Shares to buy, hold or sell: Carl Stick

Published by Rebecca Jones on 09 September 2014.
Last updated on 09 September 2014

Buy and sell chart


Stick bought into distribution and business support services group DCC during March and April this year following the Ireland-based firm's debut on the London Stock Exchange at an average price of 3,180p a share, which by Stick's own admission was not cheap.

However, the manager claims that the FTSE 250-listed company, which is primarily involved in the distribution of refined oil and gas, embodies much of what he looks for in a firm: it's established, highly cash-generative and well-managed.

"From a business point of view DCC is very strong, but what is most interesting is how it is financed. Over the past 20 years its operating profit has grown by 13% a year – that's very steady growth - plus it has converted £2 billion of profit into £2.6 billion of cash," says the manager.

The financial strength of the business is certainly the main draw for Stick, who adds that DCC's strong cash flow has enabled the firm to increase its dividend every year for the past two decades.

However, Stick also believes DCC is in a strong position for future growth, with more than 22% of the firm's operations involved in the distribution of hardware for some of the world's biggest technology firms and 14% in the distribution of pharmaceutical and healthcare products.

"It's not the cheapest stock, but I'm investing in businesses that are going to give us long-term sustainable earnings growth, cash back and dividend growth. This business fits the bill,"


Stick has held motoring and bicycle retailer Halfords in his portfolio for more than seven years and remains positive on the stock, despite recent turbulence that saw its share price plummet from a peak of 534p in June 2010 to a low of 191.60p in June 2012.

"Halfords is a good retailer with a dominant position in selling car parts, bicycles and outdoor leisure equipment. It was always a good business, but it went through a tricky couple of years," says Stick.

According to Stick, the appointment of current chief executive Matthew Davies in October 2012 was made to correct some basic errors by the previous management. Halfords' share price has recovered to its current level of 471p.

"Davies is relatively young, but he is experienced and has focused on doing the simple things correctly. He saw the workforce needed to be better trained," says the manager.

Alongside staff training, Davies has also introduced 'click and collect' to the business, an online ordering system that has helped trans- form the fortunes of other British retailers, including John Lewis and Argos.

However, Stick says that while he believes Halfords' long-term business plan is sound, he is currently holding, rather than buying, as the shares are not necessarily pricing in the 'odd hitch' along the way.


One stock Stick did not hang on to through troubled times is Barclays. An unusual purchase for the 'high quality' focused manager, Stick bought the bank last August during its rights issue for an average price of 268p.

"We thought the market reaction to Barclays was too extreme; we felt it was failing to recognise the disciplines being put in place by chief executive Antony Jenkins.

"The bank was also suggesting it might be able to grow the dividend quite aggressively over the next two years to the extent that we might have seen a dividend yield of about 5% in 2015. We thought it was a risk worth taking," says Stick.

However, the manager says he did not buy blindly and had a firm exit strategy should the shares rise or fall dramatically. Unfortunately, the latter proved to be the case. News of a fresh rate-fixing scandal caused shares to tumble from a peak of 296.50p on January 15 to 240p in mid-March, when Stick sold out.

Since then the shares have continued to slide – they stood at 225.70p as at 31 July, having rallied slightly from a low of 201.75p earlier in the month - suggesting that Stick made the right choice.

"We felt the business risk in Barclays seemed to be rising rather than falling and we don't need to take that risk, so we exited. If you've made a mistake, you're better pulling that plaster off quickly."

This feature was written for our sister publication Money Observer


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