12 picks for 2012

January has been a great month for the markets, and especially small-caps - which has led to a decent absolute and relative performance over the very short time frame of one month:

Cove has done very nicely to date and this mornings RNS should add a little fuel to the fire.

A successful appraisal adding more gas pay to the west of the previous discoveries, "adding further confirmation to the 15 to 30-plus TCF recoverable gas resource estimate for the WLBC complex".

http://www.investegate.co.uk/Article.aspx?id=201202210705027...

Adding value to the Company with it's 'for sale' sign up.

fuiseog

Even better than yesterday's RNS from Cove Energy (LON:COV) re further success offshore Mozambique, is today's cash offer of 195p p/s from Royal Dutch Shell (LON:RDSB). The sp has risen to 194p as the market seems to think this is the minimum the company may go for - perhaps other bidders will be flushed out by Shell's early bid as they have all had access to the data room since the company was put on the block in early January?

Therefore, Cove leads the way in the 12-share porty, with a 67% rise from the 116p start price.

[the 12 shares are +24% or so to date]

SM

price could rise if another bidder shows interest,but development costs might put some off

Well, after a great January what did February bring to the markets and in particular my chosen twelve shares? An even better month is what, helped in no small part by the two offers for Cove which means it is a one-bagger after just two months - it may not see out Q1 but the return will be fantastic!

Overall the portfolio is up 27.9% for the calendar year with the FTSE 100 up 5.4% and a more direct comparison, the AIM All-share, up 19.1% reflecting the re-rating that small caps have enjoyed.  Below are the month-end numbers:

I've been busy of late and unable to report on the dozen companies in the portfolio, but there's been plenty of newsflow this month already.

Starting with the ugly, Software Radio Technology (LON:SRT) reported a profits warning on Friday, stating that anticipated orders were not likely to materialise before month-end, so revenues previously forecast to be in the region of £10-16m will now be £6m (yes, SIX), with profit to come in at around £0.1m. This was a serious letdown, and the price was correspondingly marked down to 21-22p though it has recovered a little. A webcast by CEO Simon Tucker commencing before the market opened revealed that it was a $40m order from South America (Mexico?) that wouldn't make it into this financial year, though he reassured investors that it would be received, and that lumpiness of orders will continue as this is outside of SRT's control. Which begs the question why he was confident/naive enough to guide brokers with the £10-16m revenue figures...

And some bad - the two offers received by Cove Energy (LON:COV) in February saw it trading above the second offer in anticipation of a counteroffer. However, 20% was knocked from the price as the Mozambique Energy Minister stated that the country would tax any sale of Moz assets (even though it's an overseas parent company changing ownership). But we are where we are, and whilst the YTD return has dipped under 100% (!) I'm sure an arrangement will be reached that satisfies all parties.

Fortunately there has been some good too - Brady (LON:BRY) announced its prelims this morning, and great reading they were too:

• Sales revenue increased 72% to £19.16 million (2010: £11.12 million), including an increase in recurring revenues of 147% to £9.79 million (2010: £3.96 million); 
• EBITDA before exceptional transaction costs increased 78% to £3.70 million (2010: £2.08 million); and
• Earnings per share increased 111% to 3.57 pence per share (2010: 1.69 pence per share). Adjusted earnings per share, as calculated by market analysts ² increased to 5.75 pence per share (2010: 5.68 pence per share).

Still on a high multiple but deserved by the way it is executing acquisitions and producing high growth.  There's also £10.3m cash in the bank with no debt.

And 21st Century Technology (LON:C21) this morning announced a big contract win in Sweden, extending its relationship with Arriva, and adding to the Keolis contract already established in Sweden.

21^st Century, the supplier and installation service provider of public transport CCTV and vehicle monitoring systems, today announces that it has been awarded a contract, totalling £3.3m, by Arriva in Sweden to supply on board CCTV, passenger counting systems, depot infrastructure, related maintenance and software hosting for a substantial part of a fleet of public transport vehicles operated by Arriva in Stockholm.

£2.7m of the contract value will be delivered in the current year and thereafter Arriva have contracted for a further one year's maintenance and five years' software hosting. The Company is optimistic that there is further scope for collaboration within this multi-modal (bus, tram and train) transport system.

Commenting on the contract win 21^st Century's Chief Executive, Nick Grimond, said:  "We are particularly pleased to have been awarded this business which, on the back of the major contract award by Keolis last year, underpins our expansion into Scandinavia.  In addition to the provision of on board CCTV this contract includes the supply of passenger counting systems within a multi-modal public transport system, which represents a significant new growth opportunity for the Group."

SM

The first quarter of 2012 is now over and the results are in.  This first short period for the 'Molby Dozen' shows a continued outperformance of the two indices recorded, though markets and the portfolio did pull back as March drew to a close.

Contributions in the month came from Lo Q (LON:LOQ) with an 11th water park contract and a strong AGM statement, 21st Century Technology (LON:C21) with fantastic results and a special dividend, Brady (LON:BRY) keeps ticking along moving upwards on solid progress, Real Good Food Co (LON:RGD) with strong results on the back of impressive divisional performance from Renshaw's bakery products and Napier's sugar as well as a subsequent purchase of a 10% block of shares by Omnicane of Mauritius.

Treading water in the month were First Derivatives (LON:FDP) with no trading update or any news so perhaps a blackout until results in May, Tullow Oil (LON:TLW) despite progress in Africa and being awarded new blocks in Uruguay, and Titan Europe (LON:TSW) which posted great results though seemingly priced in.

Those dragging performance under for the month were Coastal Energy Co (LON:CEO) on the back of a dissappointing well (though helped by 10% rise today with another good drilling report), Cove Energy (LON:COV) on taxation uncertainty in the Mozambique sales process, dotDigital (LON:DOTD) retracing after racing away in Jan/Feb, Medusa Mining (LON:MML) on the back of more setbacks with unscheduled mill maintenance and reduction in forecast gold production, and Software Radio Technology (LON:SRT) with a profits warning.

Happy Easter one and all !

SM

We're now a third of the way through the year, so time to round-up progress of the dozen shares chosen in the New Year portfolio.  Against a number of headwinds the portfolio has done well to advance by 1% this month, against a fall in the FTSE100 of 0.5% and a fall of 2.3% for the FTSE AIM All-share.

The YTD figures show the portfolio +25%, FTSE 100 +3% and the FTSE AIM All-share +12.1%.

In what has been a poor month the portfolio has stood up well considering and is still +20%, whilst the FTSE 100 and FTSE All-share have slipped into negative territory for the first month this year.

Well, halfway through the year and the portfolio is holding onto its earlier gains for now, ending the six months up 20%, against a FTSE-100 returning -0.02% and the FTSE AIM All-Share returning -2.6%.

For the first time in 2012 I have included a payment from a stock in the portfolio value - though in the instance of 21st Century Technology (LON:C21) this was a 'capital reduction' rather than a dividend, representing 24.1% of the start price.  Other stocks have also paid out small dividends but I have not included these in the portfolio performance.  I am recording them however, and will include them at year-end and also compare against the indices with dividends reinvested.

In reply to StrollingMolby, post #22

Well done.

Would I be right in thinking that about half of your outperformance is entirely down to one stock - viz Cove Energy (LON:COV) ?

Indeed, great performance strolling. :)

In reply to emptyend, post #23

ee,

Would I be right in thinking that about half of your outperformance is entirely down to one stock - viz Cove Energy (LON:COV) ?

indeed it does - which shows the benefit of diversifying across a small portfolio, with the eight winners outweighing the four (relatively small) losers to date. So yes, Cove has carried the portfolio so far, and may yet provide further gains if Shell are encouraged by recent gas discoveries to bid higher than PTT... (of course, could slip back if no bids are flushed out).

SM

In reply to StrollingMolby, post #25

indeed it does - which shows the benefit of diversifying across a small portfolio, with the eight winners outweighing the four (relatively small) losers to date.

...though of course if you'd had a higher weighting in Cove Energy (LON:COV)..... ;-)

The diversification argument cuts both ways.

Meanwhile, you may be assured that I am taking a very keen interest in the bidding for Cove Energy (LON:COV), even though I own no shares.  ;-)

I wonder if Royal Dutch Shell (LON:RDSB) will come up with the 300p knock-out that some expect, especially given that the market has already priced half of that in.

ee

In reply to emptyend, post #26

Alternatively, Shell could just offer £150m for all of AEX and have a much bigger interest ...... ;-)

Now that would be a nice out I have to say DJP :)

Can I ask how you go about finding suitable investments, and the typical grounds you use for rejecting a candidate?

I wonder what your numbers would look like without Cove

In reply to Isaac, post #30

He'd be up 9.9%, still above the index. To be fair to him, if I take out the best performer, I should probably take out the worst, too, giving him a mean return of 12.7%. A very respectable return.

Mark

If the portfolio was more concentrated, i.e. 5 holdings I suspect the performance would be better.

It is interesting how half the gains come from 1 share. So choosing your top 5 picks is portfolio enhancing.