Hopeless cases portfolio vs. FTSE-250 - Year end review 2013

Started back in August 2011:-

http://michae1mouse.blogspot.co.uk/2011/08/very-little-research-but-are-these.html

In my update back in late September, the hopeless cases portfolio had just taken the lead despite one total write off. What's the current picture just 3 months later though?

Whilst the FTSE-250 has moved from a percentage gain of 48.9% to 59%, despite a total loss on Game Group and a 59% depreciation on Man. Group., the hopeless cases portfolio has increased it's lead. From a 51.6% gain in September it has now gained 73% in just under two and a half years. In other words, the hopeless cases portfolio leads by 14% points.

By far the best performers remain TCG and ITV up by 283% and 247% respectively. Following on behind is CWC with a current gain of 75%, Vodafone 46% and two purchases of Aviva (reasons explained in previous posts) with gains of 41% and 38% respectively.

I'm not sure what this proves, if anything, but I have found it interesting. Certainly it goes to show that out of favour or distressed stocks can eventually turn out to be the multi-baggers of the future (TCG and ITV), and even the biggest of companies that are watched by a multitude of financial experts can bring handsome rewards. Certainly if you can buy them when they appear to be unpopular e.g. Vodafone. Also bear in mind that VOD has paid excellent dividends over this period with a special dividend to come from it's sale of Verizon Wireless (I'm assuming it hasn't already been distributed?).

I probably won't pursue the comparison any further, but might instead choose a different 'hopeless cases portfolio' in the future to conduct a similar comparative study.

Incidentally, from April 2011:-

http://michae1mouse.blogspot.co.uk/2011/04/watch-out-for-competition.html

"This brings me on to Vodafone. Whilst I don’t invest in large cap. companies, I read in one of today’s newspapers that over the past 10 years Vodafone shares are down more than 17% whilst the FTSE 100 is up nearly 7%.  This is quite an underperformance. Cursory research shows that Vodafone pay a near 5% dividend, it has a modest p/e ratio (from ADVFN data) and a Chief Executive who appears to have a sensible approach to creating shareholder value.

It will be interesting to see if Vodafone moves from being the under-performer to the out-performer over the next few years."

 

Barratt Developments, RSA Group and Firstgroup

For completion, I shall take a brief look at the final three companies on the Sunday Telegraph's share tips list for 2014. They are Barratt Developments, RSA Group and Firstgroup. Please note that my thoughts are based on a fairly cursory glance at the figures, and I'm not saying the Telegraph is right or wrong to tip these companies. As mentioned before, it is rare that tipsters make any reference to the fundamentals of the companies they recommend, and I'm simply adding a few figures. As always stock pickers should carry out their own informed research.

Before I assess Barratt Developments, I should mention that I never buy housebuilders. Rightly or wrongly I class them as a trader's share as opposed to a long term buy and hold. It's a very cyclical industry, and I'd find timing when to buy and sell very difficult.

The chart shows that Barratt is in a clear uptrend, and although the share price has risen substantially from its lows, it is nowhere near it's 2007 high of over £12. The shares are trading above Net Tangible Asset Value (£2.21) which I don't find particularly attractive, and they currently sit on an historic p/e of 45 with last reported EPS of 7.7p. They haven't paid dividends since 2008 (interim of 12.23p). However, prior to that it appears that they had a progressive dividend policy, and in 2007 they paid a whopping dividend of 35.68p which would be a 10.2% dividend compared to the current share price. Maybe they will be able to re-instate the progressive dividend policy in future years. On the face of it, it doesn't look attractive to me, but as I said I'm not a fan of housebuilders and they are subject to the vagaries of both the British economy and the government.

RSA Insurance looks potentially interesting. Clearly the recent profit warnings have taken a toll on the share price which is now at 12 month lows and appears to be falling towards a possible 10 year low (we shall see)? I find it difficult to value insurers, but for income investors the larger cap. insurers usually pay handsome dividends. According to ADVFN's figures, the p/e ratio is currently below 10 and the yield is around 8%, although I suspect this will fall substantially this year given the interim payment and subsequent profit warnings. This is the sort of company I would put on my monitor as having recovery potential, I might wait to see if it falls further before serious consideration though. Aviva is a good example of how these insurance company recovery plays with a record of generous dividend payments can be good investments.

Finally,  Firstgroup also looks like a very interesting recovery play. The share price sits at a 10 year low. It's an easy business to understand, and until recently it boasted a record of being able to increase dividends each year. Following a discounted rights issue it is unlikely to go bust in the foreseeable future. Has it already hit it's share price nadir? Always difficult to know, but I'd bet it's somewhere near, and if it's not going bust then the share price has only one way to go in the longer term. I'd classify this company in the same bracket as RSA, in other words, potentially very rewarding if management can get their act together. If not, then shareholders may benefit from a activist Hedge Fund shareholder (Sandell) pushing for asset sales.

As ever, no advice intended or given. It will be very interesting to re-visit the Telegraph's tips at the end of the year.

The Aim market set to become even more attractive in April 2014

An interesting article in the Telegraph yesterday. See link below. Essentially it is about Britain's best performing fund manager, and some of his stock picks for 2014. Not surprisingly he is backing a number of Aim listed shares. I say not surprisingly because not only can Aim listed companies be held in ISA's now, but in April trading on the Aim market will be exempt from Stamp Duty. For frequent traders this could potentially save them a not inconsiderable amount of money. There is quite a bit of rubbish listed on Aim, but with all stock picking it's a matter of choosing judiciously. Here's the article and some of his stock picks for 2014:-

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/10542145/Britains-best-performing-fund-manager-picks-his-favourite-shares-for-2014.html

A happy, healthy and prosperous New Year to all.