The price is finally right for Rightmove (LSE:RMV) and Spirax-Sarco Engineering (LSE:SPX), Keith Ashworth-Lord declared this week after he ended a long wait to add them to his CFP SDL UK Buffettology fund.
Spirent Communications (LSE:SPT) and the FTSE All-Share business International Personal Finance (LSE:IPF) are the two other new entries as the veteran stock picker looks to get back on the front foot.
His buying follows a tough run for the £527 million fund, which lost 6.1% in October after 23 of the 29 stocks in the UK-focused portfolio fell in value over the month.
The six winners included analytics and business information company RELX (LSE:REL), whose rise of 2.9% took gains for the year to more than 25%. It is the fourth-largest holding in the Warren Buffet (pictured above) inspired fund, the largest being Games Workshop (LSE:GAW) with 9.59%.
In the CFP SDL UK Buffettology monthly factsheet, Ashworth-Lord wrote: “The capitulation of investors latterly has resulted in some very attractive long-term pricing opportunities.”
FTSE 100-listed Spirax-Sarco and Rightmove have been on his radar for some time but the pricing has only just entered the right area.
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The addition of the property portal came after US-based CoStar’s proposed acquisition of number three player OnTheMarket (LSE:OTMP) raised fears of a threat to Rightmove’s market dominance, sending shares 20% lower at one point.
Ashworth-Lord said: “We think this fear is overdone since the barriers are high because of the existing network effects. Also, other international companies attempting to enter the UK portal market have failed in the past.”
The appeal of Spirax-Sarco comes through a combination of demonstrable growth, sustained high margins, 20% plus return on equity and a moderately geared balance sheet.
The Cheltenham-based company, which generates more than half its sales from defensive end markets such as food, healthcare and chemicals, has lost a fifth of its value this year.
Ashworth-Lord said: “I have known this business for over 25 years and always wanted to own it in the fund. Only recently has the pricing opportunity presented itself.”
The shares were as high as 13,000p during 2022 but have fallen back to 8,366p as the Covid-19 vaccines boost for the Watson-Marlow fluid technologies business unwound.
Destocking by biopharma customers meant the division’s sales fell 21% in half-year results, offsetting the growth of the two other divisions involved in the control and management of steam and in electric thermal solutions for critical industrial applications.
The addition of equipment testing firm Spirent follows a two-thirds slide for its value after network infrastructure suppliers and operators cut spending in response to the economic outlook.
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Ashworth-Lord said: “Spirent has issued a number of profit warnings this year, something that has enabled us to purchase shares at significantly below what we believe to be their long-term economic value.”
Meanwhile, the purchase of financial services business International Personal Finance marks a return for a stock that was in the portfolio for five years up until December 2016.
Since then, the product has been redesigned and the digital channel to market developed by building on the acquisition of digital loans company MCB Finance in 2015.
The Buffettology factsheet said the under-valuation can be judged by analysts’ consensus multiples of 6.9 times and six times for 2023 and 2024 earnings and dividend yields of 8% and 9.1% respectively.
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