STOCK PICKS RE­VIEW

Dis­ap­point­ing re­cent per­for­mance from one of our ear­lier star turns takes the sheen off our an­nual se­lec­tion

Shares - - CONTENTS -

Third quar­ter up­date for our top picks of the year

Nine months into 2018 and we’re still out­per­form­ing the mar­ket with our top picks of the year. None­the­less, a 3.1% av­er­age gain ver­sus 0.3% loss from the FTSE All-Share only calls for a cel­e­bra­tory or­ange juice and lemon­ade rather than high qual­ity cham­pagne.

Ear­lier gains have been re­duced thanks to no­table weak­ness in Al­liance Pharma (APH:AIM) in re­cent weeks plus Dixons Car­phone’s (DC.) losses

be­com­ing greater.

Al­liance Pharma has moved from a 58% gain at the half year stage to now only be­ing 10.5% in profit. A spokesper­son for the com­pany said there was no clear rea­son for the share price de­cline. How­ever, look­ing at its share price chart, the sell-off was clearly trig­gered by half year re­sults on 19 Septem­ber.

The re­sults in­cluded one-off costs from stricter reg­u­la­tions and Brexit prepa­ra­tions. It also plans to in­crease stock­hold­ings ahead of these events com­ing into force, which will have a neg­a­tive im­pact on cash flow.

In­vestors may also be wor­ried about Al­liance Pharma’s shift­ing fo­cus on the In­ter­na­tional Star port­fo­lio away from its Bedrock prod­ucts, as the for­mer may re­quire ex­tra in­vest­ment in rel­a­tive terms to drive growth. We think the share price sell-off has been over­done and that now is a good time to buy more stock.

Half year re­sults pub­lished in Au­gust showed the com­pany made £93.1m pre-tax profit in six months, fast ap­proach­ing the £111.7m it made in the en­tire 12 months of 2017.

Chief ex­ec­u­tive Ian Lon­er­gan said Char­ter Court had de­liv­ered against or ex­ceeded all of its tar­gets in the pe­riod. Share­hold­ers are be­ing re­warded with their first div­i­dend.

News flow has been very thin from AB Dy­nam­ics (ABDP:AIM) since we up­dated three months ago, although we now fi­nally know who is go­ing to be its next chief ex­ec­u­tive. James Routh started on 1 Oc­to­ber, hav­ing pre­vi­ously held se­nior

man­age­ment roles at FTSE 250 firms Chem­ring (CHG) and

Diploma (DPLM). There should be a trad­ing up­date any day now, if it hasn’t al­ready been pub­lished as we fi­nalise this edi­tion of Shares.

LOS­ING MO­MEN­TUM

Shares in pub­lish­ing group

Fu­ture (FUTR) have lost some mo­men­tum since the com­pany car­ried out a £105m rights is­sue to fund the takeover of US tech and science magazine pub­lisher Purch. We’re still sit­ting on a 22.1% profit and we re­main fans of the com­pany’s strat­egy of in­te­grat­ing ti­tles within a trans­fer­able li­cens­ing, e-com­merce and dig­i­tal ad­ver­tis­ing plat­form.

Although Purch is on a dif­fer­ent scale to other as­sets it has ac­quired, we were still en­cour­aged enough to rec­om­mend in July that in­vestors should take up their rights in the three-for-four is­sue.

Some­one in­vest­ing £5,000 at the time of our orig­i­nal ‘buy’ sug­ges­tion in De­cem­ber 2017 and tak­ing their full rights is­sue al­lo­ca­tion this sum­mer, would now be sit­ting on around 2,211 shares ac­quired at an av­er­age price of 356p, and at 482p the shares are cur­rently trad­ing 35% above this level.

ON THE RE­BOUND

Multi-chan­nel dig­i­tal mar­ket­ing busi­ness DotDig­i­tal (DOTD:AIM) seems to have put the mar­ket’s doubts about the im­pact of new data leg­is­la­tion to bed, which has at least re­turned the share price to their start­ing point af­ter a weak pe­riod.

The chal­lenge now is to re-en­er­gise in­vestors for what is still, in our view, a very strong growth story driven by its dot­mailer dig­i­tal mar­ket­ing plat­form.

A re­cent re­search note by stock­bro­ker Peel Hunt flags the po­ten­tial for in­creased per­son­alised mar­ket­ing to ‘cap­tive au­di­ences’ us­ing ar­ti­fi­cial in­tel­li­gence. In­ter­est­ingly, DotDig­i­tal’s chief fi­nan­cial of­fi­cer Paraag Amin is a for­mer Peel Hunt an­a­lyst him­self. Waste man­age­ment group

Biffa (BIFF) is per­form­ing well as a busi­ness and now has a new lead­er­ship team. Chief fi­nan­cial of­fi­cer Michael Topham last week moved to the chief ex­ec­u­tive role and for­mer As­so­ci­ated British Foods (ABF)

sugar di­vi­sion fi­nance di­rec­tor Richard Pike has joined as the new num­bers man.

WHAT ABOUT THE LAG­GARDS?

We crys­tallised our losses on

Dig­nity (DTY) ear­lier this year af­ter a shock change in busi­ness strat­egy with sig­nif­i­cant price cuts. The share price did make a small re­cov­ery in May but has barely moved since June.

Our bullish call on high street re­tailer Dixons Car­phone is 10.2% in the red, with sen­ti­ment poor since a May profit warn­ing and sub­se­quent dam­ag­ing cy­ber­at­tack.

Sub­dued con­sumer spend­ing on com­put­ing and mo­bile mar­kets are near-term head­winds, but we’re still hope­ful new CEO and dig­i­tal spe­cial­ist Alex Bal­dock has the nous to rein­vig­o­rate the mar­ket lead­ing elec­tri­cal-tot­elecom­mu­ni­ca­tions ti­tan’ s like for-like sales and com­pete with ri­vals in­clud­ing Ama­zon.

If Sage’s (SGE) lack­lus­tre growth progress wasn’t dis­ap­point­ing enough, the shock res­ig­na­tion of pre­vi­ously high­lyrated chief ex­ec­u­tive Stephen Kelly in Au­gust re­ally st­ings. It was his job to help the FTSE 100 ac­coun­tancy and en­ter­prise soft­ware firm ac­cel­er­ate growth gears af­ter years run­ning at around the 6% or­ganic rev­enue mark.

He was meant to get Sage’s cloud com­put­ing act to­gether, and read­ing be­tween the lines, it looks like his fail­ure to do so cost him his job. With a new boss un­likely un­til the New Year this stock looks set for aim­less drift­ing for the time be­ing.

En­try prices taken 19 Dec 2017 Lat­est prices taken 1 Oct 2018 *Ex­ited trade 29 March 2018

START PER­FORM­ERS Char­ter Court Fi­nan­cial Ser­vices(CCFS) is qui­etly get­ting on with the job and its share price is slowly tick­ing up ac­cord­ingly.

Dixons Car­phone’s shares have been weak but we are hop­ing to see an im­prove­ment un­der its new CEO

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