Bid restores Revolution Bars’ fortunes, but investors should hold out for more

After a dramatic fall in May the shares are back where we tipped them, but resist the temptation to sell now in relief

PHEW. What had been Questor’s worst pick has recovered strongly this week following a takeover bid and, fingers crossed, no reader who invested as the result of our advice will lose money.

Revolution Bars, which also owns the Revolución de Cuba brand, is the stock concerned. We tipped it first in November last year at 178p; the shares closed last night almost unchanged from that level at 176.5p.

It has been a dramatic ride, however. After our tip the shares quickly soared to about 230p, and we reiterated our buy stance at 224.5p in March, but the price had fallen back to about 205p by May, just before a profits warning that caused the shares to plunge by 40pc to 122.25p. Despite this we stuck with the shares, rating them a “hold” at

112p on May 24.

The shares then fell further to a record low of 105.5p in early July, although they recovered somewhat to 134.5p later in the month following a trading statement that steadied investors’ nerves.

But a much more substantial rise took place on Monday, when the announcement of a 200p-a-share bid from a rival group, Stonegate Pub Company, sent the share price 44.8pc higher to 181p.

The upshot is that readers who bought as a result of our first tip have regained almost all their losses, while those who bought at 224.5p in March have seen their paper loss narrow to 21pc, compared with 53pc when the shares hit their record low last month.

The natural reaction, except perhaps for some investors who bought in March at the highest level, will be to heave a sigh of relief and sell. But this would be a mistake, according to Keith Ashworth-lord of Sanford Deland Asset Management, who owns the shares in his UK Buffettology fund.

He said Revolution was all but certain to be taken over, either by Stonegate, which owns the Slug & Lettuce chain, or by another bidder that could emerge now that the group is seen as up for grabs. A bidding war would send the share price higher.

“My feeling is that this bid is a sighting shot,” he told Questor. “I don’t think 200p is going to be enough. With the field opened up to other bidders, I think a bid will need to be pitched at 225p to succeed.”

This would allow even those readers

who bought at the level of our highest tip to make all their money back.

“I’m 90pc certain that Revolution is going to lose its independence,” he said. “It’s right in people’s crosshairs now, it is well and truly in play.”

Stonegate is currently conducting due diligence and Revolution has stressed that there is no certainty that a bid will result. But Mr Ashworthlord said the bidder’s investigations were “unlikely to turn up any slugs under the lettuce”.

He said he would not sell, but would wait for his shares to be bought by a winning bidder. “With takeovers I always hold until the bitter end in case anything happens,” he said. Questor suggests that readers follow suit.

Questor says: hold Ticker: RBG

Share price at close: 176.5p

Update: Lok’nstore

Readers who held on to shares in Lok’nstore, which runs self-storage facilities, following our tip in October last year have also experienced a volatile ride, although none will have lost money as the price has always been above the 381p level at which we tipped them.

The shares, which we backed for the firm’s record of steady growth, rose strongly in the wake of our tip, only to fall back again to just under 400p. Following further rises and falls, the price stands little changed from our tip, closing last night at 387.5p.

At the interim stage in April the company announced a 4.5pc rise in turnover, a 13.5pc increase in “adjusted” pre-tax profits and a 12.4pc rise in the dividend. Net asset value per share rose by 26.1pc and net debt fell by 35.3pc. The group said it was “confident” about the outlook, adding that it was “well positioned for future growth”.

Mark Slater, who holds the shares in various funds run by his firm, Slater Investments, said the case for holding the stock had “slightly improved in that some time has gone by and the shares haven’t moved much in the past six to 12 months”.

“The essence of the investment case is unchanged,” he said.

Questor says: hold Ticker: LOK

Share price at close: 387.5p