Interactive Investor

Shares for the future: my five best shares for long-term investment

29th April 2022 14:18

Richard Beddard from interactive investor

Our companies analyst discusses an amusing experience of shareholder democracy and names a handful of highest-scoring stocks in his Decision Engine.

It is easy for those of us who invest in stable, well-managed businesses to neglect voting at annual general meetings (AGMs).

Voting often feels like a formality. Few of us own sufficient shares to dent the large blocs wielded by insiders and financial institutions, and many of the resolutions are uncontroversial. The directors have done a good job, so we are not going to try and take them down. Voting is also a hassle, especially if we have to attend the meeting in person.

I always try to vote, however, for the same reason that every time there is a general election I trundle down to the polling station even though my Member of Parliament occupies a safe seat.

Voting sends a signal. The more of us who vote in elections, the better our democracy, and similarly the more of us who vote at AGMs, the better our companies.

AGM voting 101

A problematic feature of the nominee system – the way brokers hold the shares of all of us with Individual Savings Accounts (ISAs) and many of us with Self Invested Personal Pensions (SIPPs) – is that it has tended to disenfranchise shareholders.

Our shares are pooled, so our names are not recorded on shareholdersregisters and companies cannot invite us to upcoming AGMs. To vote, we need to request a letter of representation from our broker entitling us to vote our portion of the shares held for us by them.

But many brokers have stepped in to keep us better informed and allow us to vote easily online.

Last year, I moved one of my SIPP accounts to interactive investor, the platform you are reading this article on.

My previous broker was old school. I had to keep track of when the companies I had invested in were holding their AGMs myself, and call the brokers call centre to request letters of representation. Sometimes I did not get those letters, and for a while the brokers ineptitude meant that compensation became a lucrative second source of income after dividends.

Even though I have been happily voting electronically since I shifted broker, sometimes I still attend in person. This may be because there is an important vote on the agenda. A vote on a companys remuneration policy, which happens every three years, always encourages me to go.

Voting in person makes a more powerful statement, which is why I prefer it when companies allow voting by a show of hands. If we wish to amplify our statement, we can ask a question before the relevant vote.

I may also have questions about the companys strategy and culture, which are not part of the formal meeting. There is always a chance to buttonhole management, and often they will present to shareholders and solicit questions.

Be prepared

That is why I attended Quartix (LSE:QTX)s AGM in April. It has a new chief executive and the companys strategy may be shifting, so I hoped to glean a few insights. Better still, Quartix is an easy AGM for me to attend because the companys corporate headquarters are only a short bike ride away.

Although visiting a company can itself be revealing, Quartixs corporate HQ is located far from its operations in Newtown, Wales. It is in an office inside a building mostly occupied by another company, on an estate of almost identical buildings in Cambridge.

I was not even sure I was at the right building because the locked front door had another companys name under the buzzer next to it.

I had half an hour to kill so, rather than risk ringing the wrong doorbell, I sat on a low wall outside and flicked through my hastily written questions while waiting for another shareholder to come, so I might follow him in like a fare dodger pushing through a gate on the Tube.

Nobody came, and with ten minutes to go I plucked up the courage to press the buzzer.

The receptionist summoned somebody from Quartix, who arrived after a short hiatus and took me back out of the front door to a side entrance, where she deposited me on a chair and promised to return.

Something about her manner, friendly but perhaps slightly flustered, and our protracted journey to the boardroom, suggested to me that she might be playing for time. Maybe I was unexpected. Maybe no outside shareholders were expected. I imagined the boardroom and the agenda being hastily rejigged.

Minutes later my escort reappeared and delivered me to the boardroom.

We made our introductions and suddenly I felt a little exposed. I was the only shareholder. I had the board to myself. Indeed it felt like the board had assembled for my benefit. Faced by a panel of six or seven directors I felt a bit ridiculous, and I could not rely on the intelligent questions of other shareholders to make up for any deficiencies in my own.

Then the only member of the board I know arrived, which put me at ease. He is the companys founder and non-executive chairman Andy Walters, a keen cyclist who also arrived by bike.

The meeting started, an incongruous blend of formality and informality that we all endured with good humour. You can read what I learned in my annual review of Quartix, but the experience left me thinking about shareholder democracy.

Quartix says its investor roadshows in London are better attended, but roadshows are not substitutes for AGMs. They are public relations exercises. We cannot participate in the governance of a company at a roadshow.

Although I did not have a powerful statement to make, if I had and there had been no other shareholders there to witness it, would it have been as powerful?

Decision Engine

Since last months Decision Engine update, I have re-appraised industrial filter and laboratory equipment manufacturer Porvair (LSE:PRV), educational supplier RM (LSE:RM.), and XP Power (LSE:XPP), a manufacturer of power adapters for complex machines.

The results of these deliberations have been fed into the Decision Engine along with the latest prices for all 40 companies, to determine this months scores.

As always, the combined score for profitability, risks, strategy, fairness and price determine a shares overall score and its rank. By following the process I expect to identify the best shares for long-term investment, from my list of 40 or so good businesses.

0

Company

Description

Score

1

Howden Joinery

Supplies kitchens to small builders

8

2

Dewhurst

Manufactures pushbuttons and other components for lifts and ATMs

8

3

Cohort

Manufactures military technology, does research and consultancy

8

4

PZ Cussons

Manufactures personal care and beauty brands

8

5

Next

Retails clothes and homewares

8

6

Goodwin

Casts and machines steel. Processes minerals for casting jewellery, tyres

7

7

James Latham

Imports and distributes timber and timber products

7

8

RWS

Translates documents and localises software and content for businesses

7

9

Portmeirion*

Designs and manufactures tableware, candles and reed diffusers

7

10

Games Workshop

Manufactures/retails Warhammer models, licenses stories/characters

7

11

Porvair

Manufactures filters and filtration systems for fluids and molten metals

7

12

Judges Scientific

Acquires and operates small scientific instrument manufacturers

7

13

XP Power*

Manufactures power adapters for industrial and healthcare equipment

7

14

Focusrite

Designs recording equipment, loudspeakers, and instruments for musicians

7

15

D4t4*

Develops and integrates Customer Data Platforms

7

16

Victrex*

Manufactures PEEK, a tough, light and easy to manipulate polymer

7

17

Solid State

Manuf's rugged computers, battery packs, radios. Distributes electronics

7

18

Anpario

Manufactures natural animal feed additives

7

19

FW Thorpe

Makes light fittings for commercial and public buildings, roads, and tunnels

7

20

Treatt

Sources, processes and develops flavours esp. for soft drinks

6

21

Renishaw

Whiz bang manufacturer of automated machine tools and robots

6

22

Bloomsbury Publishing

Publishes books and online resources for academics and professionals

6

23

Churchill China

Manufactures tableware for restaurants and eateries

6

24

Tristel

Manufactures disinfectants for simple medical instruments and surfaces

6

25

James Cropper

Manufactures specialist paper, packaging and high-tech materials

6

26

Softcat

Sells hardware and software to businesses and the public sector

6

27

Bunzl

Distributes essential everyday items consumed by organisations

6

28

Trifast*

Manufactures and distributes fasteners and other low cost components

6

29

Volex*

Manufactures connectivity components and power cord

6

30

Oxford Instruments

Manufacturer of scientific equipment for industry and academia

6

31

4Imprint

Sells promotional materials like branded mugs and tee shirts direct

6

32

Hollywood Bowl

Operates tenpin bowling and indoor crazy golf centres

6

33

Quartix

Supplies vehicle tracking systems to small fleets and insurers

6

34

Tracsis

Supplies software and services to the transport industry

5

35

Hotel Chocolat

Chocolate maker and retailer

5

36

Advanced Medical Solutions*

Manufactures surgical adhesives, sutures, fixation devices and dressings

5

37

RM*

Supplies schools with equipment and IT, and exam boards with e-marking

5

38

Castings*

Casts and machines parts for vans and trucks, primarily

5

39

James Halstead*

Manufactures vinyl flooring for commercial and public spaces

5

40

Jet2

Flies holidaymakers to Europe, sells package holidays

4

Scores and stats: Richard Beddard. Data: SharePad and annual reports.
Shares marked with an asterisk* score less than 5 out of 6 for Profitability, Risks and Strategy. They are more speculative.
Click on a share's name to see a breakdown of the score (scores may have changed due to movements in share price).

 

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

Richard owns most of the shares tracked by the Decision Engine, weighting his portfolio so that its biggest holdings are in the more highly ranked shares.

For more information about Richards scoring and ranking system (the Decision Engine) and the Share Sleuth portfolio powered by this research, please read the FAQ.

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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