Shares to buy, hold and sell: John Dodd
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.
John Dodd is the co-founder of Artemis and has been the manager of the Artemis Alpha investment trust since 2003. Over the past three years it has returned 26% to shareholders, ranking it eighth in the UK growth sector.
Here are the latest stocks he has bought and sold and the one he is holding on to.
BUY: WEIR GROUP
Weir Group, a FTSE 100-listed engineering company, has three core divisions - minerals, oil and gas, and power and industrial - that operate all over the world. Dodd bought the share two years ago and sold them when the share price rose and he thought they had run their course.
"But we do like the company and we're very familiar with what it does, which is engineering excellence, for example with its equipment used in fracking. It is a high-quality company with a strong management team," he says.
"So I bought some more shares this year. We added some in July at £14.58 a share and we've got a decent sized holding now."
The price is currently around £17.59. It has been rising recently due to speculation that it could be a takeover target for US giant General Electric.
Dodd says the company is very popular among fund managers and so the share price does move around a lot. "The price has been as high as £21 back in 2000. We think the share price is currently weak and it's got legs. When it gets expensive we will sell it."
HOLD: NEW BRITAIN PALM OIL
New Britain Palm Oil is the seventh-largest holding in the Artemis Alpha trust. The company produces sustainable palm oil in Papua New Guinea and the Solomon Islands, which is used in products like margarine, ice cream and soaps.
It listed on the London Stock Exchange in 2007 and now produces around 16% of the world's certified crude palm oil and 17% of the world's certified palm kernel oil.
However, in August it announced some disappointing results for the first half of 2012, including a drop in revenue from $403.9 million (£250.4 million) the year before to $366 million. High rainfall has hampered palm oil harvests and demand for the product has fallen.
Dodd admits that the results were poor but says he still likes the sector.
"We hold three different palm oil companies so we like the theme. We think there will be some long-term growth in palm oil. For example, the yield on palm oil is very high, and it's a permanent crop rather than an annual crop."
Dodd bought the shares in New Britain Palm Oil a few years ago and topped up his holding at the start of September when the share price was around 650p. Over the past 12 months, the share price has traded in a range of 585p to 900p.
"I highly regard the management, and they have big shareholdings in the company, which I also like," he adds.
SELL: AFRICA OIL
Africa Oil Corp is a Canadian oil and gas company with assets in Kenya, Ethiopia, Mali and Somalia. The East African rift basin system is said to be one of the last of the great rift basins to be explored.
The company is quoted in Canada on the TSX Venture Exchange under the ticker AOI. Oil and gas is a favourite theme of Dodd's, with around 40% of the investment trust invested in companies operating in this area.
Although the trust is primarily UK focused, it does have a few international holdings, such as this one and a few holdings in Ireland and Denmark. The manager took profits from his holding in Africa Oil in August, effectively halving his holding.
"Short-term performance has been driven by discoveries [of oil and gas]. We made a significant amount of money," he comments.
Specifically, the Artemis Alpha trust bought 2.1 million shares priced at 95 Canadian cents each (around 60p) in April 2009. Some of them were sold in October 2010 when the share price ranged between 1.69 and 1.80 Canadian dollars. Another tranche of 2.1 million shares was bought in December 2010 priced at C$1.50.
Some of the shares were then progressively sold between April 2011 and August 2012 as the price rocketed to C$8.91. As a result, the trust made an enormous cumulative gain of £5.8 million over three years of trading the Canadian share.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
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