Dewhurst: not perfect, but…
Posted on January 14, 2009 by Richard Beddard
Filed Under Companies |
Dewhurst pushes most of the right buttons
Before I talk about this week’s shares tomorrow, I promised more on Dewhurst (DWHT), last week’s pick of the week.
There’s a funny story in a novel I’ve just read, ‘The Marriage Bureau for Rich People’*1. Irshad, the number one valve salesman in Southern India, complains that none of the marriage bureau’s prospects shows any interest once he’s met them. It turns out he can’t stop talking about valves, which are tremendously important in engineering, but not perhaps to potential wives and their mothers.
Dewhurst is a kind of corporate Irshad. It makes pushbuttons. The kind you find in lifts and on cash machines, and is moving into traffic bollards. They’re prosaic products that probably don’t excite glory-seeking investors but…
Likes:
…Dewhurst fits my template almost perfectly. It’s financially strong, it has no debt and an F_Score of 7, and a long record of rising earnings, with the odd setback along the way. It’s been profitable for at least 17 years, and probably much longer. Dewhurst’s long-term price earnings ratio is about 8, not a bargain in the current market but certainly not expensive. The average for the whole stockmarket is about 10. Last year was a record year for profits, although in 2009 they’re likely to be crunched, slightly.
Dislikes:
Two factors that escape basic analysis, but bedevil smaller companies in established industries, are increasingly frustrating me. One is the size of their pension funds and the other is ownership.
- Dewhurst is socking away £500,000 a year plugging a £4m hole in its pension fund, which its actuaries value at £16m.
- Ever since I was squeezed out of Northern Recruitment, I’ve been more sceptical about family controlled businesses. Major shareholders own 71% of Dewhurst, which is almost enough to vote through almost anything at company meetings, if they all acted together. The biggest individual shareholder, though, is Richard Dewhurst, who owns nearly 15% of the shares, so at least one individual is not in control.
Not the perfect share, then, but I feel I’ve moved a step closer in Dewhurst. I’d consider buying shares in it, notwithstanding a more difficult year ahead, as part of a portfolio of sound companies.
Footnotes:
- It’s an uplifting, and easy read. I loved it, though it’s getting surprisingly poor reviews on Amazon.
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