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Share Sleuth: spoilt for choice, but here’s why I’ve added to this holding

Richard Beddard is finding plenty of value opportunities at the moment. Here, he explains how he whittled down a shortlist of eight companies to just one.

6th September 2023 09:37

by Richard Beddard from interactive investor

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Spoiled for choice 600

Like last month, when I sat down on Tuesday 23 August to decide which share to trade this month (if any), my Decision Engine presented me with an embarrassment of riches.

Thirty companies scored seven or more out of nine, which may be unprecedented. If I were to start the portfolio again, all these would be in the frame, but I have long-established rules that restrict the size of each holding and deter me from trading if I have not evaluated a share recently, or if I have already traded that share since the last evaluation.

In practice, eight shares were available to add, as shown in the table below.

Share

Score

Holding as a % of portfolio

Churchill China

9

4.9

Porvair

8

3.1

Macfarlane

8

0.0

Quartix

8

1.3

Bunzl

8

3.0

Auto Trader

7

0.0

Anpario

7

1.3

D4t4

7

1.6

Unsurprisingly, since they score so highly, the table-topping shares, Churchill China (LSE:CHH) and Porvair (LSE:PRV), are two of my favourites, but they are also much bigger holdings than all the other contenders apart from Bunzl (LSE:BNZL).

Churchill China, which makes tableware for the hospitality industry (including the estimable House of Spice in my own village), Porvair, which makes filters and laboratory equipment, and Bunzl, a distributor of consumables to businesses and large organisations, all score 8 or more out of 9. That makes them very attractive.

There are two other shares in that group of super-high scorers: Macfarlane Group (LSE:MACF) and Quartix Technologies (LSE:QTX). They are much less well represented in the portfolio, which makes them even more attractive on paper.

Macfarlane, which is ranked eighth out of 40 shares in the Decision Engine, is a leading packaging distributor in the UK with a smaller manufacturing business.

Quartix is ranked 10th. It sells its own brand of low-cost vehicle tracking system. My gut says Quartix.

You might think Macfarlane would diversify the portfolio as it would be a new holding, but the Quartix holding is very small and Macfarlane has similarities with other businesses in the portfolio. It is a distributor with a leading position in the UK, like Lathams, it is a roll-up, using acquisitions of smaller rivals to grow faster, like a handful of companies in the Share Sleuth portfolio including Bunzl, which also sells packaging.

Furthermore, Share Sleuth is not in desperate need of diversification. Before I made my decision it had 29 holdings, which apart from shares like Macfarlane are a pretty diverse bunch.

There are other vehicle-tracking companies, obviously, but I think Quartix's focus on a cheap generic device that can be self-installed, software that can be self-configured, direct sales, and its new strategy to develop add-ons, is unique and coherent.

There are a couple of factors I am trying to keep out of my judgement.

An investor I respect is championing Macfarlane. His advocacy encouraged me to investigate the company, as well as two other Share Sleuth portfolio holdings: Judges Scientific (LSE:JDG) and, coincidentally, Quartix. While I think it is fine to get ideas from other investors, we have to make our own minds up.

Also preying on my mind is the dramatic 65% fall in Quartix's share price since 2021. While I do not consider the direction of the share price when evaluating shares, that kind of move is difficult not to ignore.

Quartix chart Sept 2023

Source: SharePad, “b” indicates an addition to the Share Sleuth portfolio. Past performance is not a guide to future performance.

I cannot put myself in the mind of other traders, my default assumption is that they are thinking in a different time frame and I buy shares when my scores tell me to do [so].

There are factors weighing on the company's performance currently, rising wage costs and investment in overseas expansion to name two.

To my mind, the long-term impact of both should be positive. Rising costs will be more troublesome for less-efficient rivals and investment overseas is already delivering more revenue.

Adding Quartix

This is not a high-stakes decision. Both shares have been through my scoring process and come out well, and I only put 2.5% of the portfolio at risk at a time.

To rationalise my conflicting thoughts I slept on the matter, and re-read my most recent write-ups (you can read Quartix here, and Macfarlane here).

My brain agreed with my gut and on Thursday 24 August I added 2,200 Quartix shares to the Share Sleuth portfolio. The price was £2.04 per share, making the cost including £10 in lieu of broker fees £4,498, about 2.5% of the total value of the portfolio.

Like Auto Trader Group (LSE:AUTO), also a regular candidate for inclusion in the portfolio, Macfarlane is always a bridesmaid.

Share Sleuth performance

At the close on Friday 1 September, Share Sleuth was worth £181,327, 504% more than the £30,000 of pretend money we started with in September 2009.

The same amount invested in accumulation units of a FTSE All-Share index tracking fund would be worth £76,104, an increase of 154%.

Share Sleuth graph Richard Beddard Sept 2023

Past performance is not a guide to future performance.

After the Quartix trade and dividends paid during the month from Bloomsbury Publishing (LSE:BMY), D4t4 Solutions (LSE:D4T4), Dewhurst Group (LSE:DWHT), Latham (James) (LSE:LTHM), Porvair, Next (LSE:NXT), and Treatt (LSE:TET), Share Sleuth has £1,675 in cash.

The minimum trade size, 2.5% of the portfolio’s value, is £4,500. If there is a trade next month, it will be to reduce or remove a holding.

Share Sleuth

Cost (£)

Value (£)

Return (%)

Cash

1,675

Shares

179,652

Since 9 September 2009

30,000

181,327

504

Companies

Shares

Cost (£)

Value (£)

Return (%)

ANP

Anpario

1,124

4,057

2,389

-41

BMY

Bloomsbury

1,681

5,915

6,917

17

AMS

Advanced Medical Solutions

1,965

4,503

4,913

9

BNZL

Bunzl

201

4,714

5,729

22

CHH

Churchill China

682

8,013

8,764

9

CHRT

Cohort

1,600

3,747

7,936

112

D4T4

D4t4

1,528

3,509

2,827

-19

DWHT

Dewhurst

532

1,754

4,549

159

FOUR

4Imprint

190

3,688

9,766

165

GAW

Games Workshop

100

4,571

10,720

135

GDWN

Goodwin

266

6,646

12,475

88

GRMN

Garmin

53

4,413

4,447

1

HWDN

Howden Joinery

2,020

12,718

14,807

16

JDG

Judges Scientific

34

833

3,216

286

JET2

Jet2

456

250

4,834

1,834

LTHM

James Latham

750

9,235

8,438

-9

NXT

Next

106

6,071

7,450

23

PRV

Porvair

906

4,999

5,527

11

PZC

PZ Cussons

1,870

3,878

2,996

-23

QTX

Quartix

3,285

7,296

6,899

-5

RSW

Renishaw

92

1,739

3,292

89

RWS

RWS

2,790

9,199

6,746

-27

SOLI

Solid State

356

1,028

4,664

354

TET

Treatt

763

1,082

4,242

292

TFW

Thorpe (F W)

2,000

2,207

7,700

249

TSTL

Tristel

750

268

2,494

830

TUNE

Focusrite

1,050

9,123

5,460

-40

VCT

Victrex

292

6,432

4,395

-32

XPP

XP Power

240

4,589

5,064

10

Notes
Aug: Added more shares in Quartix
Costs include £10 broker fee, and 0.5% stamp duty where appropriate
Cash earns no interest
Dividends and sale proceeds are credited to the cash balance
£30,000 invested on 9 September 2009 would be worth £181,327 today
£30,000 invested in FTSE All-Share index tracker accumulation units would be worth £76,104 today
Objective: To beat the index tracker handsomely over five-year periods
Source: SharePad, 4 September 2023.

Richard Beddard is a freelance contributor and not a direct employee of interactive investor.  

Richard owns shares in Quartix.

More information about Richard’s investment philosophy and how he implements it.

Contact Richard Beddard by email: richard@beddard.net or on Twitter: @RichardBeddard

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

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