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Jack's back (at HR Owen)

Jack Petchey, the multimillionaire shrewd stock picker, is secretly buying shares in HR Owen, a posh car dealer whose shares rocketed nearly 20% this week.

 

Jack Petchey, the multimillionaire shrewd stock picker, is secretly buying shares in HR Owen, a posh car dealer whose shares rocketed nearly 20% this week.

Petchey, who was in the motor trade himself after the war, has dabbled in HR Owen (HRO) before and made money. Like most Petchey picks, HR Owen is at a discount to its net asset value – estimated at 125p per share. At the current share price of 121p it also offers a historical yield of about 8.3%. This is not a bad insurance against the risk of investing in such a small company, especially given that the house broker, Charterhouse Securities, forecasts the 10p dividend will be maintained or increased slightly.

Petchey owns 240,000 shares, equivalent to nearly 1.3% of the £20 million company. He reinvested in November and has been buying heavily throughout January. Investors may have to act fast though. Petchey last bought when the price was 105.5p. It is now up to 121p.

Why the rise? Nicholas Lancaster, the managing director, told citywire.co.uk that he has no idea. ‘I have to say I wish I could give you a comment. If I knew anything I would,’ he said.

It is possible that news of Petchey’s buying has leaked into the market and spurred some buying action. Lancaster agreed with this. ‘He’s the only person who may influence it,’ he said. However, on Wednesday, the most active day for the stock this week when it rose 10%, trading levels were fairly low. Curious about the rise himself, Lancaster made enquiries among brokers to the stock. He told citywire.co.uk that by lunchtime on Wednesday, after the rise had already taken place, only five or six trades had gone through. One of these trades was made at 130p so someone is prepared to pay a fairly healthy premium on the price and Lancaster said he thought it was not Petchey on that occasion.

There is a lot of consolidation in the motor distributors sector and Petchey is famed for his ability to foresee corporate activity. Lancaster said he thinks it is unlikely anyone will make a bid for HR Owen but does not exclude the possibility altogether. ‘That would be my view, but I could be completely wrong,’ he said.

He says the company’s portfolio of franchises could tempt a rival to bid. It is certainly prestigious. HR Owen is the sole distributor of Lamborghini supercars in the UK, it also has an exclusive distribution deal with Jensen, the classic English sports car builder. In September the company acquired Jack Barclay, the world’s oldest and largest Rolls-Royce and Bentley dealership, based in Berkeley Square in central London. The price paid was £4.3 million and was partly funded by a £2 million share issue.

Petchey is not the only interesting investor the stock. Peter Vardy, the chairman and chief executive of rival dealers Reg Vardy and a much-admired figure in his industry, has held an undisclosed stake comprising 50,000 shares for two years. He has not touched it since the original investment so it seems unlikely he is about to mount a bid. It is interesting that he wants to keep an eye on it from the inside though since he we can't find a record of him having stakes in any other rivals. Vardy was not available to comment.

Also on board is singer Phil Collins, the former front man for Genesis. He owns 208,333 shares through his company Philip Collins. Hit & Run Music, which has managed Collins for the last 25 years, also has a substantial stake in the business – 625,000 shares which it bought in December, at the same time as Collins bought. This holding represents 3.33% of the company but has not been disclosed so far.

Given the rise in share price this week investors may feel the excitement is over at HR Owen, but Petchey has returned for the second time and he is no fool. Also, if investors are prepared to buy at 130p there could be some way to go yet. It is definitely intriguing but a difficult one to call.

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