What’s Been Happening?
I last updated my weekly review some time ago. With this relentless rain, the British summer seems to be over, allowing me to knuckle down and complete all my tasks, from property investment research to digging through company reports to find potential trades. I really should organise my time better to complete all work no matter the weather conditions, but I find that it shouldn’t be wasted on rare occasions when we see a little sun.
I am also using this time to learn, and I have a long way to go until I feel confident to call myself an expert in investing. What is that point when someone can give themselves the title of an expert investor? Is it a time when you have reached your financial goals, or is it when every investment magazine and news channel approaches you for your thoughts on the market?
I have been investing and trading now for several years. I make profits but struggle with impostor syndrome when I hear an analyst talk or some old codger who has lived through 200 recessions telling me I’m too stupid to be in the market.
I created this website to allow younger, less experienced investors and traders a safe space to start their journey into the world of the financial markets and to meet like-minded people. I am here because I have a passion for the stock market. I love the investigations, the drama, and the idea that I can manage my own investments without relying on the city suits who sit there thinking everyone is beneath them.
Anyone can manage their investments just as well as the pretenders at the top. I have more confidence in myself than someone like Cathie Woods of Ark Invest, who is praised daily for losing millions!
As usual, This week, I’m back to reviewing companies that are either on my watch list, I am invested in or have some read across to companies I am involved with. This is not financial advice; these are just some quick thoughts about the company and the market. I am not an accountant and have no qualifications in economics, but I have a basic understanding. I believe, and I have proven so far, that this basic understanding is enough to achieve your goals and beat the market.
Information overload can hinder your investment decisions. An accountant would rip every financial statement apart so they would never buy anything, and an economist would stay hidden under the bed. It has been proven that a monkey picking random stocks can beat the market, giving me confidence that I stand half a chance. Do get me wrong, we must learn what to watch out for and have a long way to go, but we will do this together.
NWF Group plc is a specialist fuel, food, and feed distributor across the United Kingdom. The company’s principal activities and its subsidiaries are the sale and distribution of fuel oils, the warehousing and distribution of ambient groceries, and the manufacture and sale of animal feed. The Fuels segment sells and distributes domestic heating, industrial and road fuels. The Food segment is warehousing and distributing clients’ ambient groceries and other products to supermarkets and retail distribution centres. The Feeds segment manufactures and sells animal feeds and other agricultural products.
I last reviewed this NWF back in November of 2022. Analysts’ estimates were an FY23 EPS of 19p, with an average PE of 11. I had a target price of 209p. At the time when the price was hitting new highs at around 285p, this made me reluctant to get involved. Since then, the price target has dropped back slightly, currently sitting at 255p.
Since November, the full-year earnings per share expectations for 2023 have increased substantially and before today’s release of full-year results, EPS was expected to be 29p. The figure came in at 30.1p or 31.3p, excluding exceptional items and amortisation of acquired intangibles.
I like the diversification of the company and the management team navigating NWF through some rough times. Still, I need help understanding what’s coming next. Many factors affect trading. Today’s earnings boost comes from inflation, higher commodity prices, weather conditions, and war. Will these factors still affect trading going forward, or will macroeconomics and a harsher winter give us something else to calculate in 12 months?
Nevertheless, management is confident about the future, and the group is happy with the cash generated and plans more acquisitions and larger warehouse space.
With today’s figures, the price could be higher, but I think many investors sit in the same camp as myself and keep the price slightly depressed on the unpredictability of trading.
Dividends have been increased for the 12th year, but the dividend yield is the lowest it’s been.
The balance sheet is strong but with a rising pension deficit. The company states:
Pension scheme volatility – Increases in the ongoing deficit associated with the Group’s defined benefit pension scheme would adversely impact the strength of the Group’s balance sheet and could lead to an increase in cash contributions payable by the Group.
I watch with interest and may pick some shares up on a more significant pullback.
I last reported on Greggs in November 2022 at the same time as NWF. My main worry at the time was the potential recession lingering over the horizon, the same horizon we have been staring at since about 2018. A recession that never seems to get any closer.
To date, trading has been strong at Greggs. The disappearance of workers from the high street buying sausage rolls has yet to happen. The cost-of-living crisis still sees the consumer visiting stores, with Greggs opening a further 94 in the period, making 2378 stores nationwide.
Revenue for the Half Year came in at £844m giving an Earning Per Share (EPS) of 46.8p. I cannot see any actual weightings in each half of the year, so a lazy doubling of the EPS gives an FY23 EPS of 93.6p. Analysts do expect an EPS of 119p.
The share price is down 7% on the day, with commentary from the CEO claiming input prices are expected to rise another 7%, but no price rises are planned in stores to combat the additional costs. Does this show a need for more pricing power? Are these higher costs going to help Greggs miss the expectations?
Times are tough, and companies that have found it easy to raise prices could now be at the top of the threshold. Inflation only rises to a point when people say, ‘no more’. Maybe this is showing at Greggs.
I do, however, like the pace in which Greggs is finding new areas of trade, extended opening times, increased product offerings, drive-through stores, and new store openings are all contributing to the strategy below:
We continue to progress with our strategic growth plan centred around 1) growing and developing our estate; 2) expanding our evening trade; 3) developing our digital services; 4) broadening customer appeal and driving loyalty. These objectives are underpinned by investment in our supply chain and systems, enabling us to drive progress and growth across our business.
I have always admired the company and wanted to buy the shares, but I need help finding a way in. If the price drops, I may pick some up, expecting an uplift in trading and margins once the inflation bit is behind us. Those days will come, and as we sit around eating a cheese and onion pasty, we will one day wonder what all the fuss was about.
Staffline Group plc is a United Kingdom-based recruitment and training provider. The principal activities of the company and its subsidiaries include the provision of recruitment and outsourced human resource services to the industry and providing skills and employment training and support. The company operates in three segments: Recruitment GB, Recruitment Ireland and PeoplePlus. Recruitment GB segment is engaged in providing recruitment and outsourced human resource services to the industry in Great Britain. The recruitment GB segment provides flexible blue-collar workers, supplying staff across various sectors, including agriculture, supermarkets, drinks, driving, food processing, logistics and manufacturing. The Recruitment Ireland segment provides end-to-end solutions across 20 industries, 10 branch locations, 15 onsite customer locations. The PeoplePlus segment focuses on providing skills and employment training and support.
I am not invested with Staffline but am interested in the read-across to my investment with Robert Walters. The recruitment sector interests me because of the predictability of what’s to come. Reading a chart of the recruitment sector, you can witness the ups and downs of an economy. The solid, more prominent players such as Staffline and Robert Walters know what to expect from each market cyclical and can use the experience to profit. As Staffline lets us know here, they are taking market share and waiting for the recovery.
The company states it is achieving a “resilient” performance in a “challenging” market environment and is expected to align with full-year expectations.
The company states:
There is no question that the broader economic environment in the UK and Ireland will continue to dominate headlines. However, with the increasing return to work of many classified as economically inactive in the most recent ONS labour market report, we are cautiously optimistic that the tight labour market is starting to ease and will support the economy going forward.”
Profits have dropped back in the half year as expected, but the comments on the industry’s future pleased investors to send the stock up 8% on the day.
I do you like the financials over at Robert Walters better, but I am pleased with the comments that it’s not all doom and gloom out there.
Staffline traded well to May 2019 when the company put out a profit warning blaming Brexit for workers transferring a significant volume of their temporary workforce into permanent employment to mitigate the risk of a tightening labour market. Since then, the share price has traded flat. As we learn to live with Brexit and the macro conditions improve, could Staffline get back on track and recover some of that +90% share price it has lost in the last few years? I watch for a breakout and a recovery in the sector. I will perform more research at that point. These are just quick observations.
Property Portfolio
Raising the Rent
I raised the rent on three of my properties this week. It’s hard to do, but instead of posting a letter and expecting to be paid. I visited each tenant and sat with them to explain the current market conditions, and we’re entirely understanding. My rent from my properties is still lower than the area average, and my tenants know this.
Finding that balance is still important. One of my tenants has long-term ill health and receives Personal Independence Payments (PIP), and the other two have minimum-wage jobs. I must consider their circumstances and my own during these volatile times.
Rent Reform Bill
I also explained the new regulations surrounding the rental sector and gave details of the new rent reform bill due to be implemented next year.
Most landlords are now stressing about the bill, threatening to leave the industry.
Due to the main points being:
- · Abolishing Section 21 evictions
- · Reforming grounds for possession
- · New mandatory ombudsman
- · Tenant pet requests and pet insurance
- · Rent increases and advance payments.
- · New property portal for landlords and tenants
- · Further proposed improvements to the PRS
- · Decent Homes Standard for the PRS
- · Outlawing blanket bans on benefits
I can honestly say nothing above affects me, and I welcome the bill.
Too many so-called “landlords” here to make a quick buck are giving honest people like me a bad name. I do not profiteer from my tenants, throw them out for no reason, provide unsafe living conditions or deny simple requests for no reason.
As many property experts predict a crash from landlords leaving the industry, I wait patiently to pick up some deals and look forward to working in a more regulated industry.
