Shares to buy, hold and sell: John McClure

3 July 2012

Its historic yield is 4.5%. It is up by 72% over three years, ranking it first in its sector, against an average 29% return from the UK equity income sector. Its total expense ratio is 1.59%.

Here are the latest stocks he has bought and sold and the one he's holding on to.


Arbuthnot is a group of banking services, including private bank Arbuthnot Latham & Co. It has a 70% stake in Secure Trust Bank, which provides hire purchase-style loans and current accounts to non-prime UK customers.

"It is a retail bank valued at £135 million that provides products to customers, but it doesn't have a high street presence," says McClure. "With Arbuthnot, we're getting another good-quality bank for free. We bought the company at around 300p
a share, and it is now trading at around 485p.

"We were quite nervous about the group at the beginning, but it has plenty of opportunities to grow its core business. We hold no mainstream UK banks, as we think all the bad news from the economy hasn't come out yet."

McClure adds that Arbuthnot is well-financed and holds no inter-bank debt. All of its money comes straight from depositors.


"We've held James Halstead for about 10 years and won't be selling for another decade. Our portfolio turnover is very small, and we like to hold good-quality companies for as long as possible.

"The company makes anti-slip floor coverings that are used in a wide range of properties. For example, its floors have just been installed in the new air-conditioned London Underground trains," says McClure.

"It's a UK business but it exports to the rest of the world – the Olympics in Australia and Greece have used its flooring," he says. Despite the UK focus of the fund, McClure likes companies that generate the majority of their earnings from abroad, as he is very bearish on the UK at the moment.

"The £500 million business has been run by several generations of the Halstead family, which owns the majority of the shares," he adds.


"It's essentially a well-run family business, and is probably Britain's favourite inheritance tax avoidance share as it's listed on the Alternative Investment Market.

"It's a stable business, pays a decent dividend of 5p a share and boasts 35 years of dividend growth. James Halstead is now worth around 500p a share, and we bought at around 180p 10 years ago, although that price has been diluted due to the company issuing various types of share class.

"If I could own a portfolio of 40 businesses like James Halstead, I'd be a very happy fund manager," he concludes.


"The main stock we've been selling out of recently is Stobart Group," says McClure. "It's a haulage company, but at the end of February, it purchased a second property business that led us to sell out of it completely."

The property acquisition is a collection of UK industrial, commercial, retail and residential property owned by two directors of Stobart, Andrew Tinkler and William Stobart.

"We bought Stobart when it floated about five years ago. It was primarily a transport business, with some interest in trains, tracks and airports (it owns Southend and Carlisle airports).


"We sold out of the stock for two reasons – it all felt a bit cosy, and we didn't like the main transport business being diluted. But with this property business, we couldn't see how it would create value for shareholders.

"It suited the directors to get the property off their hands, but it wasn't clear how they arrived at the valuation of the property," says McClure.

"It felt irrational, and we didn't understand it. I have to understand a business to invest in it, so we sold our holding at 120p, which meant we just about broke even.

"With only 40 stocks in the portfolio, each company has to deserve its place in there, or we just find another good quality business.

"As a result of selling Stobart, we have since upped our exposure significantly to UKMail, a solid courier company," he adds.