Shares to buy, hold and sell: Gillian Tiltman
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
BUY: CC LAND HOLDINGS
The M&G Global Real Estate Securities fund traditionally has a very low portfolio turnover, so for Tiltman to have made one addition to it in the last quarter of 2012 she must have seen a good opportunity. CC Land focuses on residential property development in western China, an area Tiltman would usually steer away from.
The company appeared on her radar during a trip to China and she says "kicking the bricks" is a vital part of making real estate investments. She was won over by CC Land's knowledge of the regions in which it operates. "Real estate is a local business where you need to know your market."
Tiltman says the company has certain qualities not usually found in Chinese businesses, including good capital discipline, low gearing (about 10%) and also a high level of disclosure, providing lots of information to shareholders.
She began purchasing shares at the end of November, at an average price of 242p. Their value has increased by 30% already, with the shares now priced at about 312p. She also thinks there is still more growth to come.
"On an absolute basis it still looks very cheap," she says. "It is a very different business model that I think is poised to do well."
Shaftesbury is a UK-based property company that owns real estate mainly in the West End of London, in areas such as Chinatown, Carnaby Street, Covent Garden and Seven Dials.
As a small company - it has just 17 employees – Tiltman likes the fact it is "on the side of shareholders".
Shaftesbury has been held for the entire five years of the fund's existence, accounting for about 2.5% of its portfolio, and is currently priced at around 567p.
She explains that the company trades at between a 5% discount and 10% premium to its net asset value, and is currently sitting at a premium. There has been some volatility in the company and, despite the premium locations it holds, it was not entirely unaffected by the recession.
However, Tiltman says it still saw a single-digit growth while many others were in decline. "Shaftesbury will shine in the depths of recession or when the market is doing well. It has created destinations within London, entire villages," she says.
Tiltman adds that it is a core holding and she does not envisage ever being without it in this fund.
SELL: FRASER AND NEAVE
"I tend to be a very supportive shareholder so it is rare for me to sell a position," says Tiltman, talking about her decision to close out of Singapore-based Fraser and Neave. The company has two very disconnected arms - one side is an Asian beverage company and the other is in real estate.
Tiltman says the share looked cheap and high quality, and she had been following it for several years but did not have the available cash to buy into the shares. She ended up making an initial purchase in early April 2012, topping up the position through May and June at an average price of 681p.
She closed out of the position just a few months later in October, selling the shares at 881p - an increase of about 33% in less than six months.
A buy offer from a Thai beverage company caused the price to shoot up in 2012, and, with the share price now hovering around 969p, Tiltman admits she probably sold too early, although she believes the shares are now overpriced.
"I have always said that I would rather lose the last 5% or 10% than go too far," she says. While Tiltman's general philosophy for all companies is that they should know what they do best and focus on that, she says Fraser and Neave was unique in the fact that it did very well with both parts of the business.
Net asset value
A company’s net asset value (NAV) is the total value of its assets minus the total value of its liabilities. NAV is most closely associated with investment trusts and is useful for valuing shares in investment trust companies where the value of the company comes from the assets it holds rather than the profit stream generated by the business. Frequently, the NAV is divided by the number of shares in issue to give the net asset value per share.
Investors who borrow money they use for investment and use the securities they buy as collateral for the loan are said to be “gearing up” the portfolio (in the US, gearing is referred to as “leveraging”) and widely used by investment trusts. The greater the gearing as a proportion of the overall portfolio, the greater the potential for profit or loss. If markets rise in value, the investor can pay back the loan and retain the profit but if markets fall, the investor may not be able to cover the borrowing and interest costs, and will make a loss. Also used to describe the ratio of a company’s borrowing in relation to its market capitalisation and the gearing ratio measures the extent to which a company is funded by debt. A company with high gearing is more vulnerable to downturns in the business cycle because the company must continue to service its debt regardless of how bad sales are.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.