Computacenter  (CCC), the independent provider of IT infrastructure services that enables users and their business, today provided an update on trading for the year ended 31 December 2017. This turned out to be acurates egg of an announcement as they started out by saying: "The adjusted pre-tax results for the year are anticipated to be ahead of the Board's expectations as at the time of our trading update on 14 November 2017 and which have been upgraded a number of times throughout 2017."  They did however go onto say in the outlook that a number of one-off costs and investments within the Group in 2018 that will not repeat in 2019, will hold back the enhancement of profitability in 2018. As a result they disappointingly said that at this early stage they therefore expect 2018 to be a year of "stable profitability", hence my curates egg comment. Looking at the forecasts I see there was only modest growth suggested for 2018 so maybe this won't be such a shock but could lead to downgrades of around 3% which is not great. This leaves them on a fairly full looking 18x with a well covered yield of around 2.2%, so probably up with events for now.

Alliance Pharma plc (AIM: APH), the specialty pharmaceutical group, announced its pre-close trading update ahead of the announcement of its preliminary results for the year ended 31 December 2017.
This was of the in line variety with the main features being a strong performance from their growth brands, a boost from FX  & a reminder about recent acquisitions that they made. They also highlighted that this had led to debt levels rising to 2.5x EBITDA at the year end, but they also flagged their strong cash flow generation and therefore that they expect their debt ratio to decline to 2x EBITDA by the end of 2018. This strong cash flow and good levels of earnings cover (3x) should continue to underpin their progressive dividend policy of about 10% per annum growth. On this basis and assuming no changes on the back of this update they trade on around 15x earnings with a yield of just over 2%, in summary not that exciting a bit like the business.

Final results from Computacenter (CCC) today the £1bn information technology and infrastructure services company. These look fine on the face of it with the earnings slightly ahead of forecasts, although they are somewhat confused by disposals and subsequent share consolidations last year. Probably as a result of this effect the dividend looked to be a little light of forecasts. I'm not unduly worried by that as the cash generation here remains good and they are back up to record levels of cash on the balance sheet despite returning significant sums to shareholders during the year.

Further to the September / quarter end performance update here are the changes as a result of the latest quarterly screening. First up though a quick reminder of the screening criteria and a small tweak to these that I have been hinting at in recent weeks.

Firstly the normal criteria remain in place for new purchases which are:
1) Selecting new stocks from top scoring stocks
2) Maximum PE of 20x, minimum dividend yield of 2% and an earning yield in excess of 5%.
3) Minimum market cap. of £50m

Now for the tweak which I have decided to add which is to also look at price momentum and exclude from the purchase list any candidates which have negative 12 month price momentum. There are several reasons why I have decided to do this as follows. While I have momentum in the Scores to a certain extent with earnings momentum, which does correlate with price momentum, I have generally fought shy of using price momentum that much myself although I pay some attention to it. However as per this graphic from one of my recent posts:

 I am also adapting my mode having implemented it and assessing the evidence. The thing that struck me, although this may have been a coincidence and I could be making a false connection, is that the two troublesome stocks in the portfolio in the first six months had negative 12 month price momentum when they were selected. The stocks concerned were Plus500 (PLUS) and Utilitywise (UTW) and on reflection both seemed to have had some background concerns and therefore despite the apparently attractive financial metrics they had both underperformed suggesting the the market was wary of them. It is also noticeable that most top scoring stock tend to also have strong price momentum so when a high scoring stock has underperformed I'm now going to let the mechanical process use it as a red flag and skip that stock. Plus the fact that price momentum itself seems to be a powerful factor despite my own reservations about using it, so it is good force the model to use it in this way as I'm trying to use the model to counter my own human biases.

That's it for the tweaks on the purchase side but I guess it does raise the question as to whether I should use price momentum on the sale side too to cut losers even if they still score well, but I have not applied that this time around to Utilitywise as there were already 4 natural sales using an 80 cut off point on the Scores. So it will be "interesting" to see how it goes from here to see if I should perhaps have applied this rule to sales as well.

Any way enough already what about the changes I can hear you thinking. Well on the sale front the natural sales using the 80 Score as a threshold were Alliance Pharma (APH) - which had been re-rated and didn't get any upgrades after results so I'm relaxed about that as I had sold my own holding any way. A.G.Barr (BAG) - had a poor update and big weather related downgrades so as a result it has to go, although personally as it was not an operational problem and the quality and dividend growth remain, I would probably have given it the benefit of the doubt if I held it. Finsbury Foods (FIF) was the next stock to go as it's score had collapsed like a soufflé to 28 on the back of the share price rise, big downgrades post their results and on going low scores in quality and financial security. So I'm sure Paul Hollywood & Mary Berry might have thought it over baked too, that's a British bake off reference in case you don't know who they are. I heard on the news today that sales of baking equipment are booming on the back of it so trying to think of a way to play that. Any way I digress, finally PLUS500 (PLUS) was still coming up as a sell and I only kept it last time because the cash bid was supposed to have completed by now. So since that has dragged on and been delayed by regulatory clearance taking longer than expected, I have decided to eject it this time given it did its job as a cash proxy in the market sell off this quarter any way and I guess the bid could still fail if clearance is not received.

That gave me around £6500 to reinvest which I split equally between four top scoring candidates after applying the criteria mentioned above and adding the 12 month performance filter which excluded Elementis (ELM). So the new stocks were the top scoring Sprue Aegis (SPRP) the fire alarm producer which has a strong following in the private investor community so I'm sure that will be a popular choice. Less popular maybe 32Red (TTR), an on line gaming company, which seems like a natural replacement for PLUS500 if you know what I mean. The portfolio has a retailer already and quite a lot of exposure to consumer cyclicals, but nevertheless I let it buy Next (NXT) as the weighting in FTSE stocks is quite low and the alternative would have been Computacener (CCC). I left this because the other purchase was RM Group (RM.) which adds another technology related stock to the portfolio, although this exposure is mostly software rather than hardware.

I must admit personally I'm a bit uneasy about buying 32Red but that is the point of this exercise. I'm also probably prejudiced against RM as it doesn't seem to have gone any where for years, although on closer inspection it does seem to be turning around under new management, so it might be one that is worth investigating further. Finally I mentioned the exposure to consumer cyclical earlier so I thought I'd include the charts below to add a bit more colour to this. While it was not surprising to see it tagged as small cap exposed I am a bit surprised to see it identified as growth, but since I'm targeting quality growing income maybe this shouldn't come as such a surprise.

So there you go, just remember that if you are attracted to any of the names I have mentioned, don't forget to do your own research as there are no guarantees although I'd say it has been good so far. Cheers good luck with your investing in these difficult times, have a great weekend whatever you are up to, enjoy the weather while it lasts and come on England in the Rugby!