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Questor: take profits on Revolution Bars (up 18pc); but for now hold on to Anglo American (up 46pc)
Last week the new-look Questor reached its first anniversary and, as we reported then, our results so far have been satisfactory. But part of the process of taking stock of a portfolio is to consider whether there are any holdings that have outstayed their welcome and should be sold.
We know that many readers read this column not just out of interest but as the basis for some of their own stock purchasing decisions and we are aware of the danger that anyone who buys all, or most, of the shares we tip could end up with a large number of holdings – too large, potentially.
Among the fund managers we admire are many who believe in “concentrated” portfolios of perhaps 30-40 stocks, on the basis that you can get to know each holding really well. Terry Smith and Nick Train belong in this camp. Others, however, welcome the diversification that comes from holding 100 or more stocks. We are thinking of the likes of Job Curtis, whose 117-holding City of London investment trust has an unparalleled record of dividend growth.
None the less, we feel that many individual investors would prefer not to have to keep track of such large portfolios. So, now we have a year’s worth of tips, the great majority of them “buys”, under our belt, we will shift the focus somewhat to revisiting existing holdings and weeding out any that seem not to be performing as hoped – or, more happily, that have done so well that it is time to take profits. We start now with two of the past year’s tips.
Update: Revolution Bars
Revolution, the bars chain, has featured frequently in this column as a result of some extreme swings in its share price: it fell sharply following a profits warning in May but recovered those losses when the outlook improved and expressions of interest in buying the group emerged from two other businesses, Stonegate and Deltic.
Throughout the saga we advised readers to hold on to the shares, most recently at 176.5p on Aug 2, on the basis that the company’s growth strategy looked sound.
Full-year results published yesterday were good, with adjusted profits before tax exceeding expectations with a 25pc rise. But the shares barely reacted, reflecting the fact that the actions of Stonegate and Deltic are now more significant for shareholders.
So far only 4pc of investors have accepted Stonegate’s offer of 203p in cash, while Deltic has until Oct 10 to come up with a firm proposal.
One major backer of Revolution in the past, Mark Slater of Slater Investments, has already sold his stake.
He told Questor: “We sold our holding at current levels in recent weeks. We therefore achieved a premium of around 4pc to the Stonegate bid. I think Stonegate is getting an excellent deal but Deltic has quite a challenge to get traction with a cash and shares bid, which is what they have been talking about.”
We suggest that readers follow the example of this successful fund manager and sell in the market now rather than hanging on in the hope of a higher bid. Anyone who followed our original tip in November last year will have made an 18.8pc gain at last night’s closing price.
Questor says: sell
Ticker: RBG
Share price at close: 211.5p
Update: Anglo American
We tipped Anglo, the mining giant, on midsummer’s day following a fascinating conversation with Jeremy Lang, co-manager of the Ardevora UK Income fund.
He had looked at the evolving state of mind of the group’s managers and decided to buy when, after periods of hubris, denial and fatalism, they had finally resolved to get to grips with Anglo’s predicament.
Our tip turns out to have been exceptionally well timed: the shares have risen by 45.5pc in the three-and-a-bit months since. Such rapid gains always prompt ideas of banking the profit, so we asked Lang what he was doing with his stake in the company.
He said: “I think it is still viewed with quite a lot of trepidation by other investors, partly because it has gone up so much.” This reflects Lang’s remark at the time of our tip to the effect that it would take time for the market to forget about Anglo’s past mistakes and fully trust it again.
“So, as long as management keep behaving themselves – and the signs are still good – I am happy to keep it.”
Questor says: hold
Ticker: AAL
Share price at close: £13.97
- All our Questor tips: telegraph.co.uk/questor