I have made a number of purchases in my portfolio over the last couple of months and haven’t gotten around to writing them up properly. Here I’ll detail what I’ve bought briefly and will have posts to follow with a bit more detail on some of the stocks.
Just Eat ($JE:LN)
This company is different from my usual investments in that it is far from what you would describe as a value stock, sitting at an eye watering P/S of 10. This is a pure growth stock, and sales have been increasing by 60% per year, with profits increasing even faster. Just Eat is a UK takeaway app that has also expanded internationally. Takeaways register with them and put up their menus for customers to chose from. Just Eat take a cut of any orders through their app. I normally wouldn’t touch such blue sky stocks but it is profitable, with margins expanding every year, and is generating lots of cash with little need for reinvestment in cap ex. A friend of mine that owns a sushi takeaway has sung the praises of this app and said it far outstrips its competitors from the sellers point of view. Customers also love it and this is shown by its popularity.
If history is anything to go by, the internet naturally converges to monopolies like Google, Amazon and Facebook, so I see this as a long term investment in what should be the market’s leading takeaway app. The valuation is high, but if growth continues for just a few more years in line with estimates then the valuation suddenly looks reasonable.
As it is a blue sky stock however, I’ve made the position size modest at 2.4% of my portfolio.
IG Group ($IGG:LN)
IG are probably a familiar name for investors in the UK, with spreadbetting services such as IG Index and now an expanded range of products. The spreadbetting seems to be the main source of revenue for IG.
They are another market leader for my portfolio, which means that they aren’t dirt cheap, but unlike Just Eat their valuation is more modest, trading at a forward P/E of 13. As always, I check conversion of profits to cash flow and it is very strong, and paying a healthy dividend yield of 5.8%. As you might guess from these numbers, the market isn’t too hot on the stock and fears regulatory clamp downs along with macro uncertainty after Brexit. ‘Binary options’ have become a thing in the UK and are just a form of gambling in essence, masquerading as investing/trading. Regulators are quite rightly looking to clamp down on this especially, but the whole spread betting industry could be affected by this. Whilst IG has its fingers in the pie, it is a small slice of their business, and I think they are a respectable company and will come through this. The market clearly doesn’t foresee destruction either or IG would be rated much lower.
I’ve made this position roughly 4% of my portfolio,
Gattaca ($GATC:LN) & Northern Bear ($NTBR:LN)
I will do full posts on both these companies, so this is just to say I have long positions in both, as they are very cheap, trading at single digit P/Es.
Japan
I am finding quite a few cheap, small companies in Japan. Analysing them is very difficult as they do not report in English, and unlike languages based on the latin alphabet, I can’t fumble my way through; the financial statements are simply impenetrable. I haven’t made any purchases yet, but will likely purchase a basket of companies with small position sizes given I cannot do due diligence on the companies beyond data on Stockopedia and Bloomberg.
Disclosure: Author is long GATC, NTBR, IGG, JE.
Investing Sidekick
Founder of Investing Sidekick. Works as a research analyst and is an avid value investor, always searching for undervalued shares.
Just eat looks like a speculative play. More so than your usual stock picks. Just wondering why you choose Just Eat over other companies like for example Takeaway.com, since it’s a bit of a ‘winner takes most’ game they play.
Yes, definitely speculative. My reasoning for going with Just Eat over others like Takeaway.com was that they are already profitable and profits are growing rapidly, and the takeaways themselves say Just Eat is a lot better as an actual product to use and manage.