Jarvis (JIM) has announced a Q1 dividend of 5p per share , which is up by 17.9% on last year.
I would expect they have continued to trade well in light of this and if anything the recent volatility may have meant they saw more trading activity too. This plus their previous positive updates leads me to suspect they will beat market forecasts for this year as these do not seem to have been updated. Just talking next years numbers as currently forecast leaves it on a reasonable looking 16x with a yield of likely over 4% as they have come back recently with the market.
There was also a trading update from Bellway (BWY) a long standing member of the CISP. This was for their first half which appears to suggest revenue growth in excess of 13%, which is roughly in line with rates of growth factored into current forecasts for the year as a whole. This came from a combination of 6.3% higher completions and increased selling prices of 7.8%, while they say the outlook is still positive despite the rise in interest rates in November. They also say they expect margins just above 22% for H1 and at that level for the full year if the market conditions remain the same.
In this positive trading environment, they say "interest from customers remains high, with website traffic and visitors to sales outlets both ahead of last year. Reservations have followed their usual seasonal trend, with the quieter, albeit positive, summer period followed by an increase in activity over the autumn months. The Group has taken 178 reservations per week (2017 – 166), an increase of 7.2% compared to the same period last year and the cancellation rate, a barometer of customer confidence, remains low at under 11% (2017 – under 12%)."
So overall sounds like a steady as she goes kind of update which probably won't lead to many changes in forecasts. The shares, as ever, look excellent value on around 8x with a 4% yield having come back £3 or so from their 12 month high recently which has left them looking a bit oversold.
Just a quick update on the performance of the Compound Income Scores Portfolio (CISP). After such a promising start it was a fairly disappointing month in the end. FTSE 100 and the broader FTSE All Share Index both ended the month with total returns of nearly -2%, while the Mid 250 stocks did slightly worse with -2.24%. As is often the way at the start of a sell off (if that's what this is) the Fledgling & Small Cap Indices held up better with Small Caps flat and Fledgling stocks actually delivering positive returns of 1.83%. The more general weakness seems to have been led by nervousness about rising bond yields on the back of the gradual withdrawal of Central Bank Quantitative Easing or QE being therefore replaced by Quantitative Tightening or QT.
So onto the CISP and its returns for the month of January were similarly drab but were at least just about positive at +0.06%. This compared to the 1.93% loss from the FTSE All Share giving 2% of out performance on the month. Since inception of this portfolio in April 2015 it is now up by 68.8% which equates to an annualised return of 25.3%, albeit that this has been achieved in a very favourable market background. Within the portfolio it was pleasing to see one of last months new purchases - Miton Group (MGR) - coming in as the top performer with a near 20% rise, while Hays Group and Bodycote delivered 11.5% and 6.6% respectively on the back of their updates. On the downside the laggards were Games Workshop (-10%), Jupiter Fund Management (-6.1%) & Bellway (-4.3%) which all probably succumbed to profit taking after previous strong performance.
Personally since I'm be using the Compound Income Scores, together with Stockopedia Stock Ranks more this year to manage my portfolios I was also able to benefit from the rise in Miton Group too. I firmly believe that these quant models can be a great help in identifying shares that outperform, as demonstrated by CISP and other portfolios based on ranking sytems. If you are not familiar with the Compound Income Scores (which have been updated for subscribers today) you can read more about the background to them and how to get access to them if you want by clicking here.
Finally we have the US Unemployment data with the non-farm payrolls today. These should still be fine, while the main FTSE Indices all still remain about 2.2 to 2.4% above their moving averages, with the Small Cap index is nearly 4% above. So these still suggest that we should not be that worried about the sell off just yet, although I guess it could develop into something nasty given valuations and the levels of complacency that have built up over the last few years on the back of QE which meant that corrections were few and far between recently.
A couple of positive updates from domestic Companies exposed to what are seen as the vulnerable sectors of Housing and Car sales. Firstly there was Bellway (BWY) the national house builder which has been one of my favourite plays in the sector over the last few years. They continue to look cheap given the on going strong trading and the price fall since the BREXIT vote. The current strong trading is however largely backward looking as they are updating to their year end which was 31st July 2016. Like many others on current trading they say it too early to tell the impact of the vote but they do observe that recent weeks have been encouraging, visitor numbers are still strong and the cancellation rate remains at a historic low. In addition to this they flag a strong forward order book which seems to account for around half of the turnover they did this year and having invested in land they say they are well placed to continue their sizeable contribution to meeting the UK’s requirement for new homes in the year ahead.
Thus they seem reasonably confident of continued strong trading in the year ahead, although I note that analysts have unsurprisingly down graded next years numbers heavily recently to the extent that they now see a near 10% fall for next year. Now as we know analysts are not that good at forecasting so it will remain to be seen if they have been too pessimistic or to optimistic in this regard. Personally I would tend to still be more favourably disposed towards the house builders given all the monetary and probably fiscal support to come and the on going housing shortage which should all help to underpin demand and allow them to keep pumping up the volume and paying out generous dividends. As ever though I guess you pay your money and take your choice and those that believe that the economy and housing market are about to crash on the back of BREXIT will obviously not be going near house builders or may be even shorting them.
Another of my favourite stocks S&U (SUS) the car loan finance company also reported a strong update today. If any thing the Chairman, Anthony Coombs was almost too cocky for my liking when he said: "In contrast to the recent gyrations and doom saying in the stock and currency markets following June's Brexit vote, trading in the real world at our Advantage motor finance business continues as strong and consistent as ever. Customer applications are at a record high with live customer numbers up 39% on last year at over 38,000 whilst margins are being maintained." Again this is largely backwards looking and they did suggest that credit quality was not quite at last years record levels but still within the range of expectations. He then went onto say: "A sound and consistent strategy, substantial investment and a dynamic and committed team both at Advantage and the Group, form the bedrock of S&U's progress. That is why, whatever the current economic uncertainties, we continue to regard the future with great confidence."
Now while I like to see a confident statement from management I do just get a bit worried about hubris kicking in when they start to sound so bullish when things are going well, which as we know in the stock market is not normally a good thing. Despite that caveat it does still look reasonable value on around 13-14x earnings with a near 4% yield. In addition looking at the numbers they are talking about I wouldn't be surprised to see some upgrades on the back of this so on that basis I'll stick with it.
We have had strong looking numbers from three stocks that I have covered in the past. First up alphabetically is Bellway (BWY) the well managed national housebuilder which unsurprisingly osi doing well given the recent buoyant housing market in the UK. This meant that turnover, margins, profits and therefore earnings and dividends were all up by strongly. Indeed the 43% rise in h1 earnings and 36% rise in the dividend were ahead of the growth rates forecast for the full year so it looks like some more upgrades might be due here. Even without that they still look cheap on less than 9x with a yield of close to 4% and with a Compound Income Score of 99 it seems likely to remain in the CIS Portfolio at the next review.
Meanwhile there were also some strong looking Q3 numbers from a former CIS Portfolio stock IG Group (IGG), the financial services firm which was focussed on spread betting but has more recently expanded into stock broking too. Their numbers today also look strong and have probably benefited from the more volatile market conditions in recent months.
It fell out of the portfolio when it had got onto an expensive rating and as lack lustre markets and the costs of investing in their stock broking business led to flat earnings and dividends. With the more volatile markets and presumably some return on their investments in stock broking forecasts are for some modest growth in earnings and dividends, which with the fall in the share price recently has brought the rating back a little.
It does however still look fairly fully valued on a PE of around 18x for this year, although the yield is more attractive at around 4%. It still scores reasonably well on the Scores but probably not well enough to get back into the portfolio.
Finally we had full year results from S&U (SUS) the motor finance and specialist lender. Comparisons here are muddied somewhat by the disposal of their home collected credit business which led to a 125p special dividend. The earnings seems to have missed forecasts by some way, but I suspect this may be due to the effects of the disposal as the dividend ex the special seems to be in line or may be 1p ahead of some forecasts.
So I guess the miss could lead to some downgrades although they do say they see very significant opportunities to maintain and even accelerate the steady and sustainable growth which has been S&U's hallmark. They also flag a 2x dividend policy going forward which, on current forecasts suggests a dividend of around 88p which at the current price of 2260p would give a yield of 3.9%. The PE again on current forecasts is a reasonable looking 13x, although it is probably best to see where forecasts settle.
If there are some downgrades then that might afford a better buying opportunity for the medium term if you are attracted to their simple business model, with lows around 2000p in the last year appearing to offer some support. Not one that scores that well but still one I'm happy to hold for the long term.
We have had a couple of announcements from CIS Portfolio stocks today. Firstly Bellway (BWY) the housebuilder reported another strong trading update for the first half of their current financial year. As expected, given the recent background of rising house prices, this is again a strong update. This was boosted by stronger than average price rises thanks to the mix of houses they sold this period with more London apartments and fewer affordable homes.
Looking forward they say they have a strong order book and land bank to continue to deliver on going volume growth of around 10% in the current year aided by the government initiatives to increasing housing output. So with government support on going and interest rates seemingly on hold until next year the shares, which have come back with the market recently, look good value on around 9x this years earnings with a well covered 3.7% yield and a top Compound Income Score of 100. They have more recently traded on up to a 10x PE, which suggests there could be scope for some upside from here towards recent highs around 2800p to 2900p, although this may of course be curtailed by the current economic and market malaise.
Meanwhile 32Red(TTR) one of the stars of the CIS Portfolio when it doubled in around 3 months recently, has come out with a pleasant surprise by way of a special dividend of 3p per share which goes XD next week to be paid in March. So that is worth a decent 2% or so on the current share price and will be in addition to the final dividend which they are due to be announced on 10th March 2016 which they have already said will be slightly ahead of expectations. This one is on a fuller looking rating of around 20x with a 2% yield for the year they are just about to report. That is however expected to fall sharply to more like 12x and it still Scores 99 on the CIS. Given the strong forecast growth it still looks reasonable on that basis despite the doubling in the share price.