simoan wrote:Well done on Diploma. My returns have been less stellar, but to take some credit I’ve constantly added on market pull backs and have held off from top slicing on multiple occasions which is unusual for me. My average price is now about £14.70 and it’s now the largest holding in my SIPP. I guess part of the reason they are able to acquire quality companies cheaply is because many such private companies are more undervalued than any similar US listed companies, and for business owners looking to sell their reputation makes them a safe pair of hands and good custodians for the business going forwards. It’s a great business model.
Yes, a very good model. I bought in 2012 at about 470p (IIRC) then topped up in 2018 around 1300p (IIRC). It was still 2500p relatively recently, but I didn't have the cash to invest and my huge top up some weeks ago was over 3400p. It only really looked 'cheap' in 2012 (the dividend yield was 3.4 percent or so) and I doubt it'll get to that level again. However, even my 2012 purchase was arguably a mistake insofar as I should have bought a much bigger position (and I don't think that is mere hindsight bias).
I wouldn't bet against 15000p a share within ten years.
Good luck with DP Poland. These days I just never invest in pre-profit situations, so DPP is a bargepole job for me. I also have absolutely no insight into the market for pizza in Poland.
Investing too early was my mistake. It took the company very long to get to where it is today. The grown has been huge in store estate, revenues and EBITDA, but this has not been reflected for ordinary retail shareholders. The key is to get that transition to sub franchising really going (and it's their strategic objective for 2024) and this has been a real weakness historically. I think they really overlooked the scale they needed to get to in corporate stores. However, they have set a specific goal of 200 stores within three years and a specific proportion being sub franchised, so I would hope they have done so from a position of confidence that they will achieve it. If they did hit 500 stores by 2030 then that is only six years off and would quintuple (almost) the current store estate.
Current turnover is forecast about £50 million for 2024 and the market cap is £90 million represents 1.8 times turnover. In the long term, I would expect that to be more fairly 3-4 times turnover. Also that turnover is growing strongly. In the early days, they said they thought a Polish store could have potential for £80,000 EBITDA per year. I won't adjust that figure for inflation (and perhaps it was too optimistic back then) but 500 stores generating that sort of EBITDA would equate to £40 million a year. Let's say that they got there by 2034. The Polish economy seems to be going great guns. It has potential but has been a perennial diluter.
doug2500 wrote:I first bought DPLM for 338p in 2011 and have added along the way. That recent rise has made it clearly my largest holding rather than 1st=
The only time I sold any was when the new CEO left after only a few months which spooked me a bit. That must have been 2018 I think. It felt, and still does, like the right thing to do at the time, but with hindsight wasn't.
Oh, that the rest of my holdings had been as reliable over the last few years! Diploma and my chunky holding of Fundsmith have been a solid foundation.
I'm not sure that yesterday really warranted a 11% rise from an already decent price but it's definitely worth a premium rating. The problem is only hindsight confirms how much of a premium it deserves, and any company is only a bad RNS away from a big drawdown.
I think Berkshire is another case of where companies are happy selling out to them for a fair price for the reasons mentioned.
Congratulations to Marcus on a very well timed, and sized top up. It feels like I've not made any great decisions for a while now, but that's the way it goes sometimes.
You picked up on DPLM sooner than I did and my purchase in 2012 was substantially more expensive. I remember 2018, but I thought it positive that they realised quickly the new CEO was not the right fit and that they took action. They recognised an issue and addressed it, but it was concerning to a degree at the time.
I make mistakes too, but spend less time discussing them.
In light of Reckitt's poor performance, which I think I put up with for too long, I decided to get rid: the proceeds went (mostly) into Evolution AB, which is Swedish listed and had recently had a sharp fall as well. It is arguably a much higher quality company on the key financial metrics and much stronger growth is forecast compared to Reckitt. They raised their dividend 32 percent for the past year. The Swedish currency is also historically weak verses the GBP. I topped up DP Poland slightly also.
doug2500 wrote:And one other thing, they've been touted as moving the listing to the US and I'm not sure how I feel about that.
I strikes me as a complication I don't need, although I can see how it may cause a short term uplift in price. I guess that wouldn't bother you, Marcus given you already hold US stocks?
Yes, about 22 percent of the portfolio is either in directly held US, Finnish or Swedish stocks so no issue for me. Where was it mentioned that Diploma might move to the US? They have been listed in some form since 1931 in the UK, I believe.
The way things are going, my portfolio will be getting slimmer and more akin to a global tracker. I want greater resilience to dividend cuts, so investment trusts such as Bankers or Brunner may have a good role, with individual companies significantly reduced. They basically behave more like trackers, I think. And then supplemented by higher conviction, quality growth companies.
Best wishes
Mark.
