UK Edition
Questor: after a 74pc rise in Motorpoint’s share price it’s time to take some profits
Today we are in the happy position of needing to decide what to do with a holding that has gained 74pc in value since we tipped it.
We recommended that readers buy shares in Motorpoint, the “nearly new” car dealership, in October 2016 after a profits warning had sent the shares sliding. We took particular note of heavy buying by three of the firm’s directors immediately after the warning.
In December 2017 we advised readers to resist any temptation to bank profits and to hold on to the shares, noting that the three directors had not sold any of theirs. The share price has risen by 12pc since then.
Following that further gain, and in view of full-year results announced yesterday, we’ll take another look.
The company reported that sales for the year to March 31 rose by 20.6pc to £991.2m, and pre-tax profits before exceptional items by 32.5pc to £20.8m. Reported pre-tax profits rose by 70.9pc to £20m because a large exceptional item had depressed last year’s figure.
The full-year dividend of 6.6p a share represents a rise of 57.1pc on last year.
Despite these healthy numbers, the shares lost 5.7pc yesterday.
It is notable that the three directors mentioned above (Mark Carpenter, chief executive, Mark Morris, chairman, and David Shelton, an executive director and co-founder) have not bought any shares (other than from option plans) since their purchases after the profits warning in October 2016. This implies that they no longer see the shares as cheap.
Meanwhile, one respected fund manager, Gervais Williams of Miton, has sold his holding.
He told Questor: “We haven’t given up on Motorpoint, rather we have cut all sorts of consumer stocks, especially those with a high ticket price, as we worry that at some stage the rise in energy prices, and the risk of unemployment rising again, will put the company under pressure.”
- Read Questor’s rules of investment before you follow our tips. See Questor's tips every day at twitter.com/DTquestor
However, another experienced fund manager, Harry Nimmo of Standard Life Investments, has retained his holding.
Collectively, the actions of these investors and the three directors suggest a view on Motorpoint stock somewhere between “hold” and “reduce”. Questor’s take is that while in hindsight the shares were clearly cheap when we first tipped them, they are not obviously so after a 74pc rise in the share price.
Accordingly, we suggest that readers take profits and retain shares to the value of their original investment.
Questor says: take profits
Ticker: MOTR
Share price at close: 246p
Update: IG Design
Gervais Williams also gave us an update on his view of IG Design, the greetings cards and gift wrapping firm tipped here in March 2017, on the basis of his holding in the stock. He described the group’s full-year results, published on Monday, as “impressive”, given that the company had modest cash at the year end despite increases in pulp prices and “heavyish” capital expenditure last year.
“The company talks of the scope to start pushing sales growth over the coming two years, which should provide the next leg of the story if it comes through,” Williams said. “We remain substantial shareholders in the company.”
Questor says: hold
Ticker: IGR
Share price at close: 473p
Update: RWS Holdings
Questor has been a long-standing enthusiast for RWS, the patent translation group, thanks to its hard-to-replicate business model and record of successful acquisitions. The shares lost 15pc after a profits warning in April, caused partly by exchange rate movements. However, the group released its half-year report last week and the shares jumped by 10pc.
Keith Ashworth-Lord, who runs the SDL UK Buffettology fund, said: “The results were good and have steadied investors’ nerves. We have continued to buy, picking up stock at prices as low as 347p.”
Questor says: hold
Ticker: RWS
Share price at close: 407.5p