‘Stocks To Sparkle In 2014‘ is taken from the title of Paul Kavanagh’s presentation at Master Investor 2014.
Paul Kavanagh is a partner and chairman of Killik Capital, a division of Killik & Co that specialises in sophisticated investing through the use of CFD’s, spread betting and managed futures.
Here is what Paul had to say about his firm’s current approach whilst working with clients:
- Work towards thematic investing
- Homebuilding/construction has durability over the next 5-6 years
- There is a shortage of approximately 1 million homes in the UK
- Demand is outstripping supply in regards to construction materials
— David Thomas (@djthomas) April 26, 2014
Clearly Paul’s focus for the presentation and his firm’s current theme is housing and construction.
Handily, Paul decided to share 7 stocks from housing and construction (or related sectors) that his firm believes could sparkle in 2014.
They are presented below including the notes I took at the show.
Berkeley Homes (LSE: BKG)
Berkely Group 1 Year Price Chart
- The management team have a good track record of timing the housing market well.
- The astute buying of land just after the Lehman collapse is just starting to bear fruit and will play out over the next 3 years
- By 2018 your investment will be covered
- It’s stock price is going through a pull back
- Possible FTSE 100 stock in 2014
Never Miss Another Post Again.
Mar City (LSE: MAR)
Mar City 5 Year Stock Chart
- Is open to new building ideas and techniques such as modular build housing
- Modular builds are prefabricated in a factory and house is built on site
- Quality of factory built houses are better because construction process is not affected by the weather
Breedon (LSE: BREE)
Breedon Aggregates 2 Year Stock Chart
- Are suppliers to the construction industry
- Good management team that turned around the company from it’s administration
- In March, Breedon (like other construction material suppliers) increased its prices
Tri-Star (LSE: TSTR)
- Market cap of £13 million
- Just signed a JV in Dubai to produce antimony – a niche market
- Antimony has widespread application i.e. not just in construction and is in demand
- Newmont/Barrick possible merger of the two largest gold producers; the process of antimony production can be applied to the gold market
Optimal Payments (LSE: OPAY)
- Is currently going through a pullback – 19x earnings
- Provides online payment systems for gambling websites
- Specialises in fraud prevention techniques and they are looking at acquisitions
New Brit Palm Oil (LSE: MBPO)
- Trading at 7x earnings – an old fashioned value play
- down from 950p to 400p
- Palm Oil (crude) price is already rising and there is a disconnect between crude price and New Brits’ price
Flow Group (LSE: FLOW)
Flow Group 8 Year Price Chart
- Developer of a new type of domestic boiler
- Not yet cash-flow positive
- Is fully funded for launch of new domestic boiler
For me, New Brit Palm Oil is the most compelling stock simply because it’s the only one selling below tangible book.
To research stocks using a top down approach like Paul means you need to keep abreast of industries and sectors going through a period of unpopularity.
The most well known recent example of this is the mining sector due to the bear market in precious metals prices.
- One way of adopting a top down approach for US stocks is to use Barchart.com to direct your search towards industries that have declined the most over the last 12 months.
- For UK investors you can use the Interactive Investor screener to look for sector decliners over the past 12 months and then direct your search to stocks within those losing sectors.
If it’s good enough for Paul, it should be good enough for you.
- 7 Brilliant Quotes From Master Investor Show 2014
- What I Learned From Master Investor Show 2013
- The Cheapest Stocks In The FTSE 100
- Gold Miners Continue Their Decline
- Stock Market Prices And How To Profit From Them
- Free Value Investing Ebook And Newsletter