Here are the latest stocks Slater has bought and sold and the one he's holding on to.
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: NCC GROUP
"I have been buying more NCC shares as the company has performed well both as a business and in share price terms. It has two divisions, software escrow and internet assurance, both of which are market leaders. Software escrow is the larger part of the business – customers pay a small annual fee for their software to ensure that if the software provider fails the customer will be able to continue using the software.
"This business is growing steadily and is hugely cash generative. The internet assurance business stress tests cyber security for clients. It's the largest of its kind in Europe and rapidly growing. The company warned in December that profits would be higher than current
market expectations. This prompted analysts to upgrade their forecasts by around 7% for the current year to May 2012. The improvement in profits had been driven by faster-than-expected turnover and margin growth in the assurance division.
"The shares now trade on about 18 times current year earnings. This may look expensive, but the growth rate is impressive and I see scope for upgrades in both divisions. I don't mind paying for good growth. I also like the fact that growth is not tied to the general economy, which looks like it will be lacklustre. NCC has a tail wind, which is a rare and wonderful thing in the current market climate."
"We first bought Cape in March 2009 at between 17p and 20p. The company sells blue-collar services to oil and gas companies: it puts up the scaffolding, installs the insulation, does the blasting and the painting.
"It is one of the very few oil and gas companies that had a ‘good' crisis with both earnings and turnover rising through 2008 to 2011. The shares ran up as high as 600p.
However, the shares have fallen back following a statement in November. A number of expected orders have been delayed and two small exceptional costs were also announced. Although it has reassured the market that revenues will hit expectations, its shares have dipped as far as 300p.
"Cape's fourth quarter update was reassuring but we would still like to see news of the larger contracts that are expected. I believe these should be announced in the next few months. Trading on a share price multiple of less than eight times its earnings, it is a strong hold until there is more clarity on future orders."
"We have sold insurance group Admiral. We only had a small investment, but it has recently had some disappointing results. The dynamics of the insurance market are changing for the worse, with referral fees – previously a means to generate revenue – being outlawed. Equally, the insurance market is extremely competitive. All this we knew, but
"Admiral had been generating profits ahead of its peer group and was paying a decent dividend. However, recent results were poor. In particular, the group's personal injury claims came in extremely high, which cast some doubts on management strategy.
"More worryingly, there are signs that Admiral might have been under providing for claims. Until recently, it appeared that Admiral was outperforming its peer group but this might simply be a matter of providing less for claims.
"Our concerns are therefore fundamental – for us, this is not just a question of the price being a little bit high – and we sold out completely. If I believe the price is a little high, I might trim back a position, but if the story has changed completely, I simply sell out. In general, we are not scared of a high multiple as long as it is high in relation to its growth rate. But
Admiral is still on a relatively high multiple, while its growth prospects appear far less certain than even a short while ago."