Shares to buy, hold and sell: Rosemary Banyard
Here are the latest stocks Banyard has bought and sold and the one she's holding on to.
BUY: RM EDUCATION
"This company supplies information technology to schools in all its forms – hardware, software and networks. It is by far the largest supplier of these types of products in the UK and it has very good contacts at the individual school level. A lot of its competitors go through the Building Schools for the Future programme instead.
"RM has been through a tough time recently because of the cuts the government is making to the education budget; 80% of a school's costs are staff and if the choice is between getting rid of teachers and shrinking the IT spend, most will opt for the latter. As a result, RM's shares have slipped significantly. Yet, it is this recent weakness that has become the opportunity.
"Initially the company was slow to react to the new environment, but major changes were made to the board last year. This is one of the things I look out for – management change can make a significant difference. In this case, Martyn Ratcliffe came on board as executive chairman. He used to run Dell Europe, and has a reputation for creating value.
"Ratcliffe refocused RM on its UK schools franchise. The company had bought businesses in America and Asia.
"He exited all that. He believes that the group is in the business of distribution to schools rather than specifically technology. He is therefore also looking at distributing, for example, insurance or energy. As more schools convert to academies, it takes them out of local authority control and plays to RM's strengths.
"We believe that they should be able to gain market share, and share price performance will pick up."
HOLD: SECURE TRUST BANK
"This bank is part-owned by Arbuthnot. It floated 25% in 2011 at an initial price of 720p and the shares are now at 1,000p. This rise in the share price is why the shares are a long-term hold rather than an immediate buy.
"It is unusual in smaller-companies investment to have the opportunity to invest in a bank, but this is an unusual bank. It is funded 100% by equity and its deposits; it therefore has no interbank or wholesale funding – its deposits are 125% of its loan book. You might call it an old-fashioned bank.
"It specialises in 'retail-point-of-sale' lending. This is for people who are buying a car or sofa, and want one-year's interest-free credit. Secure Trust Bank lends money to the retailers for them to be able to provide this service. There is some 'subprime' style lending, but it is all very controlled and there are huge opportunities as the banks move out of this part of the market. The group has just announced that new lending rose 33% last year.
"We are waiting for the group to do a joint venture with a mainstream bank, or possibly buy another business. When it does that, there could be quite a substantial uplift in the share price."
SELL: INTERIOR SERVICES GROUP
"We have been selling down this stock over the past few months. The company is engaged in the fit-out of interiors for offices, shops, banks and data centres.
Three-quarters of its operating profits in the year to June came from either UK-based businesses or food retail. This is worrying, given the weak economic environment.
Tesco has been one of its major customers and it is currently in the process of reviewing its UK expansion strategy. Its non-food areas have not performed well and the strength of internet shopping is likely to shrink the need for physical shops. Interior Services Group has also been engaged with some work for the Olympics, but this is now drawing to a close. It will not be easy for the company to offset its core market.
"Forecasts are therefore coming down quickly and we believe it is best to be out of the shares."