Saturday, April 16, 2005
Bye Ben Bailey, fair well Fayrewood
Recent portfolio excitement (if you can call it that) reached a crescendo on Friday. Following Tuesday's purchase of shares in SVB, I took advantage of further price weakness in Fayrewood and price resilience in Ben Bailey, trimming my Ben Bailey holding and reinvesting the funds into Fayrewood at 112.5p.
I first bought shares in Ben Bailey in February 2003 for 178p each. I still have the stake purchased at 390p in June 2004, but sold my original position on Friday at 473p. Bailey's rise has made a huge contribution to overall portfolio returns over the last two years. Recently, the company has comprised over 30% of my portfolio, making a huge contribution to investment returns.
I sold Ben Bailey for the simple reason that a better opportunity came up elsewhere. I kept 40% of my holding to maintain portfolio diversity and for tax reasons I can't be bothered to go into.
Occasionally over the last couple of years I've wondered how I'd feel if I ever sold Ben Bailey. After all, the investment has rewarded me well. Had some sub-conscious emotional attachment to the company taken hold, had the shareholding become not only part of my financial well-being but my psyche too? After all, Bailey's consistent rise always reinforced my belief in myself as an investor and by association, perhaps my all-round confidence too.
I've written extensively to the point of pontiffication on the need to leave emotions out of investment decisions. But how well did I know my own emotions and what emotions was I about to unwittingly unleash after instructing my stockbroker to sell?
None whatsoever. The largest portion of my Ben Bailey stake was removed in the same manner you might remove a toenail. Just part of the regular grooming a portfolio manager does. It looks like I've taught myself well.
Within minutes I placed another order to spend the proceeds of the Bailey sale. Fayrewood, the AIM listed IT distributor, had seen it's shares fall over five percent within the first hour of trading. The price being offered was too cheap to resist, a yawning discount had opened to fair value and I jumped in.
That leaves me with around 15% of my portfolio still in Ben Bailey but 15% now in Fayrewood. It is looking to be a smart move already. Fayrewood ended the day at 114p to sell - I'm in profit.
Here's to Fayrewood continuing its recovery next week and starting to make a contribution at the next portfolio update.
The Artful Dodger
(0) comments
I first bought shares in Ben Bailey in February 2003 for 178p each. I still have the stake purchased at 390p in June 2004, but sold my original position on Friday at 473p. Bailey's rise has made a huge contribution to overall portfolio returns over the last two years. Recently, the company has comprised over 30% of my portfolio, making a huge contribution to investment returns.
I sold Ben Bailey for the simple reason that a better opportunity came up elsewhere. I kept 40% of my holding to maintain portfolio diversity and for tax reasons I can't be bothered to go into.
Occasionally over the last couple of years I've wondered how I'd feel if I ever sold Ben Bailey. After all, the investment has rewarded me well. Had some sub-conscious emotional attachment to the company taken hold, had the shareholding become not only part of my financial well-being but my psyche too? After all, Bailey's consistent rise always reinforced my belief in myself as an investor and by association, perhaps my all-round confidence too.
I've written extensively to the point of pontiffication on the need to leave emotions out of investment decisions. But how well did I know my own emotions and what emotions was I about to unwittingly unleash after instructing my stockbroker to sell?
None whatsoever. The largest portion of my Ben Bailey stake was removed in the same manner you might remove a toenail. Just part of the regular grooming a portfolio manager does. It looks like I've taught myself well.
Within minutes I placed another order to spend the proceeds of the Bailey sale. Fayrewood, the AIM listed IT distributor, had seen it's shares fall over five percent within the first hour of trading. The price being offered was too cheap to resist, a yawning discount had opened to fair value and I jumped in.
That leaves me with around 15% of my portfolio still in Ben Bailey but 15% now in Fayrewood. It is looking to be a smart move already. Fayrewood ended the day at 114p to sell - I'm in profit.
Here's to Fayrewood continuing its recovery next week and starting to make a contribution at the next portfolio update.
The Artful Dodger
Thursday, April 14, 2005
SVB: new cash, new position
On Tuesday at the price of 24.12p I took out a new position in insurer SVB.
SVB has had a tough time of it lately, is thoroughly loathed by the market and trades at a large discount to tangible asset value. The company's recent final results reported net tangible assets totalling 31.6p per share. That's a 31% premium to my buy price, meeting my 30% margin of safety rule and the shares were bought.
SVB struggled in 2004 and it's balance sheet suffered a real hammer blow as huge provisions were made for potential losses from insurance written previously. This time last year, SVB showed net tangible assets of 55.6p and the shares traded at around 50p. SVB was unpopular already at the time. Losses from it's discontinued US units had pushed the group's combined ratio, a key measure of insurance profitability to 99.9%, it would have been impossible to be any closer to a loss. In June 2004 SVB was forced to bite the bullet on losses on its syndicate 1241 and announce a:
provision at Group level of £103 million in excess of June 2004 syndicate reserves
Bolstering reserves like this is a sign of sickness in an insurer. The company is setting money aside to meet expected future claims that will be arriving at a rate far higher than previously envisaged. Insurers use their reserve base to write insurance against. The premiums are an income stream which are calculated to replace any money that be paid out to meet claims - and hopefully leave some profit left over. Increasing reserves is not only expensive, it severely hampers a company's ability to operate at the same level. What SVB announced was the equivalent of a three pint blood donation and the shares duly tanked.
The investment case revolves around the new management having got this reserving decision right and developing a profitable business from what remains. If SVB can manage this I'd expect the share price to recover to the level of declared tangible asset value at 31.6p or higher and I'd take my exit.
Good news today arrived from Chaucer Holdings, my first insurance position. Chaucer cheered the market with the announcement merger talks with Highway Insurance are off. Though I would have liked to have seen a merger between the two, the prospect was preventing the market making a collective and reasoned valuation on Chaucer. Shares moved almost two percent higher on the news.
My SVB stakes is being paid for mainly through new funds that weren't in my possession at the start of the year. This confuses the return year-to-date calculation. I'll be telling you how I will be calculating return in my next blog.
And if that wasn't enough, shares in the Fayrewood, a possible share purchase highlighted recently have fallen further today, making a buy very attractive indeed. Depending on market movements, this could happen tomorrow. Whatever, I'll be keeping you informed of developments.
The Artful Dodger
(0) comments
SVB has had a tough time of it lately, is thoroughly loathed by the market and trades at a large discount to tangible asset value. The company's recent final results reported net tangible assets totalling 31.6p per share. That's a 31% premium to my buy price, meeting my 30% margin of safety rule and the shares were bought.
SVB struggled in 2004 and it's balance sheet suffered a real hammer blow as huge provisions were made for potential losses from insurance written previously. This time last year, SVB showed net tangible assets of 55.6p and the shares traded at around 50p. SVB was unpopular already at the time. Losses from it's discontinued US units had pushed the group's combined ratio, a key measure of insurance profitability to 99.9%, it would have been impossible to be any closer to a loss. In June 2004 SVB was forced to bite the bullet on losses on its syndicate 1241 and announce a:
provision at Group level of £103 million in excess of June 2004 syndicate reserves
Bolstering reserves like this is a sign of sickness in an insurer. The company is setting money aside to meet expected future claims that will be arriving at a rate far higher than previously envisaged. Insurers use their reserve base to write insurance against. The premiums are an income stream which are calculated to replace any money that be paid out to meet claims - and hopefully leave some profit left over. Increasing reserves is not only expensive, it severely hampers a company's ability to operate at the same level. What SVB announced was the equivalent of a three pint blood donation and the shares duly tanked.
The investment case revolves around the new management having got this reserving decision right and developing a profitable business from what remains. If SVB can manage this I'd expect the share price to recover to the level of declared tangible asset value at 31.6p or higher and I'd take my exit.
Good news today arrived from Chaucer Holdings, my first insurance position. Chaucer cheered the market with the announcement merger talks with Highway Insurance are off. Though I would have liked to have seen a merger between the two, the prospect was preventing the market making a collective and reasoned valuation on Chaucer. Shares moved almost two percent higher on the news.
My SVB stakes is being paid for mainly through new funds that weren't in my possession at the start of the year. This confuses the return year-to-date calculation. I'll be telling you how I will be calculating return in my next blog.
And if that wasn't enough, shares in the Fayrewood, a possible share purchase highlighted recently have fallen further today, making a buy very attractive indeed. Depending on market movements, this could happen tomorrow. Whatever, I'll be keeping you informed of developments.
The Artful Dodger
Monday, April 11, 2005
New homes for housebuilder's cash
I've held shares in Ben Bailey since buying at 178p in February 2003. That shareholding has performed brilliantly and made it's master proud. The shares sit today at 470p to sell, with my target sell price 522p.
I've pontifficated previously on my refusal to sell cheap shares. Ben Bailey remains cheap. I even bought more at 390p in June 2004. Despite the discount to fair value, I'm close to selling some of my Ben Bailey stake. Sure, the shares are still cheap, but only 11% off fair value. That's not a lot of upside.
I'm tempted to sell my Ben Bailey holding and reinvest the funds in a share that is demonstrably far cheaper, at least 30% cheaper than fair value to meet my margin of safety rule. I've found two shares that currently sit excruciatingly close to the required purchase price.
One is Fayrewood, the European IT component distributor and the second is SVB, another insurer.
If the prevailing prices fit my fastidious formula, there could be major changes to my portfolio this week. Stick around.
The Artful Dodger
(0) comments
I've pontifficated previously on my refusal to sell cheap shares. Ben Bailey remains cheap. I even bought more at 390p in June 2004. Despite the discount to fair value, I'm close to selling some of my Ben Bailey stake. Sure, the shares are still cheap, but only 11% off fair value. That's not a lot of upside.
I'm tempted to sell my Ben Bailey holding and reinvest the funds in a share that is demonstrably far cheaper, at least 30% cheaper than fair value to meet my margin of safety rule. I've found two shares that currently sit excruciatingly close to the required purchase price.
One is Fayrewood, the European IT component distributor and the second is SVB, another insurer.
If the prevailing prices fit my fastidious formula, there could be major changes to my portfolio this week. Stick around.
The Artful Dodger
Wednesday, April 06, 2005
All hands to the pumps
All hands to the pump
I think that's a nautical term - meaning the ship is going down unless the swabs start bailing fast. It's all hands to the pump here too, pumping oil out of the ground and cash into my portfolio.
The morning was spent at the annual Oil Barrel conference. And an excellent morning it was too. I went along with the hope of getting the inside track on possible oil investments. The holiday from hawk-like monitoring of my portfolio was just what it required, as Dana shares advanced 3.5% higher while my attentions were elsewhere. The shares now sit at an all-time high of 584p to sell.
It's a bit like waiting to see if a cake will rise this investing game. The harder you look the less likely you are to see anything exciting happen but if you've done the ground work, faith and insouciance and a lack of meddling interference will ease the wait and make a positive outcome more likely.
More analysis of this morning's company presentations soon.
The Artful Dodger
(0) comments
I think that's a nautical term - meaning the ship is going down unless the swabs start bailing fast. It's all hands to the pump here too, pumping oil out of the ground and cash into my portfolio.
The morning was spent at the annual Oil Barrel conference. And an excellent morning it was too. I went along with the hope of getting the inside track on possible oil investments. The holiday from hawk-like monitoring of my portfolio was just what it required, as Dana shares advanced 3.5% higher while my attentions were elsewhere. The shares now sit at an all-time high of 584p to sell.
It's a bit like waiting to see if a cake will rise this investing game. The harder you look the less likely you are to see anything exciting happen but if you've done the ground work, faith and insouciance and a lack of meddling interference will ease the wait and make a positive outcome more likely.
More analysis of this morning's company presentations soon.
The Artful Dodger
