5 small shares that top fund managers are trading
We delve into regulatory returns to see what small shares are being bought and sold by some of the best professional investors.
Helium spots bar opportunity
Small cap hedge fund manager David Newton, of the sector-beating Helium Special Situation fund, has raised his stake in up-market bar company Eclectic (BARE.L).
Newton upped his investment in the business from 1.38 million shares to 1.41 million or 11% worth £2.34 million at a share price of 166p, up 2.6% from a price of 160p at its listing in November 2013.
Newton invests in under-researched small caps where he believes the market has misunderstood the value in a business, returning 129% over three years versus an international equity index of 8.7%.
Eclectic, in which fellow shrewd investor Citywire A-rated Giles Hargreave also holds a near-20% stake, raised £15 million last year, the first listing in the bar and hospitality sector since 2007.
The company is targeting an expansion to about 50 locations over the next decade, from a current figure of 20. Broker Panmure Gordon rates it a buy with a price target of 210p.
M&G’s Dobell cashes in on Peppa Pig
UK Equity veteran Tom Dobell of M&G has banked some profit on his holding in Peppa Pig owner Entertainment One (ETO.L) as its shares continue to hover around all-time highs.
Dobell trimmed his investment in the company from 34.09 million shares to 34.05 or 11.78% worth £120.8 million at a share price of 355p, up 133% over three years versus a FTSE 250 return of 48%.
The bulk of the shares are held in his £6.94 billion M&G Recovery fund, with a minority stake in the company’s M&G Smaller Companies fund.
While best known in the UK for its ownership of children’s TV phenomena Peppa Pig, Entertainment One operates a global business of media rights, licensing and distribution, including UK rights to recent Oscar winners Dallas Buyers Club and 12 Years a Slave.
Investec raised its price target on the company from 340p to 360p and JP Morgan from 280p to 356p after it said full-year earnings were likely to beat expectation.
Activist investor Morton buys into ViaLogy
Bob Morton, a prominent activist investor, has been busily trading shares in struggling oil and gas services company ViaLogy (VIY.L).
Through his Hawk Investment vehicle, Morton bought 150 million shares – worth £225,000 – at the end of January. Just two weeks later, according to a stock exchange filing last week, he sold 18 million of those shares after their price had surged up 45%. He still owns 4.9% of the company.
ViaLogy uses seismic imaging technology to detect subsurface gas and oil deposits, and boasts clients including Chevron. The firm’s most recent earnings report revealed that it had lost £1.1 million in the six months to 30 September 2013, while despite the recent recovery its share price has plunged by 89% over the past year.
ViaLogy announced late last year that it planned to spin off its US business in part to cut its working capital requirements.
Morton’s most famous intervention in a company involved marketing services business Media Square, when he led a consortium seeking to oust executive chairman Roger Parry.
Hornby chugs into Channon’s portfolio
Gary Channon, chief investment officer and co-founder of Phoenix Asset Management, has increased his stake in model railway firm Hornby (HRN.L).
Channon bought another 57,250 shares in Hornby, worth around £45,000, to take his holding in the group to 5.9 million shares – equivalent to 15% of the business.
Hornby hired former Ladbrokes managing director Richard Ames as its chief executive last month, with old boss Roger Canham becoming non-executive chairman.
Ames now has to get Hornby back on track after it issued a profit warning in January, which it blamed on supply delays. In appointing Ames, Canham highlighted his experience of ‘managing complex supply chains’ both at Ladbrokes and previous employers including Dixons and Asda.
Channon’s flagship Phoenix UK fund has returned 351% since its launch in May 1998, compared with 108% from the FTSE All Share index. By style, he looks for ‘competent, honest’ managers running ‘companies with strong pricing power’, buying in when they are attractively valued. Hornby currently trades at 80p, far below its pre-crisis peak of 300p.
Gervais Williams throws chips down on 32Red
Small-cap dividend specialist Gervais Williams has taken profits on online gambling business 32Red (TTRL.L) Williams sold down his 2.3 million shares in the business, worth £1.88 million at price of 82p. The company was formerly among his top-ten positions.
While down fractionally over the last month the shares remain 303% up over the last three years versus a FTSE Small Cap return of 42.35%.
The shares were held in his small-cap focused income fund, the Diverse Income Trust. 32Red currently yields 2.8%, just above the trust’s historical yield of 2.4%.
Broker Numis rates the company a buy, with a price target of 100p. 32Red reported a 21% increase in revenue in 2013, from £32.1 million to £38.8 million.
The number of new players registered over the year slowed from 41,918 in 2012 to 38,033 in 2013 however while the yield per active player fell 3% from £500 to £485.