Q1 2025: Performance, Trades, and Commentary
Has there been a more weird start to the year than what we just had? Updates on COM, GEMD, RWA, HAT, SOS, NICL, ASHM, PHNX
Performance Summary of The Boon Fund
Q1-2025: -1.0% vs +4.4% (FTSE All-Share Benchmark)
2024 : +11.8% vs +5.7%
Wow! What a first three months it has been. Firstly, I apologise for not posting anything. I was away in New Zealand, and then other commitments got busier than usual, and before I knew it, a whole quarter had passed by. I will try to keep up a more regular rhythm of posting, maybe using Notes more often (so make sure you follow/subscribe to The Boon Fund or my personal profile to get those!)
The FTSE100 outperforming the S&P500, who would have thought that? All driven by the policy uncertainty around Trump tariffs and US government spending.
Despite the bright performance of the FTSE100 (+5% Q1), the FTSE250 (-5.6%) and the AIM100 (-5.2%) are still performing poorly. My underperformance vs benchmark is largely driven by the FTSE250 and the AIM, as most of my shares are from those two, instead of the FTSE100.
Meanwhile, lots of policy announcements have been made in the UK leading up to and at the Spring Budget. But actually, it is all just tweaks around the edges. A couple of billion savings on spending, on a £1tn+ annual government budget. Some tweaks to some rules here and there. Mostly coming in over a few years, rather than a big bang right now. Hardly the sort “Change” with a capital C promised by Labour.
The NI and Wage increases coming in this month are probably a much bigger impact. As an investor, I am worried, but given companies and investors have had six months to digest, I think its probably all priced in. Maybe why the FTSE250 and AIM100 are down so far this year? The silver lining is that many companies might benefit; ones who focus on minimum wage consumers like Greggs and Wetherspoons maybe? And that’s not been priced in yet. We might get a mini-stimulus to consumer spending coming, and that can be good for the UK, as we are a consumer spending driven economy.
One thought I had recently… as Trump has slapped HUGE tariffs on most exporting nations, that we in the UK also import from… think China, Vietnam, etc… exporters will have excess capacity, and will need to seek new markets for their goods. The inflation outlook for the rest of the world becomes more deflationary. You can imagine that clothing brands in the UK, like Sosandar (I hold) and Boohoo will be able to negotiate much better prices with their manufacturers in countries hit by huge USA tariffs. For the UK as a whole, an economy that does a lot of importing of physical goods, that means the Bank of England could cut rates faster later this year. Good for shares and businesses? And housebuilders? Bad for Pound strength though, especially if the USA is forced to hold or even increase rates due to inflation. Food for thought.
Loads of shares have gotten cheaper in Q1, especially on the FTSE250 and AIM100, and I have been taking the opportunity to top up some existing holdings, as well as start new ones, more details below. However, I have also realised profits on a few positions and sold, so overall I am now nearly 30% cash, which is the highest percentage since 2021.
This won’t be for long though, as almost weekly I am getting buy price triggers.
The value out there is astounding; but there will be some landmines that will do badly from the Trump Tariffs, as well as the labour cost increases in the UK. Some of the buy price triggers that I’m now monitoring daily for a possible entry:
Macfarlane (top-up)
Celebrus Technologies
Churchill China
Cavendish (top-up)
Sanderson Design
James Cropper
However, there are reasons why I haven’t pulled the trigger yet! So treat these as ideas for inspiration for potential good entry prices, rather than a flashing bat signal to buy.
Portfolio Trades
SELL: Comptoir #COM $COM.L
Sold out my entire position. The c-suite had a reshuffle, with former executive members returning who were ousted a few years back. In addition, they don’t seem to have a clear growth plan, and their rate of progress on operational metrics don’t excite me. On top of that, the NI and Wage increases to come in pretty much negates any profitability improvements this year. So another “wasted” year. Overall, I realised my initial thesis wasn’t true anymore, and the new “facts” don’t interest me. So time to sell out and wait.
A pity. I thought they were on track for a decent turnaround with new management, new strategy, when I bought in. It now looks like old management, struggling strategy. I think they have a good format, and my analysis of restaurant ratings is that they are liked by customers. So I’ll keep monitoring, to see if there’s a re-entry point later this year. After selling at c4.2p for loss, the shares have now drifted down to 3.2p. At sub-£4m market cap and a near 50% shareholder, the delisting risk looks quite high.
SELL: Gem Diamonds #GEMD $GEMD.L
I decided to exit this completely too. I bought in initially at May24 on the thesis of bumper profits from unearthing large diamonds and a fast reduction of net debt. This happened for the two quarters after, and at one point I was sitting on a 50%+ paper gain on my 9.4p entry price. Wish I had sold, as the shares then crashed when the largest shareholder tried to sell down their stake in an illiquid market...
Towards the end of 2024, it became apparent that the boom of large diamonds was drying up. In addition, their new mine plan for the next few years didn’t seem promising for profitability. Average diamond prices also continued to fall, which is bad news for miners given the fixed cost structure.
So I decided to exit; again like Comptoir, as the facts change my my initial thesis failed to play out, that’s when one should sell rather than cling on stubbornly to some hope. A bit unlucky with this one, with that large shareholder putting a spanner in the works on the SP rise as my thesis played out. Sold out at 10.7p, now trading at 9p, so that was the right call.
BUY & TOP-UP: Robert Walters #RWA $RWA.L
Bought in here for the eventual cyclical recovery in recruitment. I don’t know when that will happen, but I see companies still needing senior and mid level management in the future? If anything, more will be required - you could replace a team of 10 junior people with AI, but someone’s still got to orchestrate the AI, feed it inputs, and quality check the outputs. So maybe, for every 5 junior jobs cut from AI, one mid or senior level job gets created? That’s where Robert Walters plays in, mid and senior level jobs.
In the meantime, I have been impressed with management efforts to make redundancies, and stay profitable. A big risk with downsizing is that morale goes to the dumps and productivity drops, causing a vicious cycle. However, they have managed to maintain Net Fee Income Per Fee Earner, which is impressive. They have a sound balance sheet too, no sleepless nights despite the steep revenue drops.
In times like these, small independent recruiters are the ones that go out of business first. Through lack of diversification. Robert Walters will emerge in the next upturn with less competition, more market share.
Bought in initially at 295p in January, maybe too early it seems. Topped up more at 220p in March. Think this could easily go to 500p, maybe even 800p. So there’s potential. However, the share price chart really does look like a falling knife at the moment…
BUY: H&T Group #HAT $HAT.L
I’ve owned H&T back in 2021, but bought/sold at no profit. I can’t quite remember why; but it was at 255p back then, and I should have held as its now up near 400p. I’ve kept it on my watchlist ever since then, waiting for an opportune moment to invest.
That moment came in February, when the SP went below 340p, my buy trigger. A combination of bad market sentiment, plus jaded investors, and also lack of faith in management, who snuck out a shock profit warning last year via the brokers rather than in the RNS. Really bad form.
However, in the recent investor presentations I sensed that management have eaten humble pie, and appear to want to be more transparent going forwards.
Meanwhile, they have had a very good Q4 (Oct24 to Dec24) operationally in terms of increasing their pawnbroking pledgebook, which should drive revenue growth this year. Their other divisions should see growth too; retail jewellery and watches should continue brisk growth, and FX should continue to benefit from increased holidaying volumes this year. So overall, I actually think EPS growth this year could be 10% or more, compared to broker forecasts of 6-7% growth. And its still only trading at about 7-8x PE.
As I started building my stake, unfortunately the SP got away from me. Should have started a bit earlier or just swallowed a higher price for the full position I wanted. Anyways, its rocketed from the 338p I bought to 400p, and now settled at 385p. I’m probably not a buyer at this price, but if it does get back below 360p I will complete my position building. Think this could be a medium to large position size for me (5-10% of portfolio).
BUY: Sosandar #SOS $SOS.L
Another share I have owned before. I did really well in 2021-2022 when I bought at 23p and sold at 32p. Its crazy how far these shares have fallen, to 6p, given that revenues have almost quadrupled in that time-frame.
I’m being contrarian here to the market. Sosandar’s strategy is to have pricing/discount discipline, and become omnichannel by opening high street stores. It seems like the market thinks these strategies are going to be failures. I have the contrarian view that these are the right things to do.
Many women’s brands targeting 35-60 year olds have either gone bust, or moved to a heavy discounting model. However, that target audience is now richer than ever; much more disposable income than the average Brit. They are less price sensitive, and therefore if there is a brand that has products they need, they will buy. I think Sosandar has a winning formula here; and this is me speaking from my marketing and branding experience hat on.
They have had some horrid quarters, with fast declining revenues as the “discount sensitive, no loyalty” segment of their customer base moves on. But their profitability metric has increased, and I suspect that as the unfavourable comparative period falls away, we’ll see YoY revenue growth come back, and the fruits of their labour: much higher profit growth.
The second part of their strategy, high street stores, also has investors bargepoling Sosander. Sure, plenty of fashion high street retailers have gone bust in the last few years. However, if you look at why, its mostly down to legacy issues. Expensive leases locked in years ago. Sites with nosebleed business rates. Outdated ERP, POS systems. Inefficient store operations. Tired looking stores starved of capex.
All of these disappear if you are a completely new retailer, looking to set up a high street operation now. All of these issues do not plague Sosandar.
How are the stores performing? Management have been coy and haven’t really shared any concrete metrics here. They have continued their store opening programme, now on to their fifth store I believe. They could have stopped if the first 2-3 were underperforming, but they haven’t.
The fashion industry as a whole is still struggling in Q1. Barclays Spend data, and other industry data, point to static volume growth at best and heavy discounting putting pressure on prices. But after two years of this, I suspect we will start to see a stabilising and maybe improvement come about over the next year.
PARTIAL SELL: Nichols #NICL $NICL.L
This has played out to my thesis, having risen from 990p when I bought in Sep24, to now 1300p+. My full initial thesis is here so I won’t rehash it completely. The share price at that time was not pricing in the fast growth of Vimto (both UK and international), the rapid improvement in profitability in their Out Of Home division, and the Africa growth opportunities and new potential markets for Vimto.
All of those are now FACT in their latest results and update, and it was nice to see the shares go above 1300p.
What now? I still think there is enough momentum in the underlying business to drive modest EPS growth in the next year or two. However, I was disappointed with management’s ambition. In new markets, they have launched in Malaysia, but don’t seem to have another market ready yet, and that takes time to prep. In Africa, they have some growth initiatives in progress, but it seems like a low level of investment. In OOH, they seem to treat it as job done, instead of taking further steps to growing that segment.
All in all, I think this should be trading at between 1400p and 1500p. But I struggle to see higher potential, and hence why I banked some profits at 1320p.
TOP-UP: Ashmore #ASHM $ASHM.L
Been suffering with this one, having bought in Jun23 at 220p, and now trading at below 160p. I have had 33p of chunky dividends in that time, so that has lessened the pain, but still underwater.
Last year, it looked like Emerging Markets were coming back into favour again, and the shares rallied back up to 220p. Only for USA markets to suck back in all the capital with Trump coming into power.
Now with US stock markets wobbling, and investors wondering if the USA isn’t the stable political and policy environment they thought, there has been capital flows to other geographies worldwide. Europe has been the main beneficiary, as widely reported. But so has emerging markets, quietly.
Ashmore is about to announce a Q3 (Jan to Mar) trading update soon, and I wouldn’t be surprised if there were Assets Under Management (AuM) inflows as well as positive investment returns.
With the low share price at the moment, I took the opportunity to top up at 158p. It is now my largest position, as I sold my previous largest position which was….
SELL: Phoenix Group #PHNX $PHNX.L
On the third anniversary of holding Phoenix, since Mar22, I decided to exit. The company has recently released great FY results, beating broker forecasts and also upping targets for the years ahead.
It is an astounding share for income seekers. Even after the recent share price rise, it is still giving off a 9.5% dividend yield, which is very well covered by the predictability of future cash flows, given its annuity and life insurance focus.
The flip side is that it has highly complicated financial statements. I gave up trying to understand the entire FY results, and I’m the type of investor that loves looking at numbers. This issue plagues most other insurance and finance businesses as well. You have to have faith that the management team are solid, ethical, and balancing risk and growth appropriately.
My initial thesis back in 2022 was on declining life expectancies coming out of Covid as well as the booming Bulk Annuities Purchase (BPA) market, where companies offload their defined benefit pension schemes to insurers like Phoenix. Both of which I felt weren’t priced in to the SP at that time.
By and large, both have now come true and are FACT, reflected in Phoenix’s good results over the last two years.
So without a current thesis, I struggle to justify holding Phoenix any longer. Despite my thoughts that the 9.5% dividend yield seems too high and that income investors should be rushing in and driving it down to around 8%, which would be a share price of 675p instead of the 570p currently.
However, the dividend yield has been stubbornly high for a while now, so I have accepted that maybe this is the right level, and decided to sell and move on. Exiting at 576p, it is about the same as the blended 560p I bought in three tranches over the years. So not much capital gains for 3 years holding… however, I have also had three years of dividends since then, all c10%, so its not a bad return overall. A textbook example of how dividends can turbo-charge returns, when the share price is flat / sluggish.
Hello Boon!
I thought to myself only yesterday that I hasn't seen you postimg for a while.
Always interesting to read.
Thank you and welcome back!
Regards, Jon