Earlier today I sold my holding of Booker PLC (Epic Code BOK) in my Income Portfolio at 182p, banking a Profit of 45% (with probably another 5% on top from Dividends) from a holding period of about 1 year.
There is a lot to like about BOK - it has a habit of paying out Special Dividends and the Uptrend is just nothing short of superb. It was a nice fit in my Income Portfolio (full details of this Portfolio can be seen on my ‘Trades / Portfolios’ webpage) as the nature of small Corner Shops means a pretty defensive sector. I could easily have made a decision to continue to hold BOK and the chances are that it can go higher as the Momentum of the Uptrend continues to do its magic.
- The key issue for me is Valuation - it just looks overvalued as I will highlight below.
- The recent Trading Update on the 3rd September was a bit soggy - their Sales contracted which doesn’t seem consistent with the high Valuation.
- I mucked up big time on this Trade. I bought BOK a year ago and for some daft reason unbeknown to me (ok, probably lack of discipline and took my eye off the ball) I totally failed to ‘Push the Position’ by buying more Shares and/or by doing a Long Spreadbet on it. This was a monumental mistake as it has probably cost me at least 2% of Yearly Return on my Overall Portfolio. I suppose it was around the time that the Markets did their usual Autumn Flops and perhaps I was just too scared to act.
- I could have held BOK - but one of the issues is that I can do nothing with it. What I mean is that with it being so fully valued, I just can’t bring myself to do a Long Spreadbet on it (more likely I would want to Short it !!). By removing BOK, I have now been able to Buy Empiric Student Property (Epic ESP) at 109p and I feel this is sufficiently good value that I will be happily able to buy more Shares and add a Long Spreadbet in coming days.
- Hey, it’s an old cliché, but “it never hurts to take a profit” - so banking a decent gain and rolling it into something else to compound the Returns ain’t gonna hurt me too much. That reminds me, “a profit’s not a profit until you bank it”……………
According to ShareScope, BOK has Results on Friday 16th October - it is quite possible that it rises prior to these Results or could even rise on the announcement - it’s impossible to know. All we can do is make our best judgements on the information available at the time and go with the flow. I will probably have got it wrong, but there will be no point in beating myself up if I have - I am moving onto the new Pastures of ESP. Thanks BOK, you were a merry travelling companion.
As ever on my Blogs, the ShareScope screenshots displayed in all their luxuriousness below are taken as the situation was late last night when I made my Decision to sell BOK. I have been monitoring BOK for many weeks and it was clear to me that it was getting a bit toppy - my interest in ESP was the final straw for me to kick BOK out.
If you look at the ‘Details’ screen below, you should see in the Top Right Hand Corner that the Consensus Forecast Earnings Per Share (EPS) for 2017 is 7.73p - at the Share Price of 185p, this means the Forward P/E Ratio is 24 (185p divided by 7.73p).
BOK has quite a Cash Pile, which the screen below shows as 8.1p per Share (I am being lazy here - if you check the latest Results there might be a slightly different figure) - these figures will be from the last Year End Results but are good enough for my purposes), if we allow for this, then the Forward P/E Ratio for 2017 is still a heady 23. After writing this I noticed on the Trading Update from 3rd September that the Cash has dropped to £110m - so the picture is worse than my P/E Calculation of 23.
I am sure you have heard me say many times before that a P/E of 20 is on the high side and I would certainly not be buying stuff on such a High Rating (except if it is has exceptionally high growth potential like ARM Holdings - not for a flippin’ Grocery seller !!). I might hold something on such a Rating, but as I said above, it is a sort of ‘useless’ position because I can’t sensibly top it up. For more detail on this, read my Blog Series on ‘Reasons for Selling’ which you can find here (I think it has 5 parts despite the title !!):
BOK has a habit of paying out Special Dividends - it is likely that for 2016 it will pay an extra 3.5p to Shareholders on top of the usual Divvy - so this means the total should be 8.65p. This will give a Dividend Yield for 2016 of 4.7% - which is pretty good and would be fine for my Income Portfolio. The only problem with Special Dividends is that they are easy for the Management to withdraw from in the Future - and with the Stock on such a high P/E Rating, there is not much scope from Earnings to pay high dividends.
I’ll explain that last bit above. A Stock’s ‘Earnings Yield’ is the inverse of its P/E Ratio. So, for BOK on a P/E of 24, the Earnings Yield is 4.16% (you divide 100 by 24 and express as a percentage) - this means that if BOK paid out all of its Earnings then it could only really pay out a 4.16% Divvy - so you can see that the Special Divvys might not be sustainable for long.
For the record, ESP should pay a Dividend Yield around 5.4% and has scope for this to rise over time.
I just wanted to show the beautiful Long Term Uptrend - it takes a brave Man or Woman to sell out of such a great trend !!
The Blue Arrow marks a Blue Circle which I have drawn around an ‘Inverted Hammer’ Candlestick that was generated yesterday - in the context of the recent run up in the Price, this suggests the Shares will fall in the coming days. This is the Signal that most tells me it is time to sell.
Remember, these are Short Term Indicators. My decision to Sell is really based on the Valuation and other stuff I bulleted earlier in this text - these Technical Bits just highlight that in the Short Term it is probably a good time to Sell. The Price might move down a bit and then keep on going up and take out the All Time High. Or it might not.
Right, that’s it. Expect a Blog on ESP over coming days - might be early next week.