A very encouraging set of interim results from Densitron this morning. Caught me a little bit by surprise, since I wasn't expecting anything until September.
Revenues have increased by 31% and operating profit by 260%. The Chairman's statement indicates that these results were ahead of internal forecasts and that they are confident of meeting market expectations for the full year (EPS 1.49p) which puts the shares on a forward p/e of less than 8 (share price currently 11.6p). Seems far too low to me. Significantly the interim dividend has been increased 100% to 0.2p. I expect a further payment of 0.3p following the finals giving a yield of 4.3% for the full year.
I like their current focus on organic growth and growing the operating margin. India looks like it might provide a further substantial growth opportunity.
All in all, despite the uncertain global economic outlook and market gyrations, I see no reason to alter my views on my investment in Densitron, and shall enjoy the dividend payments whilst patiently waiting for what I hope will prove to be substantial capital growth in the medium to long term.
Surgical Innovations' share price continues to rise, and the market cap. is now around £50m. As mentioned before I took healthy profits from my investment here, but did I take them too soon? Clearly in the short term the answer is yes, although part of my reason for selling was that I couldn't see it multibagging in such a short period of time again.
The present market cap. is currently more than 7 times last year's revenue with a forward p/e of over 20. The shares look pretty fully valued to me. However, it will be interesting to watch. There is always the possibility of a takeover approach or a huge contract win etc. Besides, as I have often mentioned before in this blog, valuations of growth companies can get very heady indeed. Time will tell.
Tuesday, 23 August 2011
Friday, 19 August 2011
Miserable Mr Market
I see Mr Market is still feeling depressed at the moment, and undoubtedly he will create some bargains. However, quite a few company share prices that I have on my monitor seem resilient despite the recent sell-off. Early days yet though and Mr Market may get even more depressed and start handing out cheap shares on a plate. You can never predict market tops or bottoms with any confidence, and subsequent rises and falls generally take you by surprise. There's a great quote from Peter Lynch that I've included at the end of this blog.
In my opinion trying to second guess the market is a sure way to lose money, and as a stock picker I think the best you can do is to time your buying activity when you believe that the stock is cheap. Of course in markets like these there is always the risk that the stock gets cheaper still, so if you have the cash and are confident in your valuation methods then why not just buy some more. If you've used all your cash then just wait patiently for the real value to be recognised by the market.
Here's just one personal example. In 2002 I bought shares in Clarkson for around £2. The price looked a snip for a low p/e, debt free company with a healthy balance sheet paying what looked like a safe 7% dividend. However, Mr market got very depressed and decided that he would sell Clarkson for around £1.30 a few weeks later. If you take a look at Clarkson today you will see that the SP is around £11.35, and has been over £13. In other words the shares were cheap at £2, it's just that I didn't get in at the very bottom of the range, which is almost impossible to do on a regular basis due to the often irrational Mr Market and his moods.
At the time I was a relatively inexperienced investor, and I eventually sold my holding for around a 75% profit . Not bad, but given the capital appreciation and dividend rises over the years since, it would have been nice to just hold on for a while longer.
Anyway, here's Lynch's thought's about market timing (bear in mind that he's one of the best investors ever achieving a compound rate of 29.2% per annum.
"Every year I talk to the executives of a thousand companies, and I can't avoid hearing from the various gold bugs, interest-rate disciples, Federal Reserve watchers, and fiscal mystics quoted in the newspapers. Thousands of experts study overbought indicators, oversold indicators, head-and-shoulders patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can't predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack......All the major advances and declines have been surprises to me"
In my opinion trying to second guess the market is a sure way to lose money, and as a stock picker I think the best you can do is to time your buying activity when you believe that the stock is cheap. Of course in markets like these there is always the risk that the stock gets cheaper still, so if you have the cash and are confident in your valuation methods then why not just buy some more. If you've used all your cash then just wait patiently for the real value to be recognised by the market.
Here's just one personal example. In 2002 I bought shares in Clarkson for around £2. The price looked a snip for a low p/e, debt free company with a healthy balance sheet paying what looked like a safe 7% dividend. However, Mr market got very depressed and decided that he would sell Clarkson for around £1.30 a few weeks later. If you take a look at Clarkson today you will see that the SP is around £11.35, and has been over £13. In other words the shares were cheap at £2, it's just that I didn't get in at the very bottom of the range, which is almost impossible to do on a regular basis due to the often irrational Mr Market and his moods.
At the time I was a relatively inexperienced investor, and I eventually sold my holding for around a 75% profit . Not bad, but given the capital appreciation and dividend rises over the years since, it would have been nice to just hold on for a while longer.
Anyway, here's Lynch's thought's about market timing (bear in mind that he's one of the best investors ever achieving a compound rate of 29.2% per annum.
"Every year I talk to the executives of a thousand companies, and I can't avoid hearing from the various gold bugs, interest-rate disciples, Federal Reserve watchers, and fiscal mystics quoted in the newspapers. Thousands of experts study overbought indicators, oversold indicators, head-and-shoulders patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can't predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack......All the major advances and declines have been surprises to me"
Wednesday, 17 August 2011
All that glisters is not gold
I spotted this on the London Stock Exchange website today. I see the experts are predicting the gold price will rise to infinity and beyond: $2000/ounce by this time next year and $5000/ounce by 2020. Wonderful news, I’ll just nip down to the Westfield
It’s probably just me, but I don’t really get gold and its safe haven status. Come Armageddon how much use will a stock pile of relatively useless yellow metal really be? Stuck down inside my bunker I can’t really imagine exclaiming “Thank god I bought all those gold bars before everything kicked off”, although I can imagine saying “I’m glad I stockpiled all those Bailey’s chocolates” ;o) (see Zetar)
On a slightly more serious note, it is beginning to look like gold is entering bubble territory, although predicting when the bubble will burst is a bit of a mug’s game. However, I did read somewhere that Anthony Bolton had already sold his gold investment.
That reminds me, I wonder when I’ll get my money for the golden pin I recently sent to “webuyanygold.com”.
Whilst I’m in a slightly frivolous frame of mind, if any of you are getting fed up of all the gloom, doom and despair that’s constantly in the news at the moment, here’s my all time favourite phrase:-
Bu da geçer
No prizes for translation.
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