Holding on for the cycle to turn
Posted on April 2, 2009 by Richard Beddard
Filed Under Companies, Investing, Markets |
In practice:
Holders Technology in classic Ben Graham territory
Tiny Holders Technology (HDT ) looks like a financially sound company going very cheaply.
It supplies the electronics industry with laminates and materials to make the printed circuit boards used in mobile phones, transmitters, cars, medical devices and the aerospace industry.
The most recent annual report (for the year to 30 Nov 2008) reveals that some customers, defence and aerospace in particular, are faring better than others and its Scandinavian operation is in decline as telecoms companies switch their buying to the Far East.
Although Holders was profitable, in both cash and accounting terms, in 2008, the global economy was relatively strong at the beginning of the year. For all we know 2009 could be worse, perhaps grim throughout. As I reported yesterday, the chairman of Wolfson Microelectronics, a company one or two stages further along the electronics supply chain, is prepared for that.
So, good finances and a low valuation are prerequisites for investment. Going into recession Holders looks strong. Its F_Score, a test of financial strength, is seven out of nine. In November, shareholders owned 73% of the company’s assets, it had no long-term debt and an overdraft of just £237,000.
Chairman R W Weinreich says:
As a company we have experienced cyclical downturns before and are experienced in addressing the challenges these pose. We fully expect to maintain our position in our key markets and to end the year financially strong.
The company’s thirty-five year history gives me some confidence he will be right. Also, recent history might be a better guide than for most other companies. The slow-down of 2002 and 2003, after the technology bust, was not even a national recession, let alone a global one, but there was recession in the electronics industry. In 2002, Holders made a small loss.
The shares cost just six times Holders’ average earnings over the last ten years. Even better, the price values the company at only half its net working capital, its current assets minus all its liabilities, making Holders a fabled Benjamin Graham ‘net-net’ bargain stock.
Given its cyclicality, it’s probably more of a buy and sell (when it recovers), than buy and hold, in keeping with the Thrifty 30 system.
-
I’m trying out Sharelockholmes, an online stock screener recommended by a reader, Bruce Martin. Although I calculate the ratios and statistics you read here mostly from data in company reports, I find the companies using data exported from the popular investment program Sharescope. I won’t give up Sharescope, it’s very good for managing portfolios and its part of my routine, but Sharelockholmes is cheap, and has a wider range of ratios and fundamental data including the F_Score and shortly, at my request, the ratio of shareholders’ equity to total assets. It could also become a faithful servant.
In theory:
An all over the place shaped recession
They’ve finally worked out the shape of the US recession. It’s not going to be a ‘U’ or a ‘V; or even an ‘L’ it’s going to be all over the place.
Geographically, the global recession is already all over the place. Here’s the FT’s map.
Nassim Taleb tells Bloomberg, he doesn’t have faith in the G20: “They don’t seem to understand they caused the problem.” They crashed the plane, he says, we need another crew to fly it now.
I’m in good company. Peter Lynch drove an old banger, Willem Buiter drives a ‘hooptie’, and my old Audi is nine parts duct tape, one part steel.
Comments
6 Responses to “Holding on for the cycle to turn”
Leave a Reply
[...] Friday 03 Apr 2009 Home / Editors’ Blog About « « Holding on for the cycle to turn [...]
I like HDT. Don’t forget the 3.25p final divi, approx 4.8% on the current price, if you hold before next Wednesday ( 22nd April ). :O)
[...] Ditto. I focus on the ten-year PE and check accounting profit against cash flow. I also look for net-nets, examples of extreme value, like Holders [...]
[...] there is one net-net in the Thrifty 30 model portfolio. It’s AIM listed Holders Technology, and, in time, I may include [...]
[...] Holders Technology (HDT) [...]
[...] picked tiny Holders Technology (HDT) for this month’s Share Sleuth article. The main risks: liquidity, and the depth of the [...]