Shares to buy, hold and sell: Simon Moon


"Cineworld is a lovely company, with a cash-generative roll-out model," says Moon, explaining why he's keen on the nationwide cinema chain. He likes the amount of investment being put into the business at the moment; Cineworld has recently converted all its screens to digital and intends to expand into 25 more locations in the next five years. The company funds these roll-outs with internal cash.

And Cineworld is broadening its horizons too. It has recently acquired Picturehouse, a boutique cinema chain with only around 20 branches, to give access to a different clientele.

By introducing membership that offers unlimited viewings for a monthly fee, as well as focusing on its online booking, which requires registration, Cineworld is learning more about its customers.

"The cinema experience has actually changed little over the years, but now Cineworld is trying to improve its engagement with customers, which is something cinemas have been rubbish at," says Moon. This should lead to increased advertising revenue.

Bought originally in August 2010, the share has been topped up and is now the largest holding in the portfolio at 5%. The share price is currently 328p and the dividend is 3.8%.


Moon's fund prefers to invest in companies operating successfully in specialist growth markets, ideally where exports account for a proportion of revenues, so it is easy to see how Diploma fits into the portfolio: it's an international group of companies, with three main divisions: life sciences, seals and control. Importantly, 80% of its operating profits are outside the UK.

It is the range of hydraulic seals that Moon currently seems most interested in. But Diploma has carved out a niche for itself in this area in the US where "if it's big and yellow and moves earth then you can make money from it."

The business aims to deliver any seal, to any specification, anywhere in the US, overnight, and Moon thinks it has been benefiting from the recovery in the US housing market.

"It had a good run but it has slipped into a hold position because it doesn't meet our yield target any more," he explains. The dividend is currently 2.8%.

However, the company is investing in facilities, which Moon believes should underpin future growth, and the yield, he says, will catch up.

The fund has held the shares for more than seven years. After a dip at the end of May from around 590p, they are currently priced at 559p.


The fund's turnover is very low, so Moon has trouble picking a share that he has sold in recent months. Though Silverdell remains in the portfolio, the position has been downsized of late, with more of the shares sold in February.

Silverdell was a UK-based asbestos removal company, but in June 2012 it raised the equity to buy international company EDS and Moon says "it was a transformational deal".

The fund had held the shares for 10 months prior to the deal, and supported its decision to branch out into site remediation and become an international business. "We backed it to the hilt," says Moon.

In just nine months the share price went from 11p to 20p, and Moon explains he wanted to take some of that profit. The price started to fall in March in expectation of poor interim results and is now back down to 13p.

The fund retains a holding, however: "It's a tough environment but it's a good, well-positioned company," says Moon. The dividend is 1.9%.

This feature was written for our sister website Money Observer