It’s that time of year when we suggest punts for next year. 13 shares for 2013 is a bit OTT for me, so I’ll suggest only 5 . I’m going to select 1 share in each of the categories: growth, turnaround, value, income and momentum, so hopefully there should be a good’un in there no matter what the market does. I’ve used Stockopedia to help me generate some ideas, although I am familiar with most of the companies involved.
IDOX – IDOX – growth share
For my growth share, I’ve used Stockopedia’s CAN-SLIM screen, which looks for high growth in EPS, ROE, and share price momentum. O’Neill’s formulation calls for high sales growth, which is not a factor in Stockopedia’s screen.
IDOX creates software that manages documents. It is a major supplier to the public sector, but has increasingly diversified to the private sector. It has operating margins of nearly 20%, a ROE of 34%, and an interest cover of 9.1. It trades on a forward PE of 13.2, and has a forecast EPS growth of 56% for y/e Oct 2013. In the latest interims, management reported “a stronger pipeline than the year before across all of the divisions. We expect the geographic diversification of the revenue base to help insulate the group from challenging economic issues closer to home and assist it in the ambition to grow in double digits organically”. Good to see that the directors know how to avoid split infinitives.
LAM – Lamprell – turnaround
There’s no Stockopedia screen for turnarounds, so I used my judgement on this one. The principal activities of the Company and its subsidiaries include the upgrade and refurbishment of offshore jackup rigs; fabrication; assembly and new build construction for the offshore oil and gas and renewable sector, including jackup rigs and liftboats; Floating Production, Storage and Offloading (FPSO) and other offshore and onshore structures, and oilfield engineering services, including the upgrade and refurbishment of land rigs. LAM has made a string of profit warnings over the last year, including delivery delays, cost over-runs, fears over covenant levels, and so on. There have been recent changes in the top management, which should bode well. Debt is not excessive, and I expect refinancing to take place without issue. The company has a $1.5b order book, and sells to a sector where there is heavy demand, but constrained supply. LAM trades on a PER of 4.7, and has an interest cover of 5.6. I expect the company’s operating activities to stabilise in 2013, and a re-rating of their shares.
EMG – Man Group – value share
EMG is the world largest hedge fund. It’s flagship fund – AHL – named after the inventors of the underlying algorithms – is a trend-following fund. Unfortunately, the market has been turbulent over the last few years, leading the computers to do precisely the wrong thing at precisely the wrong time. There has been a recent management reshuffle, so hopefully they will address some of the issues with EMG’s performance. I had written about EMG less than a week ago, explaining why it was cheap compared to assets.
ABM – Albermarle & Bond – income
This one was highlighted by Stockopedia’s “Geraldine Weiss Lite Dividend Screen”. ABM is a pawnbrokers, having increased revenues from £32.9m in y/e Jun 2007, to £117.7m in y/e/ Jun 2012. It trades on an EV/EBITDA of 6.1, and has an interest cover of 18.6. It is yielding 5.8%. That dividend looks safe.
AVON – Avon Rubber – momentum
I chose this from Stockopedia’s Richard Driehuas screen, a very well respected momentum investor. Avon Rubber p.l.c is engaged in the design, and manufacture of respiratory protection products for defense, first responder and industrial users. The Company also designs and manufactures a range of polymer-based products for the dairy and defense industries.AVON trades on a PER of 11.8, has a ROE of 39%, and an interest cover of 48.0.
Happy investing. I’ll review my choices for 2012 later on in the year. Taking a quick peek, my choices seemed to have outperformed the indices by about 6% – hardly a Buffettesque perrformance.