Two more updates from Portfolio Stocks

Firstly, yesterday during the day we had a trading update from Character Group (CCT) the £100m Aim listed toy, game and gift group which has been one of the big winners so far in the portfolio since it was launched in April this year. New readers can read about the rationale behind the portfolio in this post. The update from Character was the reassuring in line type and confirmed their intention to continue with share buy backs as and when they see that as being appropriate.

Given the rise in the share price of around 45% since it was purchased the yield has now come down to around 2%, even on next years forecast dividend, which is at the lower end of what I like to see personally from my investments. Despite this though it still scores 98 and does only trade on around a 12x PE which seems cheap but may be appropriate for such a fickle and volatile industry.

Since it was just an in line update the shares saw some profit taking yesterday, which is understandable given the price looks quite extended (see chart below) in the context of the recent weak market. Thus it is a less obvious bargain now and future price trends are likely to be more influenced by their next update in December which should give a feel for their important Christmas trading period, but for now probably nothing to get excited about but it might be worth watching to see if it drifts off significantly ahead of the next update which could then perhaps provide some more excitement.

Meanwhile today we had a set of interims from Alliance Pharma (APH) the £150m Market Cap. Aim listed pharmaceutical Company. This included another trading is in line with management forecasts and we expect full year results to be in line with market expectations type of statement. This is reassuring , however the results seemed a bit underwhelming again as the revenue growth in the half seems to have been driven by the recent acquisition although this is something they do fairly regularly. This did however fail to translate into earnings as these were broadly flat at 1.65p v 1.68p last year. May be this should not be such a surprise though as this one has failed to grow its earnings at all since 2010.

Despite this they continue to raise the dividend as they run down a high level of cover and the interim was raised by 10% which compares with 12.5% growth forecast for the full year and the 10% they did on both dividends last year so 10% and 1.1p looks like the most likely outcome to me. At a price of 56p, down 3% this morning, this leaves the shares on a fullish looking 17x their flat earnings this year with a yield of just under 2% based on my 1.1p forecast which as I mentioned earlier is the low end of what I like to see personally. It is though just over 3x covered which is good but there is only so long this can go on if they continue to fail to grow their earnings.

On that basis I can't get excited about this one up here even though they say they have more debt capacity left for more acquisitions which it seems they need to just stand still. Thus I'm glad I took profits on my own holding and it looks like it might exit the CIS portfolio at the next quarterly review at the end of this month as it only scores 77 now, after rising by a surprising 50%+ since it was purchased.

So there you go there are my thoughts on these two and if you have them I'll leave you to decide if you want to throw the toys out of your portfolio and if the drugs don't work for you?