THT – Thorntons – is, as everyone knows, makes chocolate.
THT, as an investment, has been very good to me on a few occasions. I have tended to dip in and out as circumstances have dictated. I did extremely well out of its initial recovery phase, which has since petered out. I’ve done quite well trading these ones.
My latest purchase of THT was on 26 Feb 2015 at 68.48p (inc. all transactions costs). It was actually part of me testing a strategy about buying big price-droppers. I have constructed a decision matrix for deciding if shares that drop 10% or more should be bought, kept, or sold. The matrix is here: http://www.markcarter.me.uk/money/synopses/2015-04-26.htm
I derived it from a Stockopedia article (http://is.gd/RGFQK0), which is in turn based on Mauboussin’s work.
My matrix is based on momentum and value, and ignores quality. The strategy is a fairly short one: 90 days.
I bought THT because the shares dropped more than 10%, the momentum was weak, and it was in the 16th percentile of cheapness (i.e. cheap rather than expensive).
Today, THT announced that Jonathan Hart will step down as CEO. The share price reacted badly (down 2.58%), and I figured it was time to bail out. On the technical side, the RSI is over 70, so definitely overbought. Price versus the 50dMA is 24%, which also looks stretched. I hadn’t been paying attention to the technicals, but looking at them now, they do suggest that now is a good time to take money off the table.
The CEO stepping down also looks like a problem for the fundamentals.
As a complete rambling aside, I recommend that you try Green & Black’s chocolate. Their milk chocolate is my favourite. I much prefer Green & Blacks to either Galaxy or Cadbury’s. It’s like comparing Cusson’s Imperial Leather soap to Tesco economy soap. Cusson’s soap is solid, and a bar lasts a long time. It was a surprise the first time I used Tesco soap. The bar tends to disintegrate immediately. It doesn’t so much form a lather, as kind of fall off in chunks into the sink. All that would achieve is clogging up the drains.
I sold out at 92.18p (again, absolutely all transaction costs included), giving me a gain of nearly 35%. I’m more than a little happy with that for a holding period of just under 3 months.
It’s too early to say how my decision matrix will work out in general. I had previously reported that another purchase, PRES (Pressure Tech), made under the same decision matrix, was only doing so-so. Well, I had spoken a little too soon, as PRES is now performing much better: up 26.8% since purchase. I was due to sell it earlier this month, but I actually decided to keep it. The yield was nearly 3.5%, had a good ROCE, and was increasing its dividend by nearly 5% pa over the last 5 years.
I intend to put my decision matrix to further use. It’s a question of sitting patiently for the right opportunities.
Readers may be interested in Bruce Packard’s blog article on THT from 1 Jan 2015 (http://is.gd/WIixPO), amusingly headlined “How NOT to run a chocolate factory”.