Obliquity London: Renishaw and AstraZeneca in, Capita out

Here are, belatedly, the trades for this year so far for the Obliquity London portfolio. Reporting software is a work in progress, that may come to fruition soon.

Renishaw: idiosyncratic lab equipment

A somewhat eccentric business, I like the long term view and the product set, seems a good mix of staid and trying to innovate. Valuation and criteria matching are all right. The main possible cloud on the horizon is that the founders are ageing and it’s an open question whether succession will pan out. I’ll bet that there’s a good chance given the long established nature of the business and its apparent strong corporate culture. It could also be acquired, possibly at a good price.

This mid cap entry was funded by accumulated dividends and the rebalancing down of two positions that had increased more than 50% away from target weight: Associated British Foods and Berendsen.

C(r)apita out

While Capita is the like of stock that’s almost automatically matching the Obliquity criteria, many people who have experience of Capita services, including myself I had to remind myself, seem to not enjoy the experience, hence the Crapita moniker. Notably they seem to do things in labour intensive and inefficient ways which I can’t make out whether it’s due to outright incompetence, or to inflate what they charge to their public sector customers. Either way, I don’t want to be involved in that. Moreover, the bean counting management and the long time CEO leaving while the party is still going great was the cherry on the cake and I sold the entire holding.

This is only the second (full) sale since portfolio inception, almost 2 years ago. At this rhythm I’m set for an average holding period of 20 years, which is as it should be.

AstraZeneca: a bet on medical research

Following the meteoric rise of Hikma Pharmaceuticals the position was trimmed down according to the target weight rule, but I wanted to keep pharma exposure and considered AstraZeneca as possibly one of the best of the bunch of big pharma companies. This is a full size large cap position funded by the Capital sales and some spare dividends, along with the Hikma reweighing proceeds.

Like big miners, you’re partially insulated from single blockbusters success and they may buy successful biotech startups that have come up with a working med, similar to a biotech sector fund. It’s difficult to pick one of them; I just like the research centric aspect here, the management seems to be pulling more or less in the right direction, and it seems to pass OK the portfolio criteria. It may be partly a negative choice: they benefit from not being embattled and accident prone GSK, and a bit more nimble. It seems to still be relatively cheap, like most of the big pharma segment since the “patent cliff” issues came to the fore, so we get some immunity to the bio tech small caps bubble.

Reweighing rules: tweaking the rules to trading costs

I am adjusting my “top slice when 50% above target weight” for non-UK stocks, to “2x target” to prevent excess trading — my broker has increased their forex markup recently. The happy holding that triggered this thinking is St Gobain, which touched the 50% rule and that I’m happy to keep. This takes it to a 2.9% weight, which is not really a barking mad overweight — the portfolio is well diversified, with 59 holdings.

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2 comments
  1. Michael Broom Smith said:

    Congratulations on your AstraZenica call

    • cig said:

      Cheers but this is sheer luck, I wish I could time takeovers… And I’ll need to find a replacement exposure if I get cash or Pfizer shares (not too keen on keeping Pfizer post big deal).

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