Portfolio Review - January 2016

I figured now would be a good time to review the portfolio. If all is well in the world, this will be it's lowest point for some time to come, so I need to reflect on why I bought each share and be sure I understand my strategy for them. I've copied the previous review, as  for some shares my opinion will not have changed.

The colour coding is the same as before

Red - sell immediately even at a loss
Still none in this category. I suspect there never will be as I would have already sold them before the review

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.  I regret not ditching them when they were only losing spread and commission, as they have now dropped 54% and are standing at a £79.90 loss and trading below their Net Tangible Asset value. I'll keep them as a reminder to be more careful and study the fundamentals before buying.
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 41% and are standing at a £64.88 loss so I don't hold out much hope.

Pale red - High risk companies that will either bloom or collapse. Hold through the bad times in the hope of future glory
AA:Alcoa. I've counted these as pale red as I don't have the all the information I need to properly assess an American stock. However, they did not make a profit last year and only have 25% free cash flow. Not sure how that works if they didn't make a profit. Anyway, I bought them for my pension fund because of their collaboration with Renault/Nissan on aluminium-air batteries. I'm regretting not opting for ABB instead, as they have done significantly better since. However, some top funds have bought into Alcoa recently and they are planning to split the refining part of the business from the production side of the business. Given the huge contract to supply Boeing I'll be opting for the production side of the business when they do the split. There's also a dividend on the way in a few weeks, which makes the 24% slump and loss of £210.27 a little more bearable.
AFPO:African Potash. I still believe in the business model, and feel sure when everything falls into place there will be huge profits. Last time I did a review they had dropped 11% and now they have dropped 30% and are losing £246.86. Since the last review they have sold some product and just this week were meeting with the President of Uganda, so things could easily turn around.
APC:APC Technology. These don't do too well on my analysis spreadsheet. Debt is way too high, zero free cash flow, poor return on capital invested. However, they have a subsidiary called Minimise which supports companies in meeting sustainability targets. Earnings in this part of the company are doing really well, and the Paris summit  has promised loads of money for tightening up companies' carbon footprints, so I believe this could easily take off in a big way.
DOTD:DotDigital.  These are over priced for the profits they currently earn (PE ratio of 30), but there's a strong indication their profits are about to soar. They have been recently made Global Platinum Partners for Magento which is used all over the world for e-commerce, and this should open up a massive customer base. They have increasing revenues, are cash rich, have no debt and their dividend ex-date is in 8 days which will granted only deliver £7.20 but will be good for my monthly cash profit stats.
FAST:Fastnet Equity. A gamble with some dividend money that was stuck uselessly in my ISA. They are an oil company who sold everything just in time and are now looking for a Biopharma company to invest in. It may go pear-shaped, but given their good fortune in selling up at the right time, they may carry that forward. The share is up 4% which means I'm down £22.00 for spread and commission. It was only £145 investment so I've not got a vast amount to lose.
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. They have a deal with Mitsubishi which they had to win over other competition, and they would have insisted on evidence of the ability to deliver. I have these in two accounts. The first has dropped by 14% and is losing £107.90 and the second is at the same price I paid, so losing £28 for spread and commission.
LLOY:Lloyds Bank. I think this will soon be promoted to a better colour, but based on the fundamentals I have to regard it as a high risk speculation purchase. They have no free cash flow, ROCE of 0.21%, assets to price ratio of 1.1% when I look for 1.5, 22.5 rule of 44.11, PE value of 38 instead of 15 and lots of debt. However, they are picking themselves up after a torrid time and forecasting a return to dividends this year. I'm taking a bit of a risk that this is the bottom of their slump, and as these are in my pension fund there is no incentive to make a quick profit.
RDT:Rosslyn Data. These launched just over a year ago at 40p a share and have dropped to 12p. 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 29% since I bought them, losing £134.30. My patience will be rewarded...
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 19% from when I bought them losing £58.20.
TRX:Tissue Regenix. This is a speculative purchase, but based on a company that has its key product in clinical trial, no debt and a potential niche market worth $4bn. The price has remained stable so I'm just losing £38.48 from spread and commission. I may consider adding to this one.
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! At the last review these had dropped by 52% but now the loss is only 20% so they are £112.70 down.
WRL:Wentworth. These have been demoted to pale red as I think any oil and gas share has to be regarded as high risk, and they don't do well on my spreadsheet. I originally 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 no cash flow and some other measures are unavailable. I'm still hoping these could make a healthy profit, but currently they are down 17% and making £149.80 loss.

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. Happy to say I've either sold all the shares in this category or promoted them to green, so this category is now defunct.

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
ASHM:Ashmore Group. An investment manager specialising in corporate and external debt. They didn't turn my spreadsheet completely green, with a 22.5 rule of 36.59 and assets to price ratio of 44% when I prefer 66%, but they are making healthy profits, have no debt, and are returning a socking great dividend of 6.53%, some of which will appear in April. They are reliant on emerging economies, so have been hit hard by recent turmoil, with a drop of 19% and loss of £205.70. However, this turmoil will also give them new opportunities to buy debt, so I believe they will come out of it stronger.
GLEN:Glencore. Recently demoted from light purple and my nemesis share. I'm still wondering if I was mad for recently topping up with them. At last review they were light purple and only failed on debt being 14.8 times profits. Since then I've added more measures. They fail on ROCE being 3.93% when I look for 10, and free cash flow ratio of 13% when I look for over 50%. However, I'm still firmly convinced that when the panic is over, they will climb back to the 400p area. Currently the first purchase has dropped 55% and is losing £904.87 and the second purchase has dropped 14% and is losing £164.32. I'm failing miserably to detect the bottom for these shares. Maybe I should get some more...
HGM:Highland Gold Mining.  Three years ago these shares were trading at 200p before sliding all the way down to 40p in August. Since then they've been recovering gradually despite gold still suffering. When the inevitable turn-around happens, I have high hopes for these shares. Even if the share price doesn't recover for a while, they pay excellent dividends. They are green because their free cash ratio is only 32%, ROCE only 4.29% and debt a bit too high. Their current share price is about the same as when I purchased, so I'm just losing £25.90 commission and a bit of spread.
LOOK:Lookers. This one was initially purchased based on the upwards chart, but I like the business model and it ticks most of my boxes. So much that I bought more. Biggest concern is debt 14 times profit and the 22.5 rule is 44. They are however growing at 30% and show no signs of faltering, so I still think these could go up another 100p a share. My initial purchase is down 11% with a £102.15 loss, and my recent purchase is down 8% with a £149.57 loss, but this will soon turn around.
MMX:Minds + Machines. I don't know what to make of this share. It remains steadfastly stuck around the 8p mark despite the company buying back shares almost every day. I can only assume that it will take a few years of demonstrating the business model works, and ideally starting to pay a dividend for the price to increase. My first batch of shares have declined by 11% losing £88 and my second batch have declined by 20% losing £263 after I bought them at their peak. Unfortunately fear of doing this again has led to me missing out on a few other shares that have continued to rise, so I feel a little bitter towards this one - for now...
MSLH:Marshalls. These fail on a couple of key points. The 22.5 rule is 65.48, assets to price ratio of only 52% instead off 66%, price to net tangible assets of 5.02 instead of 1.2, yet their growth rate is good and my target is 400p. They continue to get good reviews from most analysts, and although I usually take these with a pinch of salt, there is good momentum behind this share. Unfortunately they have dropped 13% and I'm losing £124.78.
NTBR:Northern Bear. This is another one that has been relegated to green status from light purple. They only fail on debt of 7.5 times profit, but they are actively paying it back and a return on capital employed of 7.22 when I prefer 10. I let them off last time, but strictly they should be in green. My target for these is 145p but instead they have fallen 26% and are losing £172.85. I really don't know why. I should definitely top up on some more while they are so cheap.
PAF:Pan African Resources. This was one of my first gold mine purchases. I managed to buy them just in time to qualify for a £90.29 dividend, and even better than that they have gone up by 15% to yield a £195.79 profit. They are one of only 2 non-purple shares in profit, which says a lot about sticking to purple shares! I ought to buy more of these just for the 6% dividend. They do slip up on no free cash flow, ROCE of 7.2% instead of 10, and a little too much debt, but are close to light purple.
PTEC:Playtec. Probably my most annoying share. They were surging and in profit, but two acquisitions fell through at the same time and the share price plunged by £1 a share. They have tons of free cash available so I'm hoping another major acquisition is being planned, else a big dividend would be nice. They fail on the spreadsheet due to a 22.5 rule of 60, and assets only being 51% of price when I look for more than 66%, price to net tangible asset ratio of 6.86 when I look for 1.2 and market to book ratio of 3.84 rather than 2.5. They need to continue impressive growth to justify the share price. I've got a conservative 900p target but currently they are down by 11% with a £116.78 loss.
RNK:Rank Group. These have been demoted to green but only just. Debt is 4.7 times profit, 22.5 rule is 52.63 and market to book value is 3.72 rather than 2.5. They are probably my most consistent stock, hardly wobbling during the crash and just gaining a little every day. On current earnings they seem to be fairly priced, so it would be good to see some growth to justify the price continuing to rise. My target is 314p which is only 34p above where they are now. They have increased by 12% and are yielding a potential profit of £117.26 along with £20.00 dividends so far.
TND:Tandem Group. Another one demoted from light purple to green as I apply the criteria more strictly. I bought this because they have a big Star Wars franchise and was hoping they would go bonkers when the new film came out. 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 5.50 and have growth potential to more than double in value quite quickly. Unfortunately they have never been in profit. They increased by 5% initially, but with an 8% spread and commission my best result was losing by £50. Now they have dropped by just 4% but the impact is a £105.03 loss.
TW.:Taylor Wimpey. Yet another one demoted to green but only just. Their 22.5 rule score is 34.89 and their price to net tangible asset ratio is 2.23 instead of 1.2. These plummeted when there was a scare over the house builder bubble bursting, and each time they almost get into profit they slip back again. In my last review they were down 15% so the fact they are only down 9% now is an improvement, resulting in a £138.75 loss. I still have high hopes of meeting my 300p target.
UTV:UTV Media. Yet another demotion. I've been really strict! 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 being light purple. The sale of Ulster TV to ITV has been approved, so there will be a socking great dividend on the way at some point. It's currently up by 2% but with spread and commission I'm down £21.68.

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 deep purple because of the debt being 5.6 times profits. Tragically this share is suffering really badly from anti-Chinese sentiment. Not only the downturn in the Chinese economy, but a suspicion that Chinese stock on the AIM market is a scam designed to take the listing capital, drive the share price down to nothing then de-list. There's no doubt this has happened with other shares, but I believe this is different. They have a big contract to supply the USA and a new director has been buying 25,000 shares every month for the last three months. That's not the behaviour of a company plotting to de-list. The share has crashed by 43% with a loss of £623.90, but I'm convinced that after a few years of profit and dividends there will be confidence they are for real, and then the true potential will be unleashed. My target is 250p which would leave me £6,500 in profit. I can but dream...
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 nearly got demoted to green, as they fail on price to net tangible asset ratio of 2.32 where I go for maximum of 1.2 and had a 22.5 rule of 24.02. However, the drop in price has actually brought the 22.5 rule to 21.69 so they stay light purple. They have dropped in value by 13% and are costing me £112.60. I still think there's long term potential for hitting 900p, so will hang on in there.
BYG:Big Yellow Group. I didn't want to sell this share, but it sold automatically due to my failed experimenting with stop-losses. I did make a 9% profit of £169.03 plus £26.14 dividend, so I bought back in when their share price dropped. They are almost green thanks to my new measures, but I've let them stay as their price to net tangible asset ratio is 1.57, which is only a tiny bit above 1.2, and they have absolutely no free capital, but that appears to be because they are aggressively expanding and investing it all. They have always been volatile, and I bought them just before the crash so they have dropped 10% with a loss of £134.34. They'll soon bounce back.
CAML:Central Asia Metals. They specialise in Copper and Gold mined in Kazakhstan, but the commodities crash doesn't appear to have had the same effect on them that is has on most miners, at least up to the point I bought them! They lit up my spreadsheet apart from price to net tangible asset ratio of 2.42 when I prefer no more than 1.2, but everything else looks good, particularly when commodity prices recover. The main attraction is the stunning 8.45% dividend, although I'll have to wait until June for the first of those. They seem to have a very sound management team, so it was an ideal candidate for my pension fund. Unfortunately they are down 17% with a loss of £186.06 in just a few weeks. Roll on dividend...
CRL:Creightons. Another one that only fails on debt, being 6.3 times profits. This company has a tiny enterprise value of £3.7m so are currently trading fractionally above this value at 8p. My target is 15p which would be a 117% gain. When I bought it, I felt it could be a strong contender for a buy-out. Initially the shares climbed 6% entirely down to my own purchase, but even then with a spread of 21% I was down by £73. Inexplicably they have dropped 12% since then and are losing £98.39. I should almost certainly top up!
JLG:John Laing Group. These have been demoted from deep purple thanks to my new free cash flow measure. They have none. I don't quite understand how it works, but they seem to have everything tied up in investments. Anyway, the rest of their financials look great and point to a very healthy company with a PE ratio of 5 and directors buying shares like crazy. My target is 490p. Despite the mini-crash, the price is up 6% and £27.91 in profit.
KIBO:Kibo Mining. This is another victim of the free cash flow measure, demoting it to light purple as they have no free cash. 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. The price is up 6% from when I purchased, but spread and commission mean I'm still down by £28.83.
PUR:Pure Wafer. This is still in the light purple section because that was where it was before de-listing. They have returned 163p to shareholders and are due to return up to 25p in September when the share will vanish from the portfolio. It's registering as a small loss at the moment, but should make a £45 profit by September.
RCI:Rapidcloud. Another demoted due to zero free cash flow. PE ratio 5.12, only listed 2 years ago, and the chart is a horror to behold as it plunges downwards ever since. The decline has continued and it's painful to look at. I still 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 still convinced in the value of the company. Tragically it has crashed 65% and is losing £734.50. Ouch! I really should be topping up while it's so cheap.
RDW:Redrow. My third housing share, and the most recently purchased. The price to net tangible assets is 2.03 rather than 1.2 else this would be in with the deep purples. My target is 990p. There has been a 5% drop since I bought it, so we have a £78.31 loss, but it was in profit a few weeks ago and will be again soon.
SGRO:Segro. Yet another deep purple relegated due to no free cash flow - and again because they are aggressively re-investing. PE ratio 4.56, 22.5 rule score of just 5, ROCE of 14.75, debt 2.9 times profit, and steady growth. A dividend yield of 3.38% isn't to be sniffed at either. The price has been very volatile, and is currently down by 6% after the recent crash, losing £88.52. Long term the graph is a steady rise, so I'm reasonably relaxed and my target is over 1000p.
SHG:Shanta Gold. This would be deep purple if the free cash flow was higher than 34%. It's part of my move into gold mines and is 10% up on my purchase price. With a big spread and commission this is just £7.42 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 9.4, their ROCE is 11.8, and PE ratio only 9.52. They also have 87% free cash flow to operating cash flow ratio. 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, but is down by 1% since I bought them losing £43.90.
UCG:United Carpets. This one only fails to light everything up 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 also has a free cash flow ratio of 63% and has paid out £22.50 in dividends. 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 is 21p and I really should buy more. It's currently up by 4% but with spread and commission I'm down £18.28.

Deep purple - my top shares that turn every single box green in the spreadsheet.
CMCL:Caledonia Mining. PE ratio of 4.5, 50% free cash flow (just makes it), 18% ROCE, 3.12 for 22.5 rule, so all good. It's up 8% despite the crash and has £36.10 profit.
GVC:GVC Holdings. PE ratio of 6.8, 98% free cash flow, 26% ROCE, 13.9 for 22.5 rule. Also it's about to enter the Stock Exchange proper rather than AIM, which means loads of tracker funds will be forced to buy it and the price should rocket. Add to that rumours of an imminent acquisition and I ought to be buying more! It's gone up 14% since I bought in, making £129.85 profit so far.
SLI:Standard Life Property Investments. PE ratio of 5.6, 100% free cash flow, 10.8% ROCE, 7.66 for 22.5 rule. My target is 293p which would be 200% increase. Currently 3% up with a whopping profit of £3.22.
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 10.7, debt is 1.3 times profit  and the 22.5 rule is 9.2. Free cash flow is 68%. It was making me about £300 profit, but the crash has affected it and so we're now up by 9% with a £52.61 profit. My target is 220p from the current 89.5p.

That's it! Quite an epic now the portfolio is so big. Writing this down has made one thing very, very clear. Just buy the deep purple ones!! There are not many that qualify, but they are all in profit despite the recent crash. Stop messing around with speculative penny shares and buy some quality companies!! Here endeth the lesson.