decided to do a review of the whole portfolio yesterday, and colour-code the shares by category. I'm hoping this will give me an indication of where I should be considering a sell and what my target prices should be.
Red - sell immediately even at a loss
I'm happy to say there are none in this category - it's reserved for those that are clearly doomed
Amber - stinkers that I never should have bought and should sell as soon as they get into profit
BLUR:Blur Group. Purchased when I first started, and naively believed all I had to do was find a share price that was the lowest it had ever been and wait for it to go up. Now I understand that there's a good reason these were the lowest price they had ever been, and that's where they remain. Fortunately I also failed to understand the impact of spread and commission on these shares, so only bought £100 worth, so I don't feel any fear of losing loads of money, and can keep them as a reminder of how rubbish I was at the beginning. They are actually up 10% from when I bought them, but thanks to the gigantic spread and commission I'm still down £25. I'll flog them as soon as there's a modicum of profit, which may never happen.
TRK:Torotrak. I could write almost the same for this share as I did for Blur. They've invented a great KERS system but nobody wants it. They continue to make loss after loss and show no signs of turning around. My only hope is for a takeover - maybe VW will need to do something drastic to help their emissions problems! They have dropped 4% so I'm only losing £35 and will sell if they ever pop up into profit.
Pale red - High risk companies that will either bloom of collapse. Hold through the bad times in the hope of future glory
AFPO:African Potash. I still believe in the business model, and feel sure when everything falls into place there will be huge profits. They have dropped 11% since I bought them and are losing £163, but by next year I expect them to soar. I'm almost tempted to buy more at this price, but it is high risk so probably best to stick with what I have
JLP:Jubilee Platinum. Again, I still believe in their business model. They can produce platinum with less cost than their competitors and should deliver a profit even at current very low prices. These have dropped by 5% since I bought them, but are only down £55 with the promise of good news coming soon
RDT:Rosslyn Data. These launched just over a year ago at 40p a share and have dropped to 12p before a slight recovery to 15p. I bought these because they are a new company with no debt and I believe strongly in the future of hosted cloud services - especially business intelligence. They have some gigantic customers like Xerox, Serco and Weir Group so I seen no reason why they shouldn't become highly profitable. However they might not, so it's in the high risk category. The share price has dropped 9% since I bought them, losing £84
SXX:Sirius Minerals. This is a very long term investment. They have the rights to mine a vast potash resource in Yorkshire, but have billions to spend to get at it. I only invested £185 because of the risk it will never happen. If it's a success I won't make a lot, but it's nice to have a small stake and see what happens. Currently the shares are down 2% from when I bought them losing £25
WRES:W Resources. This is a tungsten mine in Spain. It's another company that appears to be able to produce the metal at a low cost so should be able to turn a good profit once they get going. Shares are less than 1p each so I was able to get 60,000 which is by far my biggest holding. If they ever pay dividends it will be great! Unfortunately these have dropped by 52% and I'm £184 down, but I'm confident they will turn around.
Salmon - Not lighting up my new spreadsheet the right colours, but with enough promise to prevent me selling. These are all companies I probably wouldn't buy now, but will hold until they return a reasonable profit
BA.:BAE Systems. They have a massive order book and I think are always going to be in demand. They fail on quite a few of my selection criteria. The 22.5 rule for market to book ratio times PE ratio comes out at 146.55 so fails horribly, and the debt is 20 times the annual profit when my cutoff is 3. However if you divide the enterprise value by the number of shares (my bottom line price) it comes to 680p when they are trading at 453p, so I'm sticking in there for a bit. The current price is pretty much the same as I paid for them, so I'm just down by the £25 commission, and their momentum is upwards.
GBG:GB Group. I bought these during a phase of chart watching. I figured if the chart was heading upwards, then there's sufficient momentum to jump on board and ride it. Once I plugged things into my spreadsheet I became more wary. Their PE value is 25 and I normally go for 15. They score 183 on the 22,5 rule so chronically fail that, and even the price based on enterprise value alone would be less than the current price.However, they are growing rapidly and when you factor in the growth rate of 20-40% then the shares could easily be trading in the 310-350p range as opposed to the current 267p. They have risen in value by 8% since I bought them, and so I am am £12 in profit. I'll review at around 320p.
HLMA:Halma. The first shares I bought, and intended to be my big safe pot with a nice dividend. They proceeded to tank and I was regretting this decision. They don't do bad on the spreadsheet, but the PE ratio of 27 and 22.5 rule of 138 would prevent me buying them now. However, they are a safe company and the price based on enterprise value would be 822p as opposed to the current 757p and with current growth rate 860p could be possible, so I'll hold on. They have recovered recently and are only down 1% so I'm just losing £38.
MSLH:Marshalls. These fail on lots of points. 22.5 rule is 70,
assets to price ratio of only 48% instead off 66%, price to net tangible
assets of 5.02 instead of 1.2, yet their growth rate is so spectacular
that I can't see the price stopping until past 500p. They have bucked the trend since I bought them, dropping 6% and so I'm losing £71 but it will turn around.
PTEC:Playtec. One of my most strongly growing shares, with an aggressive acquisition strategy and a promising future. They fail on the spreadsheet due to a 22.5 rule of 70 and assets only being 44% of price when I look for more than 66%. Share value based on enterprise value is over 100p less than current share price, however based on their growth rate could easily be 100p higher than it is now. For that reason I'm sticking with them. Their price fell consistently from the day I bought them, but has now bounced back and is 4% higher, resulting in a gigantic profit of £14.
Green - Fulfill most of the spreadsheet rules, but a few problems that are worth keeping an eye on, and would probably buy again or top up
LOOK:Lookers. Another one purchased based on the upwards chart, but this ticked a few more boxes than the salmon ones above. Biggest concern is debt 14 times profit and the 22.5 rule is 37 which isn't too far off. They are growing at 30% and show no signs of faltering, so I still think these could go up another 100p a share. They've dropped 2% since I bought them so I'm down £43 at the moment.
MMX:Minds + Machines. I recently topped these up with another 12,000 bringing my holding to 18,000. On the spreadsheet they fall foul of the 22.5 rule with 25 so it's pretty close, and based on enterprise value alone they should be about 40% less than they are now. However, they are just entering a marketing phase for the web names they purchased at auction, and are actively buying back shares with their excess capital. It's only a matter of time until they start paying dividends and I can still see this going up 500%. Having said that, although my first batch of shares have increased by 5%, I bought the second batch just before a drop and they are down 6%, so altogether I'm losing £126 at the moment.
PUR:Pure Wafer. It's hard to make out what's going on with this one. There was a disastrous fire at their UK factory and they have sold the site and taken the insurance money. That just leaves their US factory. As the sale of the site was built into their profits, it's hard to say what the growth potential is. They are so cash rich that their enterprise value is negative, so that screws up my calculation of the bottom line share price. However, they are due to return the profits from the sale of the UK site to shareholders in a gigantic dividend, so there's no way I'm selling. The share has risen 5% since I bought it, but that's the same as the spread so I'm still down by £21 of the commission.
WRL:Wentworth. I purchased these because they are a gas producer that's actually making profit, and they had just started delivering gas in Tanzania, so should be about to make even more. They have low debt but are trading a higher than their current enterprise value. However, if the profits increase now the gas is flowing, my hopes are this could go up by 300%. Currently it's up just 2% but with a 3% spread and commission I'm losing £34
Light purple - Fulfill all criteria on my spreadsheet except one or two if by small margins
AFG:Aquatic Food. This only fails to turn everything green because of the debt being 5.6 times profits. The share price hasn't changed once since I bough it
- in fact there hasn't been a single trade since mine. I can only assume people are afraid of investing in anything to do with China - but they just earned a big contract to supply USA, so I don't understand the reticence. With them being a fairly new company there's not a huge amount of background data to go on, but it all looks good to me. They have announced their first dividend already, and my target it 200p. I bought the shares at 35p but thanks to a ridiculous 30% spread, even though they remain at 35p I'm losing £263 on paper. Bloody annoying for my stats, but I'm hoping something will happen at some point to generate some interest in this share.
BDEV:Barratt Developments. One of the first shares I bought and meant to be a safe bet. I'm still excited about the gigantic dividends that are coming, although I only hold 100 shares so won't get that much.They only fail on price to net tangible asset ratio of 2.32 where I go for maximum of 1.2. I don't tend to think of that one as too important though, especially when everything else is green. On enterprise value alone my baseline is 100p more than they are currently trading, and with growth continuing then I think there's long term potential for hitting 900p. The problem is there's a panic on house builders shares at the moment so they have dropped 19% and I'm losing £130. I'm absolutely convinced this is nonsense and will wait patiently for a turn around.
BYG:Big Yellow Group. One of my most recent purchases. They only failed on price to net tangible asset ration of 1.57, which is only a tiny failure. Debt of 3.2 times profit is teetering on the limit, but I think that's allowable. I still see these as big winners that have a long way to go. They dropped 3% since I bought them, so I'm down £102 but that's just because the FTSE has had 3 bad weeks.
CRL:Creightons. Another one that only fails on debt, being 6.3 times profits. This company have a tiny enterprise value of £3.7m so are currently trading fractionally above this value at 8p. My target is 14p which would be a 75% gain. However, I think this one could be worth hanging on to, as it must be a stong contender for a buy-out. The shares have risen by 6% since I bought them, but that rise was entirely down to my own purchase. The spread is a mental 21% so I'm down by £73 until that narrows.
GLEN:Glencore. My nemesis share. If only I'd just watched as the price plummeted instead of jumping on for the ride. I was so convinced it wouldn't get lower - despite all the evidence of falling copper prices, Chinese slowdown and epic debt. Amazingly, the share still sits in my light purple category thanks to debt being 14.8 times profits. Everything else is positive, and I'm still firmly convinced that when the panic is over, they will climb back to the 400p area. Currently they've dropped a horrific 88% and I'm losing £734. I vow that the day these get into profit, I'm going to have such a party!
NTBR:Northern Bear. These only fail on debt of 7.5 times profit, but they are actively paying it back. They also have a return on capital employed of 7.22 when I prefer 10, but that's not too troubling. Everything else is lit up green, and enterprise value pricing would be 74p as a baseline, and with current growth I see no reason why it shouldn't hit 130p. Current price is 45p which is a drop of 21% from when I bought it, and a loss of £142. It's top of my top-up list should I get some more capital - and don't get distracted by a new shiny share.
RDW:Redrow. My third housing share, and most recently purchased despite the panic hitting the sector. The price to net tangible assets is 2.03 rather than 1.2 else this would be in with the deep purples. The enterprise value is 80p more than the share price, and my target is 900p. The share price hasn't budged since I bought it, despite the poor performance of other house builders, so I'm just down £28 for spread and commission
RNK:Rank Group. These would be straight green if not for debt being 4.7 times profit and 22.5 rule being 51. Everything else looks good, and they continue to grow. They still sell below enterprise value by 10p and with current growth I think they could easily climb to 350p before I review them. They have increased by 9% since I bought them so this is my best performing share with a £109 profit.
SSY:Scisys. These are almost deep purple, as they only fall down on price to net tangible asset ratio of 1.6 instead of 1.2. For the 22.5 rule they are an encouraging 9.46, their ROCE is 11.8, and PE ratio only 9.55. Their shares plummeted in value from 90p to 60p in June after releasing a profit warning, but this was down to a one-off problem project. Since then the share price has grown slowly but steadily by 3%. However with a 7% spread and commission, I'm still down £48. I'm confident it will soon perk up and go to profit.
TND:Tandem Group. I bought this because they have a big Star Wars franchise and when the new films come it it could go bonkers. They only fail on debt being 8.5 times profit and price to net tangible assets being 3.56 rather than 1.2. Their PE ratio is a tiny 5.79 and they are trading at 100p below enterprise value, with growth potential to easily double in value quite quickly. I only bought them a few weeks ago and they have already increased by 5%. However, with an 8% spread and commission I'm still losing by £50. Not for long I hope!
TW.:Taylor Wimpey. These were purchased just before I started using the
new spreadsheet. They just qualify as pale purple because although they miss quite a few of the scores, it's only by a fraction. Their 22.5 rule score is 44 which is their main miss, but the others are very close to green. Asset to price ratio is 64% instead of 66%, and price to net tangible asset ratio is 2.23 instead of 1.2 - I guess that's a bit wide of the mark. Current price is fractionally above enterprise value, but with their growth rate my target is still 250p from the current 198p. Unfortunately the house builder panic has hit this share badly and it's down 15% over the last few weeks, so I'm losing £191.
UCG:United Carpets. This one only fails to light everything up green on price to net tangible asset ratio of 2.35 rather than 1.2. It has a massive ROCE of 26%, hardly any debt, 10.7 for the 22.5 rule, and PE ratio of 8.64. It's a very small enterprise value of only £7.33m so shares are a few pence over this, but it also means the business is ripe for take over. My target remains 19p before I review it. Currently the price is up 7% from when I bought it, so I'm just £18 down thanks to the commission.
UTV:UTV Media. Mostly green on the spreadsheet except for debt of 6.6 times profit and ROCE of 8.77 rather than 10, but it's not far off. Everything else looks healthy and there's a potential big dividend on the way if the shareholders approve selling off Ulster TV to ITV for £100m. Given that it's currently making a loss, I can't see anyone objecting. My target for this is 260p once the dust settles after the sale. It's up 4% from when I bought it, which means I'm only down £8 from the commission.
Deep purple - my top shares that turn every single box green in the spreadsheet.
JLG:John Laing Group. Ah the joy of a sea of green. All pointers are to a very healthy company with a PE ratio of 4.74 and an enterprise value of 244p a share only trading at 190p. My target is 460p. The chart is most odd, with a steady climb after listing from 200p to 230p followed by a plummet to 190p. It appears to be jitters following on from a dodgy project, but since then it's been good news and a maiden dividend. The price is static from when I purchased, so I'm down £35 for spread and commission.
KIBO:Kibo Mining. Another beautiful sea of green, which is very rare for a mining company. PE ratio is only 4.5, they are already making profits, and their mining to power project means they will be generating electricity from the stuff they're digging up. Africa is the biggest growth area at the moment, so things are looking promising. Unfortunately the price is exactly the same as when I bought it, and with a 13% spread I'm down £71, but never mind.
RCI:Rapidcloud. PE ratio 5.12, only listed 2 years ago, and the chart is a horror to behold as it plunges downwards ever since. 110p to 25p in 2 years! Strange then that my target is 113p which would put it right back where it started. I think the downturn is partly the Asia effect, and partly the fact Malaysia is slapping a great big tax on them which will dent profits. However, they are growing and increasing dividends, so I'm hoping now is the right time to buy. Slightly tragic that the price has dropped 3% and with a 12% spread that leaves me down £156. The word Grrrr springs to mind.
SGRO:Segro. Another new share and another sea of green, with PE ratio 4.56, 22.5 rule score of just 5, ROCE of 14.75, debt 2.9 times profit, enterprise value 200p a share more than the current price, and steady growth. A dividend yield of 3.38% isn't to be sniffed at either. Inexplicably the shares have dropped by 8% since I bought them, so I'm losing £101. There seems absolutely no reason for the drop, other than the price does have a history of wild fluctuations. In fact, with hindsight I should have spotted that and waited a while, as it's been 420p where it usually drops to before taking off again. Long term the graph is a steady rise, so I'm reasonably relaxed.
SHB:Shaftsbury. This one sneaks into the deep purples. In theory it should be pale purple as the price to net tangible assets is 1.35, but it's so close to 1.2 I've let it in. PE ratio 5.71, ROCE 17.16, 22.5 rule of 7.43, debt to profit ratio of 1.7, enterprise value of 200p a share more than current price, and rapid growth over the last 3 years. The price had gone up nicely, but that's dropped off recently to a rise of only 1%, putting me £9.60 down when I was over £100 up a few weeks ago. I'm sure it's just a blip.
TON:Titon Holdings. This is a FTSE Fledgling company and only has an enterprise value of £7.22m, but profits are growing and they pay regular dividends. PE value is only 10, debt is 1.3 times profit and the 22.5 rule is 8.8. Although trading quite a way above the enterprise value, the current growth rate could take the price to 200p. The price has risen by 5% since I bought the shares, leaving me with a whopping £4 profit - Woohoo! Nice to end the review on a positive note.
That's it - phew. A bit of an epic, but a very valuable exercise. I moved several of the shares from one category to another as a result, and it's been a great opportunity to check that my original views still stand. I'm happy to say it's made me even more keen to keep hold of every one of them, which means I'll have to put my plans for buying into a gold mine on hold for a bit longer...
