Magic Hat Portfolio February 2015: LAM+SHOS in, REDD out

Another month for the Magic Hat portfolio (http://www.stockopedia.com/fantasy-funds/magic-hat-463/), so it’s time for another selection of shares. The portfolio’s returns have been disappointing. It is trailing the indices over 1 year, slighly outperforming over 2 years, and about neck-and-neck over 3 years. It is beating the FTSE350 over the formation of the portfolio. There has been no convincing demonstration of skill on my part so far.

REDD (Redde) gets kicked out of the portfolio on a rotational basis. It has climbed about 57% since purchase, which is a nice result. REDD has a Stockopedia Stock Rank of 94, so holders may want to think twice before deciding to eject from their portfolios. The dividend yield is 6.4%, and in their trading update on 16 December 2014, they announced “a significant increase on our expectations”. So there could be plenty more fuel in the tank.

LAM (Lamprell) was added to the portfolio. LAM will, no doubt, be familiar to many value investors, and are well known as a manufacturer of oil rigs. Sentiment has been hit hard in this sector, and the shares are down 21% over 1 year. But the company has net cash of around £167m, against a market cap of £367m. It generates about £650m in revenue. Stockopedia has an EV/EBITDA of 2.63, which is very cheap. Other data sources show a higher figure, though. Directors have bought over £900m worth of shares over the last year. The shares look cheap. Typical of my inept timing, the shares were bought at 117p, and now trade at 112p.

SHOS (Sears Hometown and Outlet Stores) was also added to the portfolio. It’s an American retailer which was spun out of Sears in 2012. The attraction here is that it is a net-net, with an NCAV of $288m, and a market cap of $273m. That’s not something you see every day. Shares reached a peak of around $55.62 in May 2013, and had been added to the Magic Hat portfolio at $12.37. SHOS showed a stinking loss in the 13 weeks ending Nov 1, 2014, which obviously goes more than a little way to explain why the shares are so cheap. With these Deep Value stocks you have to hold your nose and buy, trusting that the odds or on your side. It only scrapes through as a net-net, so it is by no means guaranteed that we’ve hit the bottom. The company is discussed in an article (csinvesting, http://is.gd/ols06K) on John Chew’s blog. John has created one of the best value investing blogs out there. His focus is on technique, not tips.

Other shares that have appeared on my radar recently, which others might want to check out, are: FLYB, LMI, MGR, NUM, RBS, QR.

Prosperous investing to you all.

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About mcturra2000

Computer programmer living in Scotland.
This entry was posted in Magic Formula Investing and tagged , , . Bookmark the permalink.

One Response to Magic Hat Portfolio February 2015: LAM+SHOS in, REDD out

  1. Pingback: Piggyback Portfolio 6 - Magic Hat - 7 Circles

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