CRAW (Crawshaw) is a chain of butchers. It was a company that I was interested in, but never invested in. I sat by jealously as I knew that many highly respected investors were making a mint out of this company.
The shares plunged 44% on the 15 Sep to 41.5p at the close, on the back of a trading update. Obviously there was disappointing news:
suppressed footfall patterns caused by a combination of the international football, adverse weather and Brexit.
My initial reaction to this is: “baloney”. I know that we’re a footy-obsessed nation, but I find it hard to believe that “international football” stops people from buying meat. The same goes for adverse weather. And “Brexit” is just invoking the bogeyman. Plenty of economically-sensitive businesses are reporting that they are doing just fine despite Brexit. Frankly, I’m having difficulty fathoming out which excuse of theirs is the least plausible.
Paul Scott, at Stockopedia, made his own comments:
Crawshaws seems eligible for an award for maximum number of excuses given for disappointing performance. … The only one that rings true to me, is the last one [Supermarkets very recently launching some aggressive meat promotions]. I’ve always maintained that competition from supermarkets is the big risk with this share. They’re not going to sit back and let a smaller competitor eat their lunch. It’s inevitable that the supermarkets will put the squeeze on emerging competition, if it takes away too much of their market share, as they are now doing.
I think the valuation here got well ahead of reality. Having said that, the price has now reset to a more sensible level, so personally if I held, I’d probably sit tight now.
I notice that, according to Stockopedia, CRAW has an average ROCE of 3.3%, which I consider quite low. There are many ways to invest, of course, and I am not advocating necessarily avoiding investing in companies just because they have low ROCE. LTBHs (Long Term Buy and Holds) do form part of my portfolio, and I would never consider this company for a long-term portfolio.
Stockopedia provides ranks for the company as follows: Quality 83, Value 40, Momentum 9, overall 36. My take on this is: given its low ROCE, I think the quality score needs to be treated with a pinch of salt, the value is not compelling as buy, and the momentum score really puts me off.
If I were looking for an LTBH, then quality would be paramount, value would be a consideration, and momentum would not concern me. However, this is not a LTBH for me. Neither does it pass any Stockopedia screens.
I am not necessarily saying it is a dreadful company (there are plenty of AIM nightmares to choose from if you want to know what a truly dreadful company looks like), but I have no intention of buying into the share in the foreseeable future. It does not even have a decent divvie.
Stay safe out there.