Staffline (STAF:LN) – 25% growth at P/E of 9

Staffline (STAF:LN) is the market leader in the recruitment and outsourcing of human resource services to industry and services in the welfare to work arena and skills training i.e. blue collar workers. It has just delivered a trading update which confirms it will meet full year expectations for 2017 (net profit £30.2m) which makes its current market cap of £271m attractive (P/E of 9). But it gets even better. Staffline’s net profit does not do justice to its cash generation power, as it has a large amortisation charge which does not reflect true business costs. Its true free cash flow is closer to £40-45m!

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Half Year Portfolio Review H2 2017

Another 6 months have flown by and it’s time to report on my portfolio’s performance again. At the end of the first half of 2017 I was in the midst of investing in a large pot of Japanese small stocks and haven’t made many changes to the portfolio since. I had 26% cash but this quickly reduced to 13%, so I was almost fully invested for this half.

The portfolio returned 10.4% in H2 2017, outperforming the FTSE All share tracker which returned 4.4%, and the S&P tracker which returned 9.8%. That brings my cumulative performance since inception in 2013 to 313%, or 26% annualised.

I keep thinking these years of good performance need to end at some point as the stock market cools off but the end isn’t in sight yet. I generally think my portfolio is somewhat uncorrelated to the wider market, given that most of my money is concentrated in relatively few UK small caps, and 25% is now in a basket of Japanese small caps.

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Sold 800 Super Holdings (ESH:SP)

This is an update on one of my portfolio positions, 800 Super Holdings, which I have held since late 2015. I was perusing their latest set of results and checking profitability. On the surface everything looked fine, revenue was slightly down but profit margins expanded to give a full year profit of S$17m compared to S$16.7m last year. Compared to the current market cap of $219m, this seems to put them on quite a fair valuation given the growth and I was happy to continue holding.

However, a closer look at the cash flow statement showed something worrying.

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Half Year Portfolio Review H1 2017

I’m a little late in getting around to posting this, but here’s my usual half year summary. I started 2017 with 41% in cash, so expected my performance to lag the rest of the market unless I put that cash to good use or unless the market went down. As it happened, the market was up and my expectation was correct. My portfolio returned 6.7% while the FTSE All share tracker returned 8.2% and S&P tracker 8.9%, all including dividends. I’m fairly satisfied with that, and even more satisfied that by the end of June I had put a lot of that cash to good use. My cash position is now 11% and my current portfolio is below.

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Northern Bear ($NTBR:LN)

Northern Bear is a small company in the UK providing “specialist building services”. Segments include Roofing activities, which provides a range of roofing services, including slating, tiling for domestic, commercial and public sector properties; Materials handling activities, which includes supply, service and maintenance of fork lift trucks and warehouse equipment, and Building services activities, which provides things like fire protection and asbestos removal.

It has a market cap of £9.5m and trades on London’s AIM with a trailing P/E ratio of 5.9. My initial thought was that it was in some kind of trouble, or had warned on profits, but that isn’t the case. It simply seems to be a case of the market overlooking a small cap to me.

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Cambria Automobiles ($CAMB:LN)

Cambria Automobiles is a retailer of new and used cars, commercial vehicles and bikes. It operates through four segments: New Car, Used Car, After Sales and Internal Sales. Through its subsidiaries, it has over 30 dealerships, representing over 40 franchises and 10 brands. Its market cap is £60m.

The market is very pessimistic about their prospects with the economic uncertainty over the UK, so it trades at a forward P/E of just 6.4. It is “debt free” (cash covers debt, but seems like it’s needed for operations) and boasts an impressive ROIC of 22% (which the board actually monitors – important for an acquisitive company).

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Half Year Portfolio Review H2 2016

In the second half of 2016, I spent very little time on my portfolio. It’s one of the benefits of having a value strategy buying good companies, that you can mostly forget about them. At the start of the half, I was 49% in cash, so I expected to underperform the market by quite a margin. I was pleasantly surprised that my portfolio was up 13.9% in the half, versus 15.1% for the FTSE all share tracker and 8.3% for the S&P tracker.

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