Dunelm is a high quality, highly profitable business with durable competitive advantages. It’s the UK’s leading homewares retailer.
Dunelm is not a defensive business, but it does operate in a growing market and uses relatively little financial leverage for a retailer.
Dunelm has performed very well during the pandemic and its shares have performed even better.
I still like the business, but after recent share price gains I think its valuation and dividend yield are no longer attractive.
I recently sold all my Dunelm shares having owned them since 2016.
“Dunelm is market leader in the £14bn UK homewares market and active in the £12bn UK furniture market. It currently operates 173 stores, of which the majority are out-of-town, and trades online through dunelm.com.”
Any investment which loses more than 95% of its value can only be described as a disaster. However, the lessons learned from this disaster are so powerful I would have to describe Ted Baker as a gift, albeit a painful one.
Ted Baker produced consistent, rapid growth for many years
Ted’s growth was largely funded by banks and landlords rather than shareholders
External funding was used to drive growth because of Ted’s weak profitability
Even before the pandemic, Ted had more debt and leases than it could comfortably afford.
This article covers some investing tips based on adjustments I’ve made to my defensive value investment strategy in response to the coronavirus pandemic.
So far this pandemic-driven downturn is nothing like a normal recession.
With high-quality companies suspending their dividends left, right and centre, the economic consequences of coronavirus are much more sector specific and much more devastating than we would normally see.
As a result, I’m sure that many investors have had to re-think their approach to buying and selling stocks as they attempt to minimise risks and maximise returns from their portfolios.
I’m no different. Over the last couple of months, I’ve made a few minor adjustments to my “defensive value” investment process which, I hope, will steer my portfolio through the storm and leave it well positioned on the other side.
These adjustments are based on sensible principles and I think they’ll apply to a wide range of investors.
Investors who rely on dividends for a large part of their income should prepare for significant dividend cuts and suspensions in 2020.
In recent weeks, stock markets around the world have crashed as a direct result of the coronavirus pandemic.
In most corrections and market crashes, dividend investors are able to shrug off paper losses and focus on what really matters; their reliable stream of dividend payments.
But in the current crisis that may not be so easy.
The limitations on free movement of people and goods being put in place to slow the spread of the virus will have (and are already beginning to have) a significantly negative impact on the ability of most companies to generate the cash they need to pay dividends.
Diageo’s share price has increased by more than 300% since the financial crisis of 2009. In this article, I argue that the share price is somewhat stretched and that expected returns are not particularly attractive. I also calculate a target price at which I would be happy to invest.
Diageo is a well-known and generally much-liked business. It develops and manufactures alcoholic drinks such as Smirnoff, Guinness and Johnnie Walker, which it then sells in more than 180 countries.
I write the regular Dividend Hunter column for Master Investor magazine, and in the February issue I wrote about sustainable dividend growth and how to identify it.
In almost all cases, long-term dividend growth is unsustainable without earnings growth, earnings growth is unsustainable without revenue growth and revenue growth is unsustainable without capital employed growth.
In practice, this means companies can only produce long-term sustainable growth if they employ more capital to fund more factories, warehouses, vehicles, machines, robots, offices, computers and an endless array of other capital assets.
Or to put it another way, if you’re looking for sustainable dividend growth, you should start by looking for sustainable capital employed growth…
Mean reversion of market valuations will be one of the primary headwinds or tailwinds affecting your portfolio over the long term. In this article I look at the FTSE 250’s cyclically adjusted PE ratio (CAPE), and whether it’s likely to help or hinder your portfolio over the coming decade.
Normally I don’t like to comment on the short-term ups and downs of specific holdings, but Ted Baker recently suspended its dividend and for me that’s more than enough reason to carry out a full mid-term review.
The eagle-eyed among you will know that this review comes only a few months after a similar mid-term review of Xaar. That, of course, is not ideal, but we are where we are and the best path forward is to review the situation, to learn, to evolve and to try to avoid similar situations in future.
And in case you’re interested in the history of this investment, you can read a 2018 review of Ted Baker which I wrote shortly before investing in the company.
At this time of year, many investors like to talk about which stock they think will perform best over the coming 12 months.
As a general rule I’m not a huge fan of cheerleading individual companies, especially over the short-term, but this year I thought I’d join in and write about Admiral Group, the UK’s leading car insurer, for the January issue of Master Investor magazine.
Let me be clear: I’m not in love with Admiral, but if I had to pick a favourite investment then Admiral would be it.
There are lots of reasons why, such as the fact that Admiral has produced consistent growth and average total shareholder returns of almost 16% per year since I first invested in 2013.
But that’s all in the past, and in investing it’s the future that counts.
And on that front, I think Admiral is probably more attractively positioned and more attractively valued today than it was when I became a shareholder.