XL Media (XLM) - the Israeli, Aim Listed on line performance marketing company has announced interim results today. These look pretty strong with revenues up by 33% driven by a similar level of organic growth in their highly profitable publishing division which makes up 44% of their business. This helped to make up for slower organic growth and lower margins in their media business & a fall of 25% in turnover from their partner networks operations which make up the remaining 56% (50% & 6% respectively) of the business. They also completed some acquisitions in financial & cyber security verticals in the US and in the mobile gaming area which helped to boost revenues in the media business.
The dividend was increased by 5%, which is a bit better than the marginal growth that is reflected in current consensus forecasts, so these could be upgraded if analysts bother to note that. More interestingly in the Outlook and headlines where they said: "The Board is therefore confident of comfortably meeting profit expectations for the full year..." which I take to mean they think they will probably easily beat current forecasts of 14c per share. This looks likely as even if the 2nd half was flat, then by my calculations, they would still come close to 14c. Thus there may be scope for some upgrades here if analysts share my opinion, but maybe the Company will steer them to keeping unchanged numbers so they can beat them later in the year? There will be a webcast of the results presentation which will be available on their website later today at: http://www.xlmedia.com/media/.
So overall a decent looking set of numbers which leaves the potential for some upgrades or a beat of full year numbers if upgrades don't come through in the short term. Of course being an Israeli company listed on AIM with a somewhat opaque business model, this is not one for everyone and indeed maybe one that the market loves to hate. Despite that it does have good financial metrics and has delivered growth of over 20% per annum in eps since 2011, although this may not be sustainable at this rate as they seem to be needing to make acquisitions now to keep the growth going which is potentially more risky. This new phase may well have been highlighted by big holders selling down in the last year or so, although I note the CEO still has a decent stake in the business. Given all that the quantitative scoring systems such as Stockopedia & our own Compound Income Scores continue to rate it highly at 97 & 98 respectively. So on about 12x with a 4.5% growing yield it will remain the CIS Portfolio and might be worthy of further investigation if you are not put off by the nature of it or think that the market will continue to love to hate it.
Summer is over as we roll into September and the weather certainly seems to think so too. Any way the normally quiet August passed off in its usual fashion with low volumes and only a modest positive return of 0.77% for the FTSE All Share Index. The Compound income Scores (CIS) portfolio continued its strong run of outperformance in August with a total return of 1.25%.
For the year to date this makes 7 out of 8 months so far in which it has outperformed the broader FTSE All share index and leaves it with a total return of 25.71% year to date & 52.18% or 19.81% annualised since inception at the end of March 2015. You can see a full table of the performance history by clicking here if that is of interest to you. There is also a chart of the portfolio performance against the other FTSE UK indices such as the Mid 250 and Small Cap available on the website and this is reproduced at the top of this post. The only thing missing from this chart, which is worth pointing out, is that I don't have data for the total return of the All AIM index which as shown in the following chart has been the best performing UK index this year.
Now this is worth bearing in mind as the CIS Portfolio currently has 40% in AIM stocks and is also skewed towards Mid 250 Stocks & Small Caps with 35% and 12% respectively and only has 12% in FTSE 100 Stocks which have brought up the rear this year. So this has been beneficial to the portfolio and will help to explain a large part of the outperformance this year, although obviously selecting the right stocks within in that, thanks to the Compound Income Scores, will also have been necessary. No doubt if we see a return to FTSE 100 stocks leading the way then some of the recent performance could reverse.
With that background I wanted to highlight to readers the broader benefits of the Scores as they are not just for dull income stocks but cover the breadth of the market with over 600 stocks drawn from FTSE 100 down to small caps and 200 under researched AIM stocks too. Now you may not be that interested in income stocks in particular, but it is worth bearing in mind that given the focus of the Scores on quality and growth metrics as well as yield, value and financial security, they can and do also flag up attractive quality growth stocks such as ARM before it was taken over and more recently the likes of Fevertree. These do however tend to be on expensive looking valuations, which given my value bias and limits, tends to mean that they get excluded from the CIS Portfolio. If you are that way inclined or more willing to tolerate highly rated quality growth stocks for capital compounding then the Scores can also help you to identify these type of stocks too, although they do exclude those that do not pay a dividend so you would have to look elsewhere for guidance on those. Hmm, makes me think perhaps we should launch an unconstrained Scores portfolio.
The other feature of the Scores is that hitherto they have up to now only been delivered via Google Drive. We understand that not everybody has or wants one of these or even know how to use it and it may therefore not be their cup of tea. So talking of tea - for around the cost of a cup of tea each week (£1) we would like to offer access to more people on a more user friendly basis. Therefore we are delighted to be able to announce that henceforth the Scores will now available via the following services:
So if the Google Drive access has put you off in the past and you would like to gain access to the Scores by subscribing in one of the other ways, or indeed via Google Drive if you are a new reader who uses that, then please click on your preferred method of receiving the Scores listed above to be taken to our payment partner to subscribe.
When you subscribe you'll be provided with a free e-book explaining the background to the Scores.
Further to the update on the Scores Portfolio, we have had a few contacts recently with people looking to sign up. We have replied to all those queries individually but are aware that there may be problems with spam filters and our replies may have gone to the recipients junk mail folders. So if you have been in touch and are still awaiting a reply from us then please could we ask you to check your junk mail folder.
Just to reiterate if you want to gain access to the Scores it should be relatively simple to do via this link or those given on the Scores page here or via the menu at the top of the site. But please note that this product is currently delivered via Google Drive so if you wish to subscribe you will need an e-mail address and access to a Google drive associated with that e-mail address. As it it quite a large sheet it is probably best viewed on a PC or larger tablet rather than a phone, but if you want to be able to access them on your phone then check out details of these Google Apps for - Android and I Pad or I Phone, in the Play and I-Tunes stores. If you are unfamiliar with Google Drive and want to learn more and set one up then see this link for more information.
Here's a brief belated update to the start of August rather than the end of July as I was away on a short break at the end of the month. It was another good month for the CIS Portfolio which was up by 4.9% versus the 1.8% for the FTSE All Share Total Return index. This leaves it up 24.2% YTD & 50.3% since inception or 19.2% per annum on an annualised basis. These figures are all ahead of the various UK indices as per the graph above, but then everyone is probably having a wonderful time swimming in the warm waters of this on going bull market aren't they? Mind you as dear old Warren Buffet says - we'll find out who has been swimming without trunks when the tide goes out. At least the CIS Portfolio still looks good value after this months trades as it sports a forecast PE of 13.7x with a 3.5% forecast yield based on expected dividend growth of 14% for the current year.
Talking of the total return indices above the latest Monthly timing indicators based on these remain about 5% above their averages in the case of the headline indices such as FTSE 100, while the Mid Cap and Smaller indices are further above their averages by about 7%. So these and the on going strength in US employment data and robust PMI indices suggest that the tide is still with investors so it should be safe to continue to go with the flow for now without protection and as the old saying goes the trend is your friend, so carry on enjoying it while it lasts.
This is an update for you on the performance of the Compound Income Scores portfolio, which features on the graph under the Portfolio tab in the navigation bar and in the tables etc. accessible therein. Please see these for more detail on the numbers discussed in this post. By way of reminder or for newer readers - the Compound Income Scores Portfolio is generally made up from top decile ranking stocks from the Compound Income Scores and it is re-screened / re-balanced now on a monthly basis.
In summary, incredibly June 2017 was the first month of negative returns (-1.14%) for the portfolio since June 2016, which compares favourably with the FTSE All Share which suffered negative returns in November, January, April and June 2017 (-2.47%). That makes it 5 months out of 6 that the CIS Portfolio has outperformed this year and 9 out of 12 or 75% of the months over the last year. Thus for the quarter the CIS portfolio was up by 5.11% compared to +1.41% for the FTSE All Share. For the year to date the CIS Portfolio is +18.37% v +5.5% for the FTSE All Share.
For the sake of completeness the comparisons for the CIS Portfolio for 12 months are +41.79% versus 18.12% for the FTSE All Share. Since inception in April 2015 the CIS Portfolio is +43.29% versus +17.73% for the FTSE All Share. Since inception the CIS Portfolio has outperformed in 19 of the 27 months or 70% of the time, which is not a bad hit rate.
I hope you found this interesting and don't forget if you would like to learn more about the Compound Income Scores and how you can gain access them to help you in selecting attractive income stocks then please see the Scores tab in the navigation bar or click here to read more. Finally I don't publish details of the Portfolio, but if you would be interested in following it and gaining access to the Scores at the same time then do get in touch via the contact form and I'll see if I can come up with an offer for you.